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Australian Santos receives interest for Bangladesh gas from private buyers

https://www.chemnet.com   Jul 07,2011 Platts
Australian exploration and production company Santos has received expressions of interest from large privately owned industries in Chittagong that are willing to buy gas from its offshore fields in Bangladesh at market price, a company source said Wednesday.

"Santos has already got over a dozen proposals from large privately-owned industries of Chittagong that are willing to purchase gas from us," he said, adding that they were still receiving expressions of interest from potential buyers.

The potential buyers include fertilizer factories, power plants, steel re-rolling mills and glass factories.

"Initial responses from the buyers are good," the source said, without providing further details.

Private entrepreneurs in Chittagong are keen on buying the gas, even at market price, as many factories run by gas-fired power plants were unable to even startup operations due to the gas shortage in the country, Chittagong Chamber of Commerce and Industry President Murshed Murad Ibrahim told Platts Wednesday. He said the industrial companies want consistent gas supply to keep operations stable.

Santos is the only international oil company in Bangladesh that has been allowed to sell natural gas directly to private buyers at market price, from its new offshore fields in block 16 of the Bay of Bengal.

Santos will first offer state-owned Petrobangla the option to buy gas produced from its new offshore structures at market price. If Petrobangla refuses, the Australian company will then offer the gas to private buyers. Santos has already set $4.50/Mcf as the baseline price for its gas from block 16, which is 55% higher than the previous price of $2.90/Mcf.

Other international oil companies operating in Bangladesh sell their gas output to Petrobangla first, which then sells it to state-owned gas distribution companies to reach end-users.

Santos on May 25 said it will invest over $100 million in a three-well drilling program in block 16 from the fouth quarter of the year. It is preparing to start drilling the three wells from October. It has awarded Seadrill a contract for jack-up drilling rig Offshore Resolute, to carry out the drilling program.

It will drill a well in South Sangu field first, from where the rig will move to other fields. The Sangu-11 well will be drilled from the Sangu platform, some 60 km (37.2 miles) off Chittagong, Santos Bangladesh President John Chambers told Platts earlier. If the program is successful Sangu-11 may be able to provide some immediate relief to the gas situation in Chittagong, John had said.

The other wells will target accumulations away from existing infrastructure and will take further time and investment to bring into production, said Chambers.

Santos acquired Cairn Energy's interests in Bangladesh in November, 2010. Following the acquisition, Santos became the operator of Bangladesh's only offshore operating gas field, Sangu. Santos has a 75% stake in Sangu while Halliburton Energy has 25%.

The government has forecast that the country's current gas reserves will run out by 2014-15 at current consumption rates. Its proven reserves now stand at 6.0 Tcf and probable reserves at 5.5 Tcf. Bangladesh now produces around 2.00 Bcf/d of gas, while demand is over 2.50 Bcf/d.

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