Dhaka, Bangladesh (BBN)– Scottish Cairn Energy will not carry out the much-needed gas exploration in the offshore gas fields on the Bay Bengal this year, although the government has met the firm’s long-pending demand to sell gas output to private users.

“It is not possible to conduct exploration works in the offshore Magnama and Hatiya structures in the coming winter,” a company insider was quoted by the Financial Express (FE), a local newspaper, as saying.

He said the government nod to allow Cairn to sell gas to third party came late, prompting the company to drop its planned exploration works in the offshore gas fields next winter.

It is a big blow to the country’s ailing gas supply situation as the government is struggling to meet the mounting gas demand in industries, power plants and households, persons close to the country’s gas scenario have observer.

The country’s overall gas supply is now hovering around 1,980 million cubic feet of gas a day (mmcfd) having a shortfall of around 500 mmcfd, which has resulted in the shutdown of scores of industrial units, fertiliser factories, power plants and gas rationing in industries and compressed natural gas (CNG) filling stations, the newspaper said.

In September this year, the government allowed Cairn to sell gas output to private buyers at higher rates by amending the production sharing contract (PSC).

State-owned Petrobangla signed the amendment to the PSC with the Cairn and its partners Australian Santos and USA-based Halliburton on September 26.

Cairn has long been pressing the government to allow it to sell gas to private buyers for commercial viability of oil and gas exploration from its Magnama and Hatia structures.

It also threatened several times not to conduct exploration works in the offshore structures unless the company was allowed to sell gas to third parties.

“We were expecting that Cairn and its partners would initiate exploration works in offshore gas fields this winter to expedite gas production from the prospective fields as it has been allowed to sell gas to private buyers,” a senior energy ministry official to the newspaper.

But putting off gas exploration would linger the country’s perennial gas crisis, he said.

As per its planned exploration activities, Cairn was due to conduct exploration of wells in South Sangu, Magnama and Hatiya to develop the fields for natural gas production.

The company last year conducted extensive three-dimensional (3D) seismic surveys in these structures and announced that it has ‘encountered’ gas presence there.

Cairn, however, did not disclose the size of the reserve.

Magnama, South Sangu and Hatiya structures are located in Bangladesh’s shallow offshore gas block No 16, which was awarded to Cairn Energy following the country’s first-round bidding for oil and gas exploration in 1994.

BBN/AD/SI-27Oct10-11:09 am (BST)