Petrobangla again recommends Cairn’s gas sales proposal : Industries will be forced to buy high-priced gas from Cairn


Staff Correspondent

Petrobangla on Monday sent a position paper to the government in which it again recommended that UK-based Cairn Energy be allowed to sell gas directly to any third party in the country if it strikes gas in the Magnama and Hatiya structures in the Bay of Bengal.
   Sources in the state-run corporation said the latest decision to permit Cairn to sell its share of gas to other parties, mostly industries, was taken after negotiations with the company as per the directive of the prime minister’s adviser, Tawfiq-e-Elahi Chowdhury.
   They said that Petrobangla took the decision to agree to Cairn’s proposal within one day after its director (production sharing contract), Muktadir Ali, was appointed the chairman in place of Jalal Ahmed who was reluctant to sign the approval.
   ‘Petrobangla’s decision totally goes against the interest of the country and in favour of the international oil company. It appears the government has deliberately appointed as chairman a person who has developed a good relationship with international oil companies,’ said a Petrobangla source.
   Cairn in 2008 suspended exploration work in the Magnama and Hatiya structures after detecting the presence of gas in Magnama.
   The company demanded increase in gas price or permission to sell its share of gas directly to gas-starved industries once gas is found in the structures, saying that it would not be viable for it to sell gas to Petrobangla at the price specified in the production sharing contract.
   Petrobangla, earlier in March, was in favour of Cairn’s proposal to allow it to sell gas directly to other parties. The PM’s adviser, Tawfiq-e-Elahi, asked Petrobangla to negotiate again with Cairn to know how much gas the government would get if Cairn was allowed to sell gas to other customers in the country.
   Sources in Petrobangla said when Cairn first raised the demand in 2008, the then Petrobangla’s director (mines and mineral), Maqbul-e-Elahi, vehemently opposed the idea, saying Cairn’s demand was ‘outrageous’ and in ‘clear violation’ of the PSC.
   ‘The PSC, which the company signed with Petrobangla, has a specific formula on how the gas price will be fixed. It will be a clear violation of the PSC if the gas price goes beyond the formula price,’ said a source. ‘Besides, the PSC says Petrobangla has the first right to buy the gas. Petrobangla will of course want to buy the gas as there is a shortage of around 300 million cubic feet per day of gas in the country, and that is why the PSC was signed. So the company cannot sell the gas to a third party directly unless Petrobangla declines to purchase it.’
   ‘Petrobangla will have to tell the lie that it is unable to buy gas, even though the country suffers from huge gas shortage, to make the selling of gas to other parties legal,’ he added. Sources said the Petrobangla’s last chairman, Jalal Ahmed, had argued that if Cairn extracts around 100-200 million cubic feet of gas per day, the country gains no benefit by allowing it to sell gas directly to any third party.
   If Cairn extracts around 180 mmcfd of gas, its share will be around 100mmcfd as the company will get additional gas as cost recovery and Petrobangla will get only 80 mmcfd of gas,’ Jalal was said to have told Petrobangla officials. ‘In that case the decision to allow Cairn to sell gas to a third party will only benefit the company. Cairn could have been allowed to sell its share to a third party if it could extract 500mmcfd of gas, but it has indicated that there is no big reserve in the structures.’
   Muktadir told New Age they had recommended that the government allow Cairn to sell gas to other parties in the ‘interest’ of the country. ‘If we do not agree, the company will remain idle for two more years and leave the country. Which means we will not get any gas at all.’
   ‘Besides, our recommendation is not new as we made a similar recommendation during the caretaker government’s tenure. Now we have made our recommendation again and it’s up to the government to decide if it wants to allow Cairn to sell gas to a third party,’ he said.
   BUET’s energy expert, Professor Nurul Islam, had earlier told New Age that it appeared that a ‘plot’ was being hatched to allow the company to sell gas to industries at a high price.
   ‘The company has been almost idle for a decade and shunned gas exploration, and now it has come up with demands which violate the production sharing contract. The industries in Chittagong are in a crisis because of shortage of gas and they will be forced to buy high-priced gas from Cairn as they do not have other options,’ he said.

Source: The Daily New Age, 21 April 2009

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