September 4, 2012 (TSR) – Australian exploration and production company Santos has lost interest in acquiring UK-based Tullow Oil’s assets in Bangladesh, a Santos official said Tuesday.
“We are no longer interested in buying Tullow’s assets in Bangladesh,” Santos Bangladesh President John Chambers said.
Santos, which had initiated talks to acquire the assets in May, now believes that the assets have lost “significance” with the discovery of the Srikail gas field by Bapex, or the Bangladesh Petroleum Exploration and Production Company. The Srikail field is located adjacent to Tullow’s producing onshore Bangora gas field in Comilla district under block 9, some 100 km southeast of the capital, a Santos source said.
Bangladesh’s sole oil and gas exploration firm Bapex discovered the field mid-July this year and plans to initiate gas production from November, Bapex Managing Director Mortuza Ahmad Faruque said Tuesday. The Srikail field has a recoverable gas reserve of around 300 Bcf, he said. There is a cumulative 40 meters gas layer in two zones in the Srikail field, Faruque said.
Bapex, a wholly owned subsidiary of state-owned Petrobangla, will start supplying around 30,000 Mcf/d of gas from Srikail, he added.
Bangora’s gas output along with its reserves would fall sharply with the start of gas production from Srikail, the Santos source said.
Meanwhile, Tullow is reportedly planning to divest its Asia assets, all of which are in Bangladesh and Pakistan, to focus on core operations in other regions. It hopes to wrap up operations in Bangladesh by December.
Santos is not interested in Tullow’s assets in Pakistan, the source added. Tullow posted sales revenue of $20.8 million in Asia in 2011, $19.8 million of it from operations in Bangladesh. The company has a 30% stake in the Bangora field in Bangladesh, which produces around 100,000 Mcf/d of gas.
Bangora’s other stakeholders are Canada’s Niko Resources (60%) and Bapex (10%).
Separately, Tullow’s other interest in Bangladesh is the shallow offshore gas block SS-08-05, which it was awarded in the February 2008 bidding round. But a production sharing contract has yet to be signed as neighboring India is opposing the deal, claiming a major portion of the block lies in its territory.
A portion of SS-08-05 block was licensed by India in 2007 as block NEC-DWN-2004/2 to Santos, according to UK-based consultant Wood Mackenzie. The dispute has been referred to the Hague’s Permanent Court of Arbitration.
Santos is the operator of Bangladesh’s sole producing shallow offshore gas field Sangu-11, which is currently producing 19,000 Mcf/d of gas.
Santos is the only international oil company in Bangladesh that is allowed to sell natural gas directly to third parties at market prices.