‘Diplomacy’ draws OVL to Bangladesh

Almost all global majors have deserted the offshore bidding, citing ‘un-viability’ and ‘lack of clarity’

Limited (OVL), the foreign investment arm of state-run ONGC, has turned out to be one of the only two applicants for a fresh round of offshore bidding in Bangladesh.

At a time when almost all global majors deserted the bidding process, citing “un-viability” and “lack of clarity at the policy front”, OVL is probably acting according to a “diplomatic” decision by the Centre. If OVL wins the bid, it would mark the company’s foray into Bangladesh.

During the pre-bidding stage, global majors such as Chevron, Royal Dutch Shell, Santos, Statoil, Krisenergy, Eni, Bahrain Petroleum, Tullow, Exxon Mobil, BP, Conoco Philips, Petronas and China National Offshore Oil Corporation were reportedly in the race. However, barring OVL and Conoco Philips, all these companies backed out, citing lack of incentives to cover the offshore investment risks. “These companies had opted out of the race because the blocks were unviable and there was no clarity at the policy level,” said a senior executive at one of the multinationals that participated in the pre-bid meeting.

The last date of submission of bids for the oil and gas shallow sea blocks was April 2.

D K Sarraf, managing director of OVL, said, “To go for theblock was a business strategy. We had done our initial studies before going for the blocks and, according to these studies, the blocks we had gone for are viable.”

Of the nine shallow-water blocks up for auctions, ONGC and Conoco Philips went for only three blocks – SS 04, SS 09 and SS 07. The Bangladesh government has notified the terms and conditions of bidding for three deep-sea blocks are being reviewed, with an attractive production-sharing contract. The dates for bids would be notified later, it added.

When contacted, Bangladesh Commerce Minister Ghulam Muhammed Quader declined to comment on the issue.

“Diplomatic energy exchange is part of India’s strategy with Saarc (South Asian Association for Regional Cooperation) nations. However, I believe the geological data conclusions by OVL might have shown good potential for those blocks. For Bangladesh, there is always an issue related to PSC (production sharing contract), logistics, etc. That might be the reason why private companies have opted out of the race,” said Deepak Mahurkar, who heads oil & gas industry practice at PricewaterhouseCoopers India.

In December 2012, the Bangladesh Mineral Oil & Gas Corporation, through Petrobangla, had invited bids from international companies for 12 blocks. Indian interest in the blocks is considered to be aimed at tackling the aggressive Chinese expansion in trade and investments in Bangladesh.

Currently, OVL has assets in Kazakhstan, Russia, Myanmar and Vietnam in the East Asia; Iraq and Syria in West Asia; Libya, Nigeria and Sudan in Africa and Brazil, Colombia, Cuba and Venezuela in Latin America.

Source: Business Standard