The drilling was postponed for a year because of the Covid-19 pandemic
Bangladesh will begin gas exploration drilling in its maritime areas on Wednesday.
Bangladesh and India will jointly drill a new block in the Bay of Bengal under Production Sharing Contracts (PSCs) in a bid to increase gas production in the country, according to media reports.
The SS-4 or Shallow Sea-4 block, located offshore in the Bay of Bengal, will be drilled under Production Sharing Contracts (PSCs) by Indian state-owned ONGC Videsh Ltd, Oil India Ltd, and Bangladesh Petroleum Exploration and Production Company Limited (Bapex).
The drilling could help the country, which has been experiencing severe gas shortages due to limited output from existing onshore gas fields.
Finding gas will improve domestic production and reduce reliance on pricey Liquefied Natural Gas (LNG), Md Anisur Rahman, senior secretary of the energy division in the Ministry of Energy, Power and Mineral Resources, told The Business Standard.
"Because of the worldwide pandemic, the drilling was postponed for a year. International oil firms (IOCs) will now be permitted to search for oil and gas in the shallow sea," he added.
ONGC would drill 4,000 metres beneath the block, according to officials from the Bangladesh Oil, Gas & Mineral Corporation (Petrobangla).
The company plans to drill again on this block in the middle of next year, sources said.
Two PSCs were signed with ONGC Videsh Ltd (OVL) and Oil India Ltd (OIL) for drilling at blocks SS-4 and SS-9 during the Bangladesh Offshore Bidding Round of 2012. Bapex has been designated as a stakeholder with a 10% interest in these blocks by the Bangladesh government.
Contractors will survey and drill the block at their own expense, and gas revenues will cover 55% of their expenses each year, as required by the PSC contract.
Petrobangla will own a minimum of 60% and a maximum of 85% of the recoverable gas from the block, as well as a minimum of 70% and a maximum of 90% of the recoverable oil.
The ONGC partnership has completed a 5,500-line-kilometer two-dimensional or 2D seismic survey in the block since the contract was signed.
In Bangladesh's marine border, it discovered 25 shallow and deep-sea blocks. Only three blocks for gas and oil exploration have been given thus far.
This is not the first time a foreign corporation has been granted permission to explore gas and oil.
In March 2017, a PSC for deep-sea block DS-12 was signed with South Korean oil and gas company POSCO DAEWOO Corporation under the "Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act, 2010."
However, due to a disagreement over gas costs, the company left Bangladesh without completing the project.
Meanwhile, the country has discovered 28 gas sources on land, 22 of which are operational and provide two-thirds of the country's total gas consumption.
Currently, the country consumes 3,034 mmcf of gas per day, despite demand of over 4,000 mmcf. The rest of the gas originates from local fields, with the exception of 600mmcf LNG.