Australian Santos announces its first commercial gas discovery in Bangladesh
Thursday, 16 February 2012 | 00:00
Australia-based exploration and production company Santos has found commercially viable gas reserves in the Sangu-II well it has drilled in block 16 in the Bay of Bengal, its first success in Bangladesh, John Chambers, president of Santos in Bangladesh, told Platts.
Gas supply from the well will be available by April, he added. Sangu-11 in shallow water block 16 is being drilled from the existing Sangu platform, some 60 km (37.2 miles) offshore Chittagong.
Chambers did not quantify Sangu-II's reserves, but said the company will be able to do so in the next couple of weeks when necessary assessments are completed.
Petrobangla Chairman Hussain Monsur on Tuesday said: "Santos has informed us of getting new gas finds. It's a ... relief to ease the acute gas crisis in the port city of Chittagong."
He hoped that at least 20,000 Mcf/d to 25,000 Mcf/d of gas from the new well would be available for Chittagong's industrial customers.
The is the second time commercially viable gas reserves have been found offshore Bangladesh, following the previous discovery by UK's Cairn Energy in 1996. Cairn, the previous operator of the Sangu field, found gas at the same block.
In addition to owning 100% of the Magnama and Hatiya structures in block 16, Santos acquired Cairn's interests in Bangladesh in November 2010. Following the acquisition, Santos became the operator of Bangladesh's only offshore producing gas field, Sangu. Santos has a 75% stake in Sangu while Halliburton Energy has 25%.
Santos began a $128 million three-well drilling program in block 16 in October last year, but it did not discover any commercially viable gas reserves in the first two wells it drilled, Platts reported earlier. Santos completed drilling the South Sangu-4 and North East Sangu-1 wells in December.
"It is possible that a fourth exploration well may be drilled on the new Magnama prospect, should time and weather permit," Chambers previously told Platts.
Sangu is now producing around 9,000 Mcf/d of gas, which is around 4.0% of the field's peak output of around 220,000 Mcf/d in 2006 when Shell was its operator.
Santos has been incurring losses in operating the Sangu field over the past year as gas output has fallen sharply, a company official previously told Platts. He said that producing gas from the Sangu field is economically viable only when output crosses 20,000 Mcf/d.
Despite incurring losses, Santos has been producing gas from Sangu on expectations that its overall block 16 operation will be profitable if it is able to supply gas from new wells to private buyers at market prices, the source said.
Santos will be able to sell gas from its Sangu-11 well at market price, the Santos official said. 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.
All other international oil companies have to sell their gas to state-owned Petrobangla first, which then sells it to state-owned gas distribution companies to reach end-users.
Santos will first offer Petrobangla the option to buy gas produced from its new offshore structures at market price, Platts reported previously. If Petrobangla refuses, the Australian company will then offer the gas to private buyers.
Santos has 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 between Santos and Petrobangla.
Santos has already received expressions of interest from over a dozen large privately owned companies in Chittagong that are willing to buy gas at market price due to a growing gas shortage in the country, Platts previously reported.
Bangladesh's proven reserves stand at 6.0 Tcf and probable reserves at 5.5 Tcf. Bangladesh produces around 2.04 Bcf/d of gas, while demand is over 2.5 Bcf/d.