Recently, the government reintroduced a new production sharing contract (PSC) with the provision to export gas explored from Bangladesh’s offshore blocks in the Bay of Bengal. This was apparently done to persuade international oil companies to extract gas from the offshore blocks. Robab Rosan of The Daily Star talks to Prof Anu Muhammad, member-secretary of the National Committee to Protect Oil, Gas, Mineral Resources, Power and Port, and Prof M Tamim, a former adviser to the caretaker government, to know their thoughts on the issue.
How do you view the new PSC that reintroduced the provision for the foreign drilling companies to export gas extracted from Bangladesh’s offshore blocks?
I have seen that every time a new PSC is drawn, transparency, national interest, and the long-term results or consequences of a PSC are not considered. In most cases, it is seen that the PSC is drawn based on the model proposed by companies that will be its beneficiaries.
We have always argued that this model of PSC is not in line with the national interest of Bangladesh. The export provision was kept in the 2008 model of PSC as well. We had then demonstrated that 80 percent of gas would be exported to foreign countries through the drilling companies, using the opportunities provided in many of the clauses and the export provision. The export provision was suspended in the face of our protests. However, later it was seen that the opportunities for multinational companies were expanded in other areas. It was seen that it would cost more to buy gas from the extraction companies than to import gas.
You’ll see that LNG is being imported citing the gas crisis in Bangladesh. This so-called crisis is also used to build coal-based power plants and nuclear power plants. Now they are also using the excuse to draw gas export deals. This cannot be acceptable in any way.
What is needed for Bangladesh is to increase national capacity and strengthen institutions like Bapex. This institution should be given the opportunity to explore offshore blocks by further expanding the skills that Bapex has shown onshore. If there is a deficiency somewhere, we can subcontract some of the work or hire foreign experts. But ownership should be 100 percent in the hands of the country. There is no alternative to increasing national capacity to ensure that 100 percent of gas is being used within the country.
Another thing is: the price we will get or the benefit we can derive if the gas fields are owned by the country, will not be available in case of foreign ownership. With foreign ownership, the price of gas rises, competitiveness is reduced, and insecurity is created. Gas and mineral resources are part of national security—having national control and ownership over it is essential not just for our energy security, but also for national security.
In your opinion, which of the clauses of the new PSC seem to contradict our national interest?
The export provision in this PSC is dangerous. For a long time, we have been saying that we will have a seismic survey. We have the ability to do this survey. Or a company can be hired to do so. According to domestic and foreign surveys, the Bay has a good amount of gas reserves. This gas can be used to generate low-cost electricity.
However, an assessment of the prices charged through PSCs shows that it is more reasonable to import gas. This means that our gas will increase the profits of foreign companies and their partners. It will not be of any use to Bangladesh. Moreover, we will have to import LNG at a very high cost while coal-based power plants will be built, doing great harm to the country including the Sundarbans. It is quite unmistakable that this PSC is a trap that we are being thrown into.
In this PSC, it has been said that Petrobangla will be asked first to buy gas. If they do not buy gas, it will then be exported. If Petrobangla buys gas, then there will be no reason for export. Why are you protesting then?
This clause was there too before. It’s just an eye-wash. Whether Petrobangla will buy gas or not will depend on those who are in the energy ministry. Sadly, the main role of those involved with Petrobangla is to provide services to foreign companies rather than to strengthen the organisation. That is why it is seen that despite Bapex’s onshore ability, foreign companies are given the task of exploration for offshore blocks at a cost two-three times higher than the cost at which Bapex can do the work.
In fact, the role of the energy ministry has largely become that of the spokesperson of foreign companies. Many ministry officials are playing the role of their public relations officers in Bangladesh. That is the danger. It is likely that after the PSC is signed (with a foreign company), the cost of extracting gas or the price of gas that will be set will not be economically profitable for us. Then they will argue that it is better to export that gas. Then again, that export money is not likely to come to Bangladesh. The (gas production) sharing provisions will be set in a way that foreign companies will even receive that money eventually. This model should be completely rejected, since it serves only the foreign companies and their local collaborators.
Tell us more about the potential of Bapex.
Bapex is very powerful onshore. Still, onshore work is given to foreign companies instead of Bapex. Capacity cannot be created in a day. It needs time and budget. Unfortunately, budget allocation for mineral resource exploration and extraction is very limited. Moreover, the gas development fund or other funds are not allowed to be used for Bapex’s work. The money is controlled by Petrobangla or the energy ministry. There is no accountability of any sort. Bapex’s capacity is not being utilised.
How do you view the new PSC that reintroduced the provision for foreign drilling companies to export gas extracted from our offshore blocks?
Gas export is the second option here. The first option is that Bangladesh will extract gas. If Bangladesh buys gas, there will be no need to go for the second option. If Bangladesh says it will buy gas, then the companies will not be able to sell gas anywhere else. On the other hand, if Bangladesh does not buy gas, then the companies will be able to export it.
Critics are saying that gas export is against the interest of the country.
In what sense is this against the interest of the country? One may recall that the provision to export gas was also there in the first PSC. But the condition attached there was that it had to be exported in LNG form.
If the question really boils down to only protecting the interest of the country, then a contract can be made with only one condition: that the government will buy all the gas wherever it is found. There must be a guarantee. Then the companies will not object because they want to sell the gas and they will not bother about who buys it.
The companies are taking huge financial risks in offshore exploration. If they do not get gas, everything they invest will be lost. They won’t even get a penny back. And if they get the gas, then they will keep an account of the cost and get their money back accordingly.
If they didn’t do the exploration, we would have to do that, in which case we would have to bear the whole cost. In the existing system, if they do not find gas, then we do not have to pay a penny. This is their risk. This is the basic aspect of the PSC. Then, since they are taking the risk, the gas that will be left after deducting their recovery costs will be divided as “profit gas” between the government and the company involved.
Many complain that if foreign companies extract gas and export their share abroad, both the gas and the profit will end up abroad. In that case, Bangladesh will get nothing.
No, this is not correct. According to PSC’s gas sharing clause, they will also export Bangladesh’s share of gas and Bangladesh will get that money.
Do you agree with those who say that handing over mineral resources to foreigners is not only a threat to energy security but also to national security?
No, I don’t think so. Because our PSC experience so far has been very satisfactory. We have been getting gas for a long time without any problem. About 60 percent of our gas is produced by foreign companies. There is a huge capacity gap within Petrobangla. They are not of international standards.
Can’t Petrobangla’s capacity be developed to meet international standards?
The management and technical know-how of Petrobangla can certainly be raised. However, there is no longer any opportunity to increase its capacity because it will involve a huge investment in hardware purchase. For example, Petronas or other companies are also not involved in many activities themselves. However, they can perform tasks such as dealing with foreign companies, supervising them etc,. They have that training. We should equip our workforce with management and supervision skills.
If foreign companies own the gas fields, will they be able to extract gas or stop extraction whenever they want?
I cannot say anything in this regard. I do not know if there is anything mentioned in the agreement on this issue. There is no detail in the agreement on how much can be exported, how long the gas will be extracted, whether it can or cannot be stopped.
What do you think are the negative aspects of this PSC? Does it have any gaps?
Overall, the deal is okay. But gaps can exist in the contract. All contracts have different kinds of gaps. I haven’t read the agreement in detail yet. So, I cannot say.
What happens when the price of gas in the international market is lower than that of the gas produced here?
Whenever gas price falls in the international market, the price of high furnace oil also goes down. If the price of gas fluctuates in the international market, then the price will fluctuate here too.
LNG is being bought citing gas crisis…
Listen, after extracting gas offshore, it has to be brought through pipelines. After all this, the cost of importing LNG may be lower than that cost. Then, why should I go and buy gas? Then, LNG can be bought at a lower cost with the export money. There can be many other situations. If more gas is found, then Bangladesh will not have the opportunity to make full use of it. So, will they just sit idle? I would like to say that although the contract talks about gas export to attract companies, in reality, the possibility of a circumstance of exporting gas is unlikely. If it is seen that gas is being exported against our best interests, then it can be stopped by agitation.