Bapex dives into offshore gas exploration

Bapex is set to shell out $28.85 million for joint exploration of gas blocks in the Bay of Bengal to gather first-hand experience of offshore search.

Australia-based Santos Sangu Field Ltd will lead the exploration.

Santos had made the proposal to Bangladesh Petroleum Exploration and Production Company (Bapex) to explore the Magnama geological formation in Block 16 of the Bangladesh seabed.

If Bapex was interested, it would have to shoulder 49 percent of the costs, as per the proposal.

Santos had earlier invested $92 million, which was counted as sunk cost and Bapex will now have to pay $12.7 million towards it.

Initially, Santos claimed $40.6 million from Bapex as sunk cost, but later through negotiation it was brought down to $12.7 million, officials said.

For digging Magnama-2 well in the sea belt, the total cost is expected to be $26 million -- 49 percent of which must be borne by Bapex. The amount comes to $16.15 million.

Bapex will have to pay Santos a total of $28.85 million this month.

If commercially extractable gas is found, Bapex will have to invest another $119 million for various works.

Many are worried that the government's money would go to waste if gas is not found, said Bapex officials.

“Even if no gas is found Bapex will gain some experience in this field. So, it would not go to vain,” said one of the officials.

A draft sale and purchase agreement has been prepared and forwarded to the cabinet committee on economic affairs for approval, said an official of the energy and mineral resources division.

Founded in 1954, Santos has been active in the energy business for more than 60 years. Its name was an acronym for South Australia Northern Territory Oil Search.

Santos first entered Bangladesh in 2007 through an interest in the producing Sangu field in the Bay of Bengal, which ceased production in 2013 and has now been handed back to the government.

In November 2010, Santos became 100 percent owner of the offshore Block-16, following acquisition of Cairn Energy's interests in Bangladesh. It is also the operator.

Based on 3D seismic acquired in 2010, there is considerable gas potential in a number of leads over the Magnama structure, according to Santos.