The Australian energy firm Santos has struck commercially viable gas reserves in the Sangu-11 well under block 16 in the Bay of Bengal.
An official of Santos Bangladesh told The Daily Star last night that the company had found the new reserves three to four days ago. An announcement of the find will come at a press conference in Chittagong today.
From the new well, at least 25-30 million cubic feet of gas per day will be available for Chittagong's industrial clients within March-April, the official added.
Petrobangla Chairman Hossain Monsur said, “The Australian company has informed me of the discovery. But it did not confirm the quantity of the reserves. It only said it could be over 20 million cubic feet per day.”
Platts, a New York-based firm that provides energy and metals information for the industry and industry observers, reported the find yesterday.
John Chambers, president of Santos Bangladesh, told Platts that gas supply from the well would be available by April. The company will be able to quantify Sangu-11's reserves in the next couple of weeks when necessary assessments are completed, he added.
Sangu-11 in shallow water block 16 is being drilled from the existing Sangu platform, some 60 km (37.2 miles) offshore Chittagong.
This is the second time that commercially viable gas reserves have been found in offshore Bangladesh, following the previous discovery by the UK's Cairn Energy in 1996. Cairn, the previous operator of the Sangu field, found gas in the same block.
In addition to owning 100 percent of the Magnama and Hatiya structures in block 16, Santos acquired Cairn's interests in Bangladesh in November 2010. Following the acquisition, the Aussie company became the operator of Bangladesh's only offshore producing gas field, Sangu. It has a 75 percent stake in Sangu while Halliburton Energy has 25 percent.
Santos began a $128 million three-well drilling programme in block 16 in October last year, but it did not discover any commercially viable gas reserves in the first two wells it drilled. It completed drilling the South Sangu-4 and North East Sangu-1 wells in December.
Santos has been incurring losses in operating the Sangu field over the past year as gas output has fallen sharply, a company official previously told Platts. He said that producing gas from the Sangu field would be economically viable only when output crossed 20,000 Mcf/d.
Despite incurring losses, Santos has been producing gas from Sangu in the expectation that its overall block 16 operation will be profitable if it is able to supply gas from new wells to private buyers at market prices, a source told Platts.
Santos will be able to sell gas from its Sangu-11 well at market price, the Santos official said. Santos is the only international oil company in Bangladesh that has been allowed to sell natural gas directly to private buyers at market price, from its new offshore fields in block 16.
All other international oil companies have to sell their gas to state-owned Petrobangla first, which then sells it to state-owned gas distribution companies to reach end-users.
Santos will first offer Petrobangla the option of buying gas produced from its new offshore structures at market price, Platts reported previously. If Petrobangla refuses, it will then offer the gas to private buyers, the Platts report said.
The company has already received expressions of interest from over a dozen large privately owned companies in Chittagong that are willing to buy gas at market price due to a growing gas shortage in the country, Platts previously reported.
Bangladesh produces around 2.04 Bcf/d of gas, while demand is over 2.5 Bcf/d (billion cubic feet per day).Its proven reserves stand at 6.0 Tcf and probable reserves at 5.5 Tcf (trillion cubic feet).