Uncertainty looms over offshore oil and gas prospects

Bangla Press Desk:   Even more than a decade after winning its maritime boundary, Bangladesh has failed to achieve any notable success in oil and gas exploration in the Bay of Bengal. While neighbouring India, Pakistan and Myanmar have moved ahead in discovering offshore energy resources, Bangladesh has remained stuck in a cycle of failure for nearly fifteen years. The most recent evidence came from the latest offshore oil and gas exploration tender, where although seven foreign multinational companies purchased tender documents, none ultimately submitted bids.

As a result, the prospects for offshore oil and gas have become uncertain due to the lack of interest from multinational companies. Discussions with relevant sources and energy-sector experts reveal multiple structural and policy-related reasons behind this disinterest. Key issues include companies’ profit-sharing margins in oil and gas extraction, insufficient survey data, and the requirement to share profits with employees through the Workers’ Profit Participation Fund (WPPF).

Other concerns include the high cost of acquiring geological data for offshore blocks, additional wheeling charges for transporting gas from deep sea to onshore facilities, and the country’s ongoing political uncertainty. However, multinational companies’ strongest objection relates to the mandatory payment to the WPPF under Bangladesh’s labour law.

Sources in the Energy Division and Petrobangla said the government has recently formed a committee to review and make recommendations on the draft Offshore Model Production Sharing Contract (PSC) 2025. The committee is headed by Mohammad Mohsin, chairman of Bangladesh Gas Fields Company Limited, and has been asked to submit its report by 15 January.

Earlier, Petrobangla finalised the draft PSC 2025, introducing major reforms on gas pricing, pipeline cost recovery and work obligations to attract international oil companies.

CPD Distinguished Fellow Dr Mustafizur Rahman said that the reasons why seven foreign companies bought tender documents but did not submit bids must be reviewed before retendering. He said Bangladesh had failed to act in time and had become overly dependent on LNG imports, unlike Myanmar and India, which moved ahead earlier. He stressed the need to consider the feedback of companies that withdrew, while safeguarding national interests and clarifying how WPPF obligations would apply to foreign-currency investments.

He also noted that state-owned Bapex has only onshore drilling capacity and lacks offshore capability, making foreign companies essential for offshore exploration.

WPPF: a major barrier to investment

Under the Bangladesh Labour Act 2006 and Labour Rules 2015, companies are required to contribute to the WPPF. However, there is no clear guideline on how this applies to projects financed by foreign currency. Several multinational firms argue that such obligations are not fully aligned with international investment norms, particularly as the law remains unclear for foreign-currency-invested industries.

Experts note that while WPPF is important for workers’ welfare and inclusive growth, clear policies and transparent management are essential to make it compatible with foreign investment.

Former BUET professor and energy expert Dr Ijaz Hossain said Petrobangla has addressed many technical issues, but political and economic instability discouraged companies from submitting bids due to high financial risk. He added that recent revisions linking gas prices to international oil prices are positive, and further structural fixes could improve future investment prospects.

Despite repeated PSC revisions and interest from major global companies, political uncertainty remains the primary deterrent. Petrobangla officials say further incentives are being added in PSC 2025, including a higher gas price benchmark, to attract investors.

According to Petrobangla, Bangladesh has 26 offshore blocks in the Bay of Bengal. Over the years, several multinational companies have started operations but later withdrawn, citing pricing disputes and commercial risks. Experts suggest that while data costs and wheeling charges can be resolved by policy decisions, addressing WPPF and labour law ambiguities requires urgent action by the Ministry of Labour and Employment.

BP/SP