Gazprom deal may oil Dhaka arms
purchase By Syed Tashfin
Chowdhury
DHAKA - Bangladesh indicated its
growing intimacy with Russia through the award
last month of well-drilling contracts without
going through a tender process and without a
production sharing clause. Dhaka also hopes soon
to obtain suppliers' credit worth US$850 million
to procure Russian-made military equipment.
The government of Prime Minister Sheikh
Hasima on December 20 approved contracts for
drilling 10 wells in existing gas fields by
Russia's Gazprom. The move follows the signing
last year of an agreement with Russia for a nearly
$2 billion nuclear power plant that will be set up
in Bangladesh.
Bangladesh's cabinet
committee on government purchases
approved the onshore drilling
contracts after almost two years of talks between
state-owned Petrobangla and Gazprom, also
state-owned. Gazprom had made an offer on a
turnkey basis at a total cost of $193.55 million.
Gazprom is the first foreign company to
partner Petrobangla in exploration without a
production sharing contract (PSC).
Gazprom
will drill five development wells in the Titas and
Rashidpur gas fields. Titas is Bangladesh's
second-largest gas field, producing around 444,000
million cubic feet of gas. Rashidpur, owned by
Sylhet gas fields, is producing around 48,000
million cubic feet per day.
Gazprom will
also drill five exploration wells in four gas
structures at Shahbazpur, Semutang, Sundalpur and
Begumganj, that are owned by Bangladesh Petroleum
Exploration and Production Co Ltd (Bapex).
The drilling is scheduled to be completed
within 18 months of approval being granted.
Gazprom will pay 5% of the total cost as a
performance guarantee.
Platts quoted
Petrobangla chairman Hossain Mansur as assuring
that they will "sit with Gazprom officials shortly
to finalize negotiations before inking a deal over
the drilling program", to settle outstanding
issues such as a framework for compensation in the
event of a blowout and the payment of insurance
premiums. The development was welcomed in
Bangladesh, which requires fast solutions to its
ongoing energy crisis. Against a demand of 2.5
billion cubic feet of gas per day (Bcf/d) , the
country can supply only around 2.04 Bcf/d, a
shortage that is set to worsen in an economy that
has grown at a rate of at least 6% since 2003.
A law passed last year by the Awami League
government allowed it to ensure fast
implementation of power and energy projects while
bypassing the tender process, paving the way for
the Gazprom deal.
Polish oil and gas
explorer Poszukiwania Nastyi Gazu Krakow was
initially selected to drill five wells after a
competitive tender process and rounds of talks
that ended on September 2010. It subsequently
backed out from the project. The gas that the
Polish company was supposed to extract from the
five wells would have been added to the Bangladesh
national grid in 2012.
The Bangladesh
cabinet considered a segment in the Gazprom
proposal that referred US company Chevron digging
nine wells in Moulvibazar and Bibiyana in Sylhet
next year at an estimated cost of $19 million per
well. Petrobangla officials, prior to the
approval, had evaluated that Gazprom's quotation
was "at par” and in some cases, "lower than other
companies".
A final agreement for the job
will be signed between the two governments in line
with a bilateral agreement made between the two
sides during Prime Minister Hasima's visit to
Moscow in November 2010.
Dhaka also
expects to conclude a deal with Moscow soon to
obtain suppliers' credit worth US$850 million to
procure Russian-made military equipment.
Bangladesh officials have claimed the
procurement will "modernize" Bangladesh's armed
forces. On November 21, 2010, during a speech to
mark the Bangladesh armed forces' day celebration,
Hasima assured the army her government would
obtain for them high-quality tanks, self-propelled
artillery, air-defense missile systems, fighter
aircraft and helicopters.
The duration of
the suppliers' credit from Russia will range from
four to six years, Bangladeshi officials said
following a two-day meeting in Moscow early last
December. Major General Abdul Matin of Bangladesh
armed forces division led the six-member
Bangladesh team while KV Vyshkovskiy, director of
state debt and state financial assets, led the
Russian side.
The two teams designated
Russian state-owned bank, Vneseconobank, and
Bangladesh's state-owned Sonali Bank to handle the
deal.
Bangladeshi Finance Minister AMA
Muhith told Bangladesh's New Age later that
although there were "many offers for loans
including suppliers' credit by Russia and China”,
the government would accept the loan deals "which
would benefit the country [Bangladesh]".
New Age reported that besides procuring
military equipment from Russia, Bangladesh will
soon obtain "44 new tanks and three armored
recovery vehicles from China and two helicopters
from France" at "less than $200 million".
The incumbent Bangladesh government has
enjoyed a strong bond with Russia since
Bangladesh's liberation from Pakistan in 1971,
when the Soviet Union was the first nation to
recognize the new country. Bangladesh bought eight
MiG-29 jet fighters for about $124 million from
Russia during the last time Awami League
government, which ended in 2001.
The
nuclear power plant project deal between
Bangladesh and Russia is expected to generate at
least 1,000 MW of electricity by 2014. Russia is
to assist in the design, construction and
operation of nuclear power plants in Bangladesh
and to train Bangladeshi engineers and officials.
Syed Tashfin Chowdhury is the
Editor of Xtra, the weekend magazine of New Age,
in Bangladesh.
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