Gas supply from Sangu-11 soon

DHAKA: Australian company Santos expressed hopes to start supplying gas from its offshore Sangu-11 well to the Bangladesh Power Development Board (BPDB) by the end of this month as the state-owned electricity supplier has agreed to pay for transport charges.
    
BPDB had earlier agreed to buy gas from the Sangu-11 well at $4.50/Mcf, set by Santos, but there was disagreement over who should pay the transportation cost.

The Australian firm had asked BPDB to pay the wheeling charge in addition to the gas price of $4.50/Mcf. But BPDB had said it would only pay for gas.

Although BPDB has agreed to pay the wheeling charge, it has demanded a reduction in the wheeling charges set by state-run gas supplier Karnaphuli Gas Distribution Company Ltd.

KGDCL, a subsidiary of state-owned Petrobangla, will transport Santos gas from its new offshore well directly to BPDB power plants via pipelines.

It has demanded 36 cents/Mcf as wheeling charge. The company supplies natural gas to the southeastern port city of Chittagong.

“We will settle the issue soon through a discussion with KGDCL,” BPDB authority source said Tuesday.

“Santos has been ready to supply new gas from Sangu-11 since late March 2012 on completion of a three-well drilling program in the Bay,” Santos president in Bangladesh John Chambers said.

“The delay is disappointing,” he said. He hoped the issue will be settled by May.

This is first time in Bangladesh that an international oil company has negotiated directly with an end-user to sell gas at market prices.

Usually they sell gas to state-owned Petrobangla at a rate fixed in the production sharing contract, which then sells it to state-owned gas distribution companies.

Under its PSC, Santos must give Petrobangla first option to buy its gas at market prices and if it declines, can then offer the gas to other buyers.

Santos found commercially viable gas reserves in the Sangu-11 well which was drilled in block 16 in the Bay of Bengal mid-February.

Petrobangla Chairman Hussain Monsur had said the initial recoverable reserve from the well was estimated at 20 Bcf and around 25,000 Mcf/d of gas could be supplied from there for at least the next two years.

BPDB currently purchases natural gas at around Taka 79.82/Mcf (98 cents/Mcf) from state-owned gas distribution companies to generate electricity at gas-based power plants.

Before initiating a $128 million three-well drilling program in block 16 in October last year, Santos had received expressions of interest in July from over a dozen large privately owned companies in Chittagong that were willing to buy gas at market prices due to a growing gas shortage in the country.

But now BPDB, the country`s main electricity supplier, has come up to purchase gas from Santos.

Santos has set $4.50/Mcf as the baseline price for its gas from block 16, which is 55% higher than the price of $2.90/Mcf that Petrobangla now pays other international oil companies and Santos.

Petrobangla earlier said it would not pay Santos more than $2.90/Mcf for gas from its new offshore structures.

BDST: 1750 HRS, MAY 22, 2012
Edited by:
Maria Salam, Asst Output Editor
M. Mahbub Alam, Asst Output Editor