Deep water exploration and production

Here’s why Bangladesh’s gas price is not valid in India

Arvind Kejriwal had first raised the question of Niko Resources charging a price of $2.34 in Bangladesh as against its demand of over $8 in India.
The Supreme Court of India during the hearing of two public interest litigations (PIL) on the gas pricing issue asked the government why Niko Resources is selling gas in Bangladesh at $2.34 per mmBtu while it wants a price of $8.4 per mmBtu in India. Ironically when the case was being argued in the Supreme Court, government owned ONGC has demanded a price of $13 per mmBtu for its gas.

While the product, natural gas remains the same, the three price points that we have only adds to the confusion. Why should ONGC ask for higher gas prices when the government, using the Rangarajan Committee formula has suggested a price of $8.4, which in any case is being contested saying that it is too high.

Arvind Kejriwal had first raised the question of Niko Resources charging a price of $2.34 in Bangladesh as against its demand of over $8 in India. The question does seem logical, why should a product cost nearly four times as much between neighbouring countries, when the producer is the same.

The difference in prices arises from the source of extracting the gas. In Bangladesh, Niko is evacuating gas from onshore fields (based on land). While in India the company has to extract gas from offshore fields (in the sea). In fact the KG D6 basin from where Niko along with Reliance and BP are extracting gas is a deep water well, which means that the company has to operate in the deep sea. ONGC uses the same justification when it demanded $13 for its gas for its wells in Mahanadi basin (close to KG D6).

Deep water exploration and productionAn idea of the cost of operations in land/shallow and deep water can be ascertained from the cost of hiring rigs which are meant to evacuate the fuel. An onshore rig can be hired at around $20,000 (Rs 12 lakh) per day, while a shallow water rig costs around $ 70,000 (Rs 42 lakh) per day and a deep water rig costs around $280,000 (Rs 1.6 crore) per day.

There will naturally be a difference in prices between a well that uses equipments at Rs 12 lakh a day as compared to one that hires equipments at Rs 1.6 crore per day.

Apart from the rigs, there are other costs which adds up as we move from onsite wells to shallows ones and finally deep water wells. A deep water well, because of its exposure to sea water in extreme conditions need costlier corrosion resistant equipments. The same is not the case with an onshore rig. A US Energy Information Administration study points out that cost of production of oil and gas in onshore is $31.38 per barrel of oil equivalent as compared to $51.60 in the case of offshore (shallow water). Deep water exploration and production are at least twice as expensive as shallow ones.

In short, it would not be fair to compare the price of Bangladesh wells with that of Indian ones.

But what needs to be asked is why should we not buy gas priced at $2.35 from a neighboring country rather than buying it from a costlier source in India. Even Rangarajan Committee did not take into account cost of importing from Bangladesh and Burma but rather used price of importing gas from some of the distant countries like US and Japan.

More from explore

ADN Telecom to raise Tk 13.5cr

ADN Telecom Ltd. [Formerly known as Advanced Data Networks System Ltd.] is an ISO 9001 : 2008 certified company to provide seamless and secured data & internet connectivity to various grades of customers using fiber, satellite and wireless solutions. ADN … read more

Myanmar-Bangladesh-India gas pipeline

INDIAN commerce and Industry Minister Anand Sharma recently led a delegation to Myanmar to revive the Myanmar-India gas pipeline project. According to the Times of India (June 7), he discussed the possibility of setting up the pipeline along a land … read more

Bangladesh opposes proposed dams in Meghalaya: Minister

Meghalaya has made it clear that the dams which are to be built across the Myntdu and Umiew rivers would not have any negative impact on Bangladesh. Bangladesh has opposed the construction of two hydro-based power projects along the Indo-Bangladesh … read more

Land scarcity and rising population

Sources : Long-term outlook for Bangladesh is presumed to be bleak as unplanned growth of population is complicating the process of meeting the demand for food, basic health requirements and educational facilities — triggering unemployment and social unrest. The prospect … read more

Bangladesh 91st peaceful country

Bangladesh has been placed in the 91st position among I58 countries in a ranking of peace by the Institute for Economics and Peace. This year Bangladesh slid six positions from 2011’s 83rd. In 2010, Dhaka’s position was 87th while in … read more

Bangladesh signs drill deal with Russia’s Gazprom

Bangladesh’s Goverment-run Petrobangla has signed a deal with Russian energy giant Gazprom to drill 10 onshore wells. The $193 million deal was signed in Dhaka on Thursday amid hopes that Bangladesh will be able to add up to 300 million … read more

Cox’s Bazar the beach in Bangladesh- upgrowing economy .

BANGLADESH is probably one of the last places in Asia people would expect to see a thriving beachside resort with luxury hotels. And yet, Cox’s Bazar is exactly that — a place where affluent Bangladeshis go for a weekend of … read more

Bangladesh approves allocation of $135 million from gas fund for projects

Bangladesh’s energy ministry has approved allocation of Taka 11 billion ($135 million) from the gas development fund for various development and exploration projects, a senior official said Tuesday. This the first time the ministry will be accessing the fund since … read more

Bangladesh says ConocoPhillips seeking more gas blocks

Bangladesh says U.S. energy firm ConocoPhillips (COP.N) is seeking to expand operations in the Bay of Bengal following a U.N. tribunal border ruling which cleared the way for more offshore oil and gas exploration in the region. A senior energy … read more

Promise of a smarter life- by SAMSUNG

Samsung Electronics Co Ltd introduced its 2012 product catalogue at South West Asia Regional Forum, held in Bangkok on March 18. The regional forum offered South West Asian consumers and media of Bangladesh, India, Sri Lanka and Nepal a first … read more