The five onshore gas wells represent a crucial part of Bangladesh’s plan to tap into its existing gas reserves for energy generation.
In a bid to bolster its domestic natural gas production and alleviate the burden of costly liquefied natural gas (LNG) imports, Bangladesh is poised to grant a significant gas-drilling contract to the Russian energy giant, Gazprom.
This move comes as a part of Bangladesh’s strategy to reduce its reliance on LNG imports and strengthen its energy security. Sources indicate that the deal with Gazprom is on the verge of being finalized, as the Prime Minister’s Office (PMO) has given the green light to award the contract for drilling five new onshore gas wells. Zanendra Nath Sarker, the Chairman of Petrobangla, confirmed this development.
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The negotiations for this gas drilling contract are expected to proceed under the Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act, commonly known as the indemnity law in the fuel sector. This legislation enables expedited solutions to energy and power crises by bypassing the typical tendering process. It provides immunity to those involved in implementing rapid-fix energy solutions, a mechanism that has previously been employed for quick-rental power plants, complete with capacity-payment provisions.
The five onshore gas wells earmarked for Gazprom are distributed across the Shahbazpur, Bhola North, and Shahbazpur North East gas fields. Two wells are situated in Shahbazpur (designated as SBZ-5 and SBZ-7), two in Bhola North (Bhola North-3 and Bhola North-4), and one in Shahbazpur North East (Shahbazpur North East-1). These wells represent a crucial part of Bangladesh’s plan to tap into its existing gas reserves for energy generation.
Gas Reserves in Bangladesh
The gas fields involved in this endeavor boast substantial reserves. Shahbazpur gas field, owned by BAPEX, currently produces approximately 63 million cubic feet of gas daily (mmcfd) from four producing gas wells, exceeding its total production capacity of approximately 50 mmcfd. With gas reserves estimated at around 1.3 trillion cubic feet (Tcf), Shahbazpur gas field is a valuable asset.
Bhola North and Shahbazpur North East gas fields also possess impressive gas reserves, surpassing 1.5 Tcf collectively. This influx of natural gas will play a pivotal role in meeting Bangladesh’s growing energy demands.
Gazprom’s role and responsibilities
As Gazprom prepares to submit its technical and financial proposal to the state-run Bangladesh Petroleum Exploration and Production Company Limited (BAPEX), negotiations regarding pricing will commence afterward. Upon securing the contract, Gazprom’s responsibilities will encompass various facets of drilling operations, including construction of drilling pads, camp warehouses, site preparation, rig shifting, procurement of drilling materials, engagement of third-party services, drilling, testing, and commissioning. The contract will also necessitate insurance coverage for equipment, blowout incidents, third-party liability, and personnel.
Furthermore, Gazprom might be required to provide a performance guarantee amounting to 5.0 percent of the total contracted costs. This guarantee serves as a commitment to fulfill the contractual obligations efficiently.
All the wells in question are classified as development wells, signifying that known gas reserves exist within these structures. Gazprom’s involvement in drilling these wells will ensure the extraction of natural gas, thereby contributing to Bangladesh’s energy security.
Gazprom’s participation in Bangladesh’s oil and gas sector has a rich history, dating back over a decade to 2012 when the Russian state firm began its tenure as a contractor company in Bangladesh. Over the years, Gazprom has successfully completed the drilling of 17 gas wells, primarily development wells, across various gas fields.
Russian Foreign Minister Sergey Lavrov has expressed optimism regarding the continued collaboration between Gazprom and Bangladesh in the gas sector. During a press conference in Dhaka, he highlighted the promising prospects for future cooperation.
As of September 22, 2023, Bangladesh’s natural gas demand stands at approximately 4,000 mmcfd, according to Petrobangla statistics. While the country has made strides in increasing its natural gas production, it still relies on imports, including around 719 mmcfd of re-gasified liquefied natural gas (LNG).
By strengthening domestic production through partnerships like the one with Gazprom, Bangladesh aims to reduce its dependence on LNG imports and achieve greater energy self-sufficiency. This endeavor not only secures the nation’s energy future but also contributes to economic stability and growth.
Why is Gazprom drilling gas wells?
The Bangladesh Petroleum Exploration and Production Company Limited (BAPEX) has a well-established reputation for its expertise and competence in onshore gas exploration and drilling. This state-owned company has successfully completed all the essential tasks related to onshore gas exploration and production.
Notably, BAPEX has achieved a remarkable success rate in gas exploration. Globally, it typically takes drilling five wells to find gas, but BAPEX has consistently discovered gas in one well, often drilling fewer than two wells to achieve this feat.
In 2012, the responsibility for drilling onshore gas wells in Bangladesh was initially awarded to Gazprom, Russia’s state-owned energy company. This decision was made in response to the urgent need to address the country’s gas crisis by drilling ten wells. Officials asserted that BAPEX lacked the capacity to simultaneously work on multiple wells. Gazprom was entrusted with this task, albeit at a higher cost compared to what BAPEX would have required.
This contract was awarded without going through a tender process, under the Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act of 2010, which provided legal protection to the officials involved from prosecution for this decision. Fast forward eleven years, and Gazprom has completed the drilling of a total of 20 wells.
Interestingly, Gazprom has once again been selected to drill an additional five gas wells without the need for a tender process, citing the same rationale that BAPEX lacks the necessary capacity to handle these projects.
While visiting Russia in 2010, Prime Minister Sheikh Hasina had sought cooperation from Russian President Vladimir Putin for the exploration and development of Bangladesh’s oil and gas sector. A protocol agreement was signed at the time, where no specific Russian company was named. Russia later appointed Gazprom for the work.
On 8 August 2011, Gazprom submitted a proposal to Petrobangla for the drilling of 10 wells without tender. Under the Speedy Supply of Power and Energy (Special Provision) Act, Gazprom was awarded the contract for those 10 wells. They were later awarded contracts for 7 more wells.
According to a report sent to Petrobangla from BAPEX on 17 November 2016, just within a few days after gas extraction began from five of the 17 wells drilled by Gazprom, the extraction had to be halted as water and sand began to rise up. These are the Semutang 6, Begumganj 3, Shahbazpur 4, Titas 21 and Titas 20 gas wells. Gazprom had been paid around Tk 8.53 billion (Tk 853 crore) for drilling these five wells at the time.