Petroleum exploration in Bangladesh dates back in the early 1900 when Burma Oil Company extended its exploration activities in the then Bengal area. The first well ever to be drilled in Bengal was at Sitakund in 1914, which was a dry hole. In 1923-33 Burma Oil drilled two wells at Patharia in Sylhet, one of which reportedly flowed oil but its commercial viability could not be ascertained.

During the Pakistani period limited exploration brought remarkable successes specially by Shell Oil Company (British-Dutch joint company) which discovered large gas reserves at Rashidpur (1960), Titas (1962), Kailashtila (1962), Habiganj (1963) and Bakhrabad (1969). Bengal was put on the world petroleum map as a natural gas province with its geological parameters suggesting more prospects.

After the liberation of Bangladesh, an ambitious program to involve foreign oil companies for hydrocarbon exploration in the Bay of Bengal was undertaken in 1974, with the Government signing six production sharing contracts (PSC) with six reputed oil companies (Union Oil, Arco, Ashland of USA, Nippol Oil of Japan and Ina Naptaplin of Yugoslavia). The following three years nine deep exploration wells were drilled, resulting in one small-size gas field (recoverable reserve 0.45 tcf) discovery named Kutubdia' in the middle of the Bay of Bengal. High hopes of big finds suffered a setback and the companies abandoned the areas and left the country during 1978-79. Experts opined that the reason, being not upto the expectation, was that the exploration was not rigorous enough to unfold the true potentials of the offshore Bangladesh. 

In the meantime, birth of Petrobangla had given the local explorers a chance to join in the quest for petroleum. Initially Petrobangla exploration wing was assisted with Russian expertise and technical help, which was still far behind the more sophisticated technology of the western world. The national exploration company remained an unsophisticated, under equipped operator in the western standard. However, that did not deter it from achieving good successes in petroleum finds. The first gas field discovered by Petrobangla was Begumganj (1977), followed by Feni (1981), Kamta (1981), Fenchuganj (1988), Narsingdi (1990), Meghna (1990), Shahbazpur (1995) and Saldanadi (1997). Thus, out of the 18 gas fields discovered in the mainland, 10 were discovered by Petrobangla's exploration wing now known as Bapex. Certainly Petrobangla's exploration wing deserved credit for significantly contributing to the national wealth.

In December 1986, Bapex discovered the first commercial oil field in Bangladesh - The Haripur field in Sylhet. Curiously, this field was discovered in a rather non-traditional way in the sense that Bapex geologists had to bargain and insist on carrying out test on a suspected oil zone, when the foreign consultant, opined that drilling operation should stop as the required gas zones had already been found. This led to a dispute which had to be settled by Dhaka Headquarters which finally instructed to carry out the test. When the test resulted in discovery of Haripur oil field, nobody could think that the oil field would be taken away from Bapex and would be given to Scimitar Oil Company, virtually an unknown firm. In 1988, the Government of H.M. Ershad signed a PSC with Scimitar for developing Haripur oil field. This was widely condemned and a Public Enquiry Committee headed by Dr. Kamal Hossain held the government responsible for dealing with Scimitar against national interest. Scimitar was not professional enough to produce oil and could not fulfill its work obligation. The new Government, following Ershad's fall, terminated the PSC with Scimitar and the firm had to leave Bangladesh. Haripur oil field remained undeveloped and the above uncoordinated action reduced the prospect of the field to produce its real potentials.

If Haripur scandal is a prime example how a credible national organization (Bapex) was denied its credit and undermined, what is happening now is probably even more alarming. With the opening of the whole country to the foreign oil companies for petroleum exploration, serious concern has been raised as to the fate of Bapex. Without a single block reserved for Bapex, what would be the future role of this exploration company? Placing Bapex in the same list of the foreign oil companies for bidding for blocks, is not a mockery that Petrobangla weighing Bapex against foreign companies from the other side of the table? PSC is not unique to Bangladesh, but has been in practice throughout the developing world with success stories in Malaysia, Indonesia, Thailand, India - just to mention a few. Nowhere, perhaps, the national exploration organization is placed in such a disgraceful position as in the case here. Probably, it would not be surprising to find Bapex placed in a coffin to be carried to an eternal resting place very soon.

23 Petroleum Exploration Blocks of Bangladesh:

First Round Bidding:

In September 1993, Bangladesh announced first round bidding for petroleum exploration in the country. A total of 23 blocks were on offer, including the offshore areas on a first come first serve' basis. The response to this invitation was good and in the next two years, production sharing contracts were signed with the following companies awarding blocks as mentioned below:

Blocks 15+16 (Chittagong) to Cairn Energy,

Blocks 12+13+14 (Sylhet) to Occidental Oil,

Blocks 17+18 (Cox's Bazar) to Rexwood Oakland and

Block 22 (Ctg Hill Tracts) to United Meridian Corporation.

Rexwood Oakland, a US company is operating in the offshore blocks 17 and 18 around the St. Martins island. It has already acquired 200 km area.

The UMC Bangladesh Corporation, a subsidiary of the United Meridian Corporation of the USA has already started geological and seismic survey at Block 22 at Khagrachari area. The status report of the company said that structural and stratigraphic section measurement of about 200 line kilometer had begun from November 1, with the help of a Bell-212 helicopter from Canadian Helicopters International. The UMC has got six expatriate geologists, two Petrobangla geologists and two UMCBC geologists, who are working in the field. They've discovered oil reserves at Chhatrachhari by the side of Uttanchhatra hills, 20 km north east of Barkal thana under Rangamati district in December 97. The existence of oil was detected by the US firm at the initial stage of the seismic survey. An official of UMC said, oil was gushing out continuously in the area. The seismic experts of UMC and Bangladesh went to Chhatrachhari with the help of security forces and conducted the survey. An expert of UMC said some stones were collected from the area for examination.

Among the eight blocks currently under contract in Bangladesh covering one third of the country. Two are held by UK companies (Cairn 75 per cent and Shell 25 per cent) and six by US companies.

Cairn Energy discovered its first gas field Sangu' in the offshore area in 1996 and went on with the program in order to develop and produce gas and started its production to the national grid from June 12 1998. Cairn Energy has got plans to start supplying 160 million cubic ft of gas per day. Cairn has by now drilled 5 appraisal wells in the Sangu field and has been building a gas processing plant at Chittagong. It is expected that the company will gradually increase its production to about 200 million cubic feet per day by the year 2000. Also, Cairn has been doing appraisal of the Semutang Gas Field, discovered in 1969 by the national oil company but leased out to Cairn now for gas production. It is expected that by 2000 Cairn would be producing gas from Semutang. At present Cairn is drilling another exploratory well at Haldi near Chittagong and should it make a discovery here, the company is likely to put that gas field on stream as well.

Occidental Oil Company had its first discovery at Magurchhara in June, 1997 in Sylhet Block No. 14. But the widely known well had blown out in this gas field before the drilling well reached its target depth, making it impossible to plan gas extraction from here. The company has been held responsible for its negligence and inefficiency for the blowout by an official inquiry committee and compensation money has been claimed by various parties concerned to the Occidental management. Occidental, for the time being, left the Magurchhara Gas field and is about to start drilling well in Jalalabad Gas field. This field, discovered previously in 1989, was given to Occidental in 1995 for development. The Company is expected to start producing 100 million cubic feet of gas per day from July/August, 1998. The company is at present drilling an exploratory well in Block 14 at Bibiana and will be drilling a good number of wells in coming years. Considering Sylhet area as the most prospective petroleum province, it is very likely that Occidental will find more gas fields. Once discovered, the company will start exploiting the gas. 

In the Chittagong Hill Tracts, United Meridian Corporation has conducted geologic and seismic surveys.

A similar situation is expected in the Cox's Bazar area where Oakland-Rexwood joint venture is continuing its effort.  

Second Round Bidding:

The second round block bidding for exploration in 12 blocks of the country started in June 15 1997, amid much enthusiasm. With the exception of Blocks 1, 2 and 23 situated in the Dinajpur, Rangpur and Rajshahi region of North Bengal, for which there were no takers, the response was encouraging. A total of 21 IOCs (International Oil Companies), including several top companies which are known as Oil Majors, are seeking to undertake exploration activities on 12 blocks out of 15 on offer in this second round of bidding. This is the first time Bangladesh invited multiple offers for a block.

Bidders :

Highest seven offers have come for block 9, with such big names as Total Exploration of France, Chevron-Texaco joint venture, Shell-Cairn joint venture, and Union Texas Bangladesh-Murphy Asia joint venture. Mobile Eastern paired with BAPEX and Malaysia's Petronas for this block. Smaller companies for this block are Tullow Oil Plc and Niko Resources.

For block 10, six bids have been received from Total, Niko Resources, Union Texas Bangladesh-Murphy Asia joint venture, Mobil Eastern, Cairn-Shell joint venture, a joint venture of Unocal Bangladesh, PTI Oil and Gas and BAPEX.

There are four proposals for block 11 - Tullow Oil, Pangaea Energy LLC, Enron Oil and Gas, the Mobil-Petronas-Carigali-BAPEX joint venture and Unocal Bangladesh-PTI joint venture.

Block 19 has drawn three offers - from Maersk Olie of Gas, Cairn-Shell joint venture, and Hondo Oil and Gas.

Three offers are also there for block 20 - Maersk Olie of Gas, Triton Bangladesh and Hondo Oil and Gas being the bidders.

Hondo Oil and Gas is also vying for block 21.

For the risky western blocks, the number of bids is much fewer. The block 7 has two offers - Cairn-Shell joint venture and Triton Bangladesh-PTI Oil-Unocal joint venture.

South Asia Oil and Gas is seeking blocks 4 and 5. The block 5 is also sought by the Shell-Cairn joint venture. The block 4 has another bidder - Tullow Oil.

Enron is the lone bidder for block 3.

Among the 15 blocks of 2nd round of bidding - there were no interest for blocks 1, 2, 4 and 21 and 23. Initial interest of Enron for block 3, 6 could not proceed further for several reasons.

Result :

On 26 July 1998, GOB finally announced eligible the following bidding companies for gas blocks and pre qualified for further negotiations :

A production-sharing contract was initiated by Shell, Cairn, BAPEX and Petrobangla for exploring oil and gas in two blocks (5 & 10). The number-5 block of exploring hydrocarbons consists of greater Khulna while number-10 spreads over greater Noakhali and Bhola. Under the PSC, BAPEX (Bangladesh Petroleum Exploration and Production Company) will have 10 per cent share (carrier interest) in the production from the new blocks being taken for exploration. With the signing of a final agreement, Shell-Cairn will start geological, aeromagnetic and seismic survey on the block areas. According to the bid, In block 5, a 500-km seismic survey and 6500-km aeromagnetic survey will be done and one well excavated for striking gas and oil and a 2500-km seismic survey and digging of five wells are included in the preliminary exploration in block 10. "In the contract protection of world heritage site in the Sundarbans under block 5 has been ensured in line with the government's environment-preservation policy" as per official source.

Petrobangla is negotiating with Pangea for signing PSC for the block 8. Being the only oil company in the second round bidding which stuck to its original proposal submitted to the government nearly three years ago, Petrobangla had a very little difference of opinion with Pangaea.  Pangaea would invest some 13 million US dollar in the three-year initial operation period (IOP) to conduct seismic survey covering an area of 1000 km and drill an exploratory well. Successful activities would follow a two-year extension of the PSC twice. Unlike Shell, Unocal and other oil companies negotiating under the second round bidding, Pangaea did not seek any modification in the model PSC and extension of the three-year IOP up to five years or put any pressure to allow it to export gas in case of discovery.  The only major issue that came up in the negotiations between Petrobangla and Pangaea was the one of determining the period of PSC extension if the oil company fails to fulfil its commitments due to "force majeure". The model PSC of Petrobangla outlined a six-month PSC extension time in case of "force majeure". But Pangaea sought an extension of one year under this clause.  Experienced with the Magurchhara disaster back in mid 1997, Petrobangla readily agreed to the proposal of Pangaea. Pangaea is a very small and new private oil company with short track record. It has just completed drilling a well in the rainforests of Peru spending about 26.5 million dollars. A Petrobangla expert said that Pangaea was the sole bidder in block 8 though it had tremendous prospects of oil and gas discovery. The country's first traces of oil reserves was discovered in this block in 1961 when a foreign oil company named Stanolind undertook a drilling programme at Hazipur. He added that afterwards, almost no exploration activities were undertaken there.

Tullow managed to buy major share of Rexwood-Oakland for block 17 1nd 18. But could not prove the financial strength enough to continue to press for block 9 alone. Meanwhile, Petrobangla is waiting for a joint response from Irish oil company Tullow and American oil company Chevron regarding the government's recent proposal regarding block 9 that Bangladeshi exploration company BAPEX should be the operator. BAPEX has a 10 per cent carried over interest in this block while Chevron, Texaco and Tullow has 30 per cent interest each. The government proposed this to end disagreement between Tullow-Chevron and Texaco about which company would be the operator in the block. While Chevron-Texaco agreed to the proposal, Tullow did not. The government then suggested that the three companies discuss the proposal among themselves and give the feedback soon. Sources said Tullow has unofficially suggested that none of the involved companies should be the operator in the block. Instead, the Joint Review Committee (JRC) comprising representatives from Petrobangla and the oil companies concerned which is formed after a PSC is signed would act as the operator. "It seems negotiations on block 9 has reached a dead-end," one source said, adding that such a proposal was unlikely to be accepted by the government or even Chevron-Texaco.

It looks like that the major resistance from local experts and media support compelled BAPEX to come back to focus. If the present status of BAPEX will be handled properly, there are chances of developing national
organization and ensure better use of gas resources.

Petrobangla is also likely to hold negotiations on block 11 with Malaysian national oil company Petronas later this month.  Some sources however said Petronas has informed Petrobangla that it is interested in both blocks 9 and 11 and not block 11 alone.

At present negotiations advanced for blocks 19 and 20 with European oil company Maersk Olie for PSC signing of oil and gas exploration in deep sea. The company is now taking up various issues including taxation and duration of the initial operation period  (IOP). Sources concerned said Maersk Olie seeks a five-year IOP instead of the three-year time frame outlined in the Model PSC. Maersk is seeking a PSC for mainly conducting seismic survey in deep sea blocks 19 and 20 instead of focusing on drilling exploratory gas or oil well. It argues that deep sea blocks require heavy investment for developing a gas or oil field (in case of discovery) and ensured supply of the gas or oil to consumers. Therefore, it wants the government to ensure purchase of its gas. Since the government is not willing to sign any Gas Purchase and Sales Agreement now, Maersk seeks a seismic survey oriented PSC.

In the process Mobil, Petronas declined to continue negotiations further. Triton has been changed its status ( became bankrupt). Texaco indicated that they would be happy if block 9 would be awarded to Chevron. OMV of
Austria also loose interest in Bangladesh. Cairn has transferred its rights in Bangladesh to Shell Oil. Similarly Unocal became owner of Occidental Oil company rights for blocks 12, 13 and 14 in Sylhet basin.

It appears that in the very near future, gas production in Bangladesh will increase significantly considering the activities of the foreign oil companies operating at present plus the ones to be joining them soon in the present process of second round bidding.

Present Status of 23 Petroleum Exploration Blocks of Bangladesh :