Maiden bid to strike gas at Block 9 fails

Oil companies led by Irish Tullow have failed in their first attempt to strike gas at Block 9 despite high hopes that made this area most lucrative in the second round block bidding.

Tullow won the bid proposing to drill 10 wells, not just three, in the block.

Tullow, its partner Chevron-Texaco, which has sold off its concerns to Niko Resources of Cayman Islands, and Bangladeshi BAPEX began drilling at Kashimpur in mid December. The work began amid a lot of odds and disagreements between Tullow and Chevron-Texaco over the sale of the block's shares.

Disappointing results of the venture late last month clouded Tullow's enthusiasm. "The small company not only suffered a blow from this failure but the news also affected its share-prices back at its home," said a Petrobangla high official, adding "but in oil and gas business such failure is only normal."

The world industry standard ratio of striking gas is 10:1 (or one discovery out of 10 wells drilled), he said, "whereas we have a 3:1 ratio. None should be too disappointed to see no gas in the first attempt."

This was the first exploratory well drilling under the second round block bidding that concluded three years ago and also the first venture for Bangladesh Petroleum Exploration Company (BAPEX) to

work with foreign oil companies as a 10 percent stakeholder.

Disappointed or not, the oil companies are committed to drill a second well in Gumti river area this month. As per the PSC (production sharing contract), signed on April 11, 2001, the oil companies will drill another well in Block 9 before April 2004.

Meanwhile, the deadlock over transfer of Chevron-Texaco shares in the block to Niko Resources has somewhat eased. Petrobangla declined to accept Niko Resources, a subsidiary of a Canadian company registered in Cayman Islands with a capital of $10,000 only. Now the parent company Niko Resources of Canada has contacted Petrobangla saying it owns that company.

Petrobangla has asked Niko, which was disqualified in the second round bidding on technical as well as financial grounds, to send its profile and other documents first.

"Our legal experts will then scrutinise [the documents] to see if Niko qualifies to get government clearance as the block's equity-holder and a future operator. If it qualifies, Petrobangla will recommend so to the ministry," said a high official.

Explaining why Niko Cayman struck the deal instead of its parent company, the official said, "it's a common tax-evasion strategy for many western companies."

Although the sale of 60 percent shares of Chevron-Texaco in Block 9 to Niko violated almost all aspects of the PSC, the government is all set to approve the deal due to pressure from high political lobby.

Considered a highly prospective zone, Block 9 is situated in the heart of the country's gas pipeline network, a location that offers an inbuilt advantage to explorers in mobilising equipment as well as connecting gas easily to the national gas grid, if gas is discovered.