Dhaka, Bangladesh (BBN)– The government has prepared a draft production sharing contract (PSC) to conclude a deal with US oil giant ConocoPhillips to initiate gas exploration in deep water in the Bay of Bengal, officials said.

“We’ve prepared the draft PSC and forwarded it to the energy ministry, which was subsequently sent to the law ministry for vetting,” Petrobangla Chairman Dr Hussain Monsur was quoted by the Financial Express (FE), a local newspaper, as saying.

He also said Prime Minister Sheikh Hasina, who is also the minister for power and energy, will give final approval following the vetting before signing the much-delayed PSC.

State-owned Petrobangla has inked an initial deal with the US firm early this month to sign the PSC sometime next month.

Petrobangla signed the previous PSC following the country’s second round bidding on July 4, 2001 with British Shell Oil and Cairn Energy for exploration in blocks 5 and 10, officials said.

The US firm would be able to start exploration including seismic surveys immediately after signing the PSC, the Petrobangla officials added.

ConocoPhillips would conduct hydrocarbon exploration in two deep water offshore blocks — DS-08-10 and DS-08 -11 – under the proposed PSC.

The US firm would have to avoid exploration activities in disputed areas inside the blocks as claimed by neighboring India and Myanmar until settlement.

High sulphur fuel oil (HSFO) price has been fixed at US$ 70 per tone as the floor price and $180 per tone as the ceiling price for fixing of gas prices.

Prices of onshore gas field would be 75 percent of the HSFO, shallow-depth gas field would have a 25 percent hike over the onshore prices.

For deep-water gas blocks the prices would be 100 per cent of the HSFO.

The contractor will have to pay corporate taxes of their own under the proposed PSC.

The ConocoPhillips would be able to export gas only in the form of liquefied natural gas (LNG) form provided it gets consent from Petrobangla.

BBN/SSR/SI-28Oct10-10:35 am (BST)