State-run oil and gas company ONGC Videsh signed two production sharing contracts (PSC) on Monday to explore oil and gas in Bangladeshi waters.
State-run Bangladesh Oil, Gas and Mineral Corporation, known as Petrobangla, awarded shallow water blocks SS-04 and SS-09 in the Bay of Bengal to the company.
Finance Minister Abul Maal Abdul Muhith told reporters at the signing ceremony that Bangladesh needed to be more prudent in its use of natural gas because of falling production and rising consumption.
Bangladesh currently faces a daily shortfall in gas supplies of 500 million cubic feet (mmcf) on demand of 2,700 mmcf per day, he said, and demand is rising 8 to 10 percent each year.
Under the PSC, ONGC Videsh will spend $103.2 million during the initial exploration of the two blocks, according to a document distributed to reporters during the signing event.
It will also conduct an in-depth seismological survey of the blocks during a five-year initial exploration period which will be followed by a three-year exploration period.
The contractors will be allowed to operate and sell oil and gas for 20 years from an oil field and 25 years from a gas field.
The firm must offer to sell gas to Petrobangla and if Petrobangla does not accept within six months the contractor can sell it in Bangladesh, according to the document.
Bangladesh's offshore gas output has been zero since October 1 when the Sangu offshore field was shut permanently because it was not commercially viable.
"Santos (STO.AX), an Australian oil and gas exploration company, the operator of the field officially informed us about the closure," said Mohammad Imaduddin, director of Petrobangla.
Sangu was only producing 2.5 million cubic feet gas a day compared to the up to 180 million cubic feet of gas a day it produced at its peak.