The Bangladesh Government has taken an initiative for updating the Model Production Sharing Contract (MPSC) to attract the International Oil Companies (IOCs) to participate in the next bidding round for oil and gas explorations in the country's offshore blocks soon. State-run Petrobangla has been updating the Model PSC by bringing in some positive changes in the provision to make the offer more attractive for International Oil Companies.

Last year, Petrobangla awarded the contract to Wood Mackenzie to upgrade the MPSC (Model Production Sharing Contract) with a target to get the MPSC fiscal terms upgradation completed by the Consultant in line with the IOC expectations and current market scenario.

Offshore Model Production Sharing Contract

In the latest development Petrobangla has incorporated the recommended changes to the MPSC.

WoodMac also suggested Petrobangla the need for making some positive changes to the Non-fiscal terms of the MPSC in addition to their recommended changes in the fiscal terms which have also been considered in the new the MPSC. The upgraded/revised MPSC 2023 has approved by the Cabinet during July 2023 and the same has been officially published by Petrobangla recently. The Model Production sharing contract 2023 can be downloaded from the Petrobangla website.

http://www.petrobangla.org.bd/site/page/51 b49476-08c2-4c15-b957- ece3879c8dee/Model-PSC

The Salient Features of the Model PSC 2023 on the Major Changes are as Follows:

Contract Features and Description

1) Exploration Period: Total Exploration Period 9 years (Initial Exploration Period 6 years + Subsequent Exploration Period 3 years)

) Mandatory work Program: Seismic Only.

3) Biddable work Program: Geology, Seismic, Drilling, Other Surveys.

4) Cost Recovery: 75% for Oil /Gas /NGL/Condensate produced per calendar year.

5) Profit Split (Govt. Share): R-factor (Sliding Scale) based Shallow Sea Blocks: 40% 65% (Biddable upper and lower limits) Deep Sea Blocks: 35% 60% (Biddable upper and lower limits)

6) Carried Interest: 10% carried interest for Govt. for Shallow Sea Blocks only. (Bapex participates as carried Partner)

7) Import duty on Equipment: No duty.

8) Corporate Income Tax: Petrobangla shall arrange necessary fund to Contractor and Contractor shall pay their tax to appropriate authority.

9) Gas Price: Indexed to a percentage of global index Gas Price = 10% x Brent Applicable both for Shallow and Deep Sea Blocks No Ceiling and Floor. Price will be at Wellhead.

10) Gas Export Contractor: has the option to sell Contractor's share of Natural Gas produced from offshore blocks in the domestic market to a third party at a negotiated price subject to Petrobangla's right of first refusal If no market exists then Export.

11) Third Party Gas Sales: Contractor has the option to sell Contractor's share of Natural Gas produced from Offshore blocks, in the domestic market to a third party, at a negotiated price, subject to Petrobangla's right of first refusal

12) Pipeline and Tariff No: pipeline tariff applicable both for shallow deep sea blocks Contractor shall have the right to construct operate the Pipeline recover the cost.

13) Fees and Bonus:

a) Commercial Discovery of Oil and Gas in Contract Block: US 3 000 000

b) Production Bonus: US 500 000 to US 6 000 000 on the basis of Production.

c) Research and Development: US cent 10 per bbl of profit Oil/NGL/Condensate and US cent 0 4 per MCF of Profit Natural Gas.

d) Contract Service Fee: d) US$ 200,000 during exploration and development period on each anniversary of the Effective Date and US$ 300,000 during production period on each Calendar Year.

14) Training: US 150 000 during exploration and development period and US 200 000 during production period on each Contract Year.

15) Extension of Production Period: Production Period is 25 years If commercial production still possible then provision of additional 10 years extension.

Offshore Seismic Survey:

The Government also took initiative to conduct multi-client 2D seismic survey for Bangladesh Offshore areas in the Bay of Bengal, which has been awarded to TGS- SchlumbergerJV. The contractor will conduct the seismic survey in the Bay covering 32,000 line-kilometers, in both deep and shallow waters.

The survey initiated in January this year and the first phase of the study covering approximately 12000 line- kilometers have been completed in April 2023. Data processing has been done simultaneously. FYI, the 2nd phase of the seismic survey is expected to start by the end of this year or early next year.

Total Offshore Blocks: 26

Shallow Offshore: 11

Deep Offshore: 15

Total Offshore Block Area: 111,126 Sq. Km. Approx

Shallow: 58,729 Sq. Km.

Deep: 52,397 Sq. Km.

Current Offshore PSC Signed Status:

The Production Sharing Contracts (PSC) of the Blocks SS-04 and SS-09 were signed by the Petrobangla with the consortium of ONGC Videsh Limited (OVL) and OIL India Limited (OIL) and Bangladesh Petroleum Exploration and Production Company Limited (BAPEX) on 17 February 2014.

OVL has been acting as the Operator of these two Blocks with Participating Interest of 45%, OIL holds 45% PI and BAPEX 10%.

The Government's Plans to For the Bidding Round / Direct Negotiations:

According to the Energy Ministry, the bidding round would be held after the general election due in January 2024 as they expect to get actual seismic data on the offshore blocks in the Bay through completing the 2nd phase of ongoing multi-client 2D seismic survey by Q1,2024 (expected).

ExxonMobil officially expressed their interest for the Deep offshore blocks in the Bay of Bengal.

Chevron bought the 1st phase of seismic data covering 12k line-kilometers from TGS- SLB during the last quarter and a number of IOCs are in advance communications on procuring the data from TGS-SLB. FYI, the 2nd phase of the seismic survey is expected to start by the end of this year or early next year depending on securing the IOC prefunding for the same.

In addition to ExxonMobil, Chevron also submitted a formal letter to Energy Ministry expressing its Commercial Interest in Bangladesh Offshore Gas Exploration and Development Projects.