Production Sharing Contract and Ajmiriganj Upazila: Difference between pages

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<p class=Normal >'''Production Sharing Contract''' (PSC)''' '''a special agreement between the government of Bangladesh and foreign contractors signed mainly for petroleum exploration and development in the country. Under the Bangladesh Petroleum Act 1974, the government owns all mineral resources including petroleum within the territory, continental shelf and economic zone of the country and has the exclusive right and authority to explore, develop, exploit, process, refine and market petroleum resources. The government has also the exclusive right under the act to enter into [[petroleum]] agreements with any person for the purpose of any petroleum operations. On behalf of the government, the petrobangla exercises the rights and powers to explore, develop, process and market petroleum and also to enter into petroleum agreements with any person/company for these purposes.  
'''Ajmiriganj Upazila''' ([[Habiganj District|habiganj district]]) area 223.98 sq km, located in between 24°27' and 24°40' north latitudes and in between 91°09' and 91°25' east longitudes. It is bounded by [[Sulla Upazila|sulla]] and [[Baniachang|baniachang]] upazilas on the north, Baniachang and [[Mithamain Upazila|mithamain]] upazilas on the south, Baniachang upazila on the east and [[Itna Upazila|ITNA]] upazila on the west.


In 1973, following a comprehensive policy review, the government started setting up a new legal framework to encourage rapid exploration and development of natural gas and oil and to safeguard the national interest. The government also took initiative for development of national capacity in the oil and gas sector with assistance by international companies. The idea came from the experience of significant success achieved under production sharing contracts (PSC) of Indonesia, Malaysia, Egypt, China, India and some other countries with international oil companies.
''Population'' Total 99294; male 51383, female 47911; Muslim 70753, Hindu 28442, Buddhist 9, Christian 40 and others 50.


In 1974, the government of Bangladesh invited bids from international oil companies for exploration and development of petroleum in the territory of the country under established criteria and ground rules. The bids submitted were evaluated on a 40-points grading, ten points for each of the four criteria including financial capability, technical capacity, experience, and work programme. A selected number of qualified companies were invited to negotiate on the basis of the model PSC and finally, seven contracts were concluded for offshore exploration and development. The companies with which the PSC was signed were Atlantic Richfield, Union Oil of California (later renamed as UNOCAL) and Ashland of the USA, Superior Oil Company of Canada, Deminex and Ina-Napthaline of Europe, and a Japanese company. UNOCAL discovered an offshore gas reservoir at Kutubdia but under some economic considerations, the company did not start its exploitation.
''Water bodies'' Main rivers: Kalni, [[Kushiyara River|kushiyara]], Khaikal; Ghaniabanga, Bagha and Dhiga beels are notable.


The foreign companies soon started loosing interest in PSC since they found Bangladesh to have large reserve of gas and not of petroleum. In 1981, Shell Oil signed a PSC for onshore areas. In the mean time Petrobangla developed significant capability for exploration and development of oil and gas resources and in 1989, established the Bangladesh Petroleum Exploration Company (BAPEX) for exploration of petroleum in the country. Petrobangla made the first discovery of oil in the Bangladesh territory in 1986 at Haripur, Sylhet. There were different offers from reputed international oil companies for development of the oil field and one of them was Scimitar, a company incorporated in British Virgin Islands in June 1987 with an authorised capital of only $50,000. The technical experts of Petrobangla suggested not to award the contract to Scimitar but the suggestion was ignored and in December 1987, the government signed a PSC with the company. Scimitar was not able to start work by the stipulated dates. It repeatedly sought extensions, which were granted and meanwhile, it explored the whole world to raise necessary funds.
''Administration'' Ajmiriganj Thana was formed in 1922 and it was turned into an upazila in 1983.


The international scenario for gas development underwent major changes since the end of the nineteen eighties. A review of the policy and legal framework carried out under the World Bank';s Petroleum Exploration Promotion Programme in 1987 pointed out that there were bright prospects for gas exploration. A new model PSC was formulated in 1988 to encourage exploration for gas and to ensure that the price for gas would have parity with the market price for fuel oil. It was further revised in 1993 commensurate with government policy changes and new incentives to the investors for petroleum exploration. Some more changes in the model PSC were made in 1997.
{| class="table table-bordered table-hover"
|-
| colspan="9" | Upazila
|-
| rowspan="2" | Municipality || rowspan="2" | Union || rowspan="2" | Mouza || rowspan="2" | Village || colspan="2" | Population || rowspan="2" | Density (per sq km) || colspan="2" | Literacy rate (%)
|-
| Urban || Rural || | Urban || Rural
|-
|
1
|
5
|
68
|
89
|
14381
|
84913
|
443
|
48.89
|
32.81
|}
{| class="table table-bordered table-hover"
|-
| colspan="5" | Upazila Town
|-
|
Area<br>
(sq km)
|
Mouza
|
Population
|
Density<br>
(per sq km)
|
Literacy rate<br>
(%)
|-
|
5.74
|
2
|
14381
|
2505
|
51.95
|}
{| class="table table-bordered table-hover"
| colspan="5" | Union
|-
| rowspan="2" | Name of union and GO code  || rowspan="2" | Area (acre) || colspan="2" | Population || rowspan="2" | Literacy rate (%)
|-
| Male || Female
|-
|
Ajmiriganj
13
|
4861
|
11495
|
10089
|
44.57
|-
|
Kakailseo
67
|
7611
|
12661
|
11781
|
31.24
|-
|
Jalsuka
54
|
6161
|
7416
|
6914
|
32.69
|-
|
Badalpur
27
|
17461
|
10059
|
9334
|
41.62
|-
|
Shibpasha
81
|
9414
|
9752
|
9793
|
24.50
|}
''Source''  Bangladesh Population Census 2001,Bangladesh Bureau of Statistics.


Bangladesh signed a PSC in May 1994 with Cairn Energy and Holland Sea Search, a British-Dutch joint venture for exploration of oil and gas in block 16. The joint venture signed another PSC for block 15 in June next year. These two blocks cover partly Chittagong onshore and adjacent offshore areas. In January 1997, Hallibarton Energy of United States joined the Cairn-Holland Sea Search in the Sangu gas field portion of Block 16. Shell Oil purchased Cairn';s PSC rights in these two blocks in mid-1999. In 1995, Occidental signed PSCs for blocks 12, 13 and 14 in the Sylhet area (Surma basin) but transferred its PSC rights to UNOCAL in 1999. A low profile US joint venture Rexwood-Oakland signed PSC in January 1997 with Petrobangla for blocks 17 and 18 located in Cox';s Bazar-Teknaf region with 80% offshore exploration areas. Rexwood later merged with Oakland. The United Meridian Corporation (UMC) was another small US oil company that signed PSC in late 1996 for oil and gas exploration and development in block 22 in the Chittagong Hill Tracts area. Later, the UMC transferred its rights to a US company Ocean Energy. Subsequently the block 17 and 18 were relinquished as no commercial prospects were identified.
''History of the War of Liberation'' During the [[War of Liberation, The|war of liberation]] in 1971 a prolonged eighteen hours encounter between the freedom fighters and the Pak army was held on 16 November in which freedom fighter Jagatyoti was killed. Besides, the Pak army brutally killed 11 innocent villagers.


The PSCs resulted in new discoveries of gas fields in the Surma basin by Occidental-Unocal (Bibiana and Maulavibazaar) and at Sangu (offshore). They also generated new gas production and supply of over 200 million cubic feet of gas per day to national gas grid. The additions accounted for one fifth of the country';s daily consumption. By 1997, both Cairn and Occidental signed gas purchase and sales agreement with Petrobangla for the sale and delivery of the gas into the national gas distribution systems operated by Petrobangla. Enthusiasm of both government and private investors in the gas sector was so great between 1996 and 1997 that during the period, Bangladesh attracted attention of top international investors in petroleum sector. In this backdrop the government following exploration promotion meetings in London and Huston in February-March 1997, issued a worldwide invitation to bidders in April 1997 (Second round gas bidding). International oil companies were invited to submit bids by 15 July 1997 on the basis of the model PSC updated in 1997 for remaining 15 blocks.
''Religious institutions'' Mosque 60, temple 35, tomb 5.


The number of companies showing interest in response to the invitation for bids was 23, some of which were less known and perhaps appeared in the exploration scene for the first time. Companies like Tallow Oil Plc, Hondo Oil and Gas, South Asia Oil and Gas, Nico Resources, Triton and Pangea, Maersk Oil were the new entries. Texaco, Shell, Mobil, Chevron, Unocal and Enron are known names in the international petroleum exploration business. Available information indicates that there was no bid for blocks 1, 2 and 23. Of the remaining 12 blocks, number 9 attracted the largest number of bidders, followed by block 10, 11, 6, 5 and 7 (onshore) and there were more than two bids for each of the offshore blocks 19, 20 and 21. No block was kept reserved for the national company [[bapex]]. Negotiations were in process in 2001 for blocks 5 and 10 (with Shell Oil and Cairn), block 8 (with Pangea) and for blocks 19, 20 (with Maersk Oil) and two PSC were concluded, one with Unocal for block 7 and the other with Chevron-Texaco-Tullow for block 9. In this second round bidding, however, 10% percent of shares by the name of carried over interests for [[BAPEX]] were considered. Second round block bidding resulted the signing of PSC for block 9 with Tallow Bangladesh Ltd as its operator. For this PSC Tallow has 30% share, 60% share belongs to Nico Resources and 10% carried interest enjoyed by BAPEX. Bhangura gas field discovered within this block which currently produces 100 million cubic feet of gas daily.
[[Image:AjmirganjUpazila.jpg|thumb|400px]]


PSC signed with Occidental in the first round of block bidding for blocks 12, 13 and 14 were transferred to Unocal and subsequently to the International Oil and Gas Company Chevron. Important gas fields like Jalalabad, Maulavibazar and Bibiana are discovered within these blocks. Only the Bibiana Gas Field now produces approximately 500 million cubic feet gas daily. In addition Jalalabad and Maulavibazar Gas Fields are producing daily 230 and 75 million cubic feet of gas respectively.
''Literacy rate and educational institutions'' Average literacy 35.28%; male 40.13%, female 30.12%. Educational institutions: college 2, secondary school 6, primary school 88, kindergarten 1, madrasa 6. Noted educational institutions: Jalsuka Krishna Govinda Public High School (1876), Paharpur Basanta Kumar High School.


Sangu Gas Field discovered earlier in the block 16 currently produces 35 million cubic feet of gas. The International Oil Companies working in Bangladesh (Chevron, Cairn Energy, Tallow and Nico Resources) produce approximately 943 million cubic feet of gas daily which is more than the half of the total produced gas in the country.
''Cultural organizations'' Library 2, literary society 1, auditorium 1, cinema hall 1, playground 2.


In their proposals the companies were to indicate their competitive bids in respect of six items: (a) cost recovery ratio, (b) profit of oil/gas sharing ratio, (c) work programme, (d) performance guarantee in support of work programme, (e) discovery bonus, and (f) production bonus. Arthur Andersen, an international firm of chartered accountants was appointed as consultant to assist the government in evaluation of the bids. A large number of international oil companies came up with proposals for petroleum exploration in Bangladesh during that period. However, subsequent global oil crunch and uncertainty in government decisions caused a decline in the enthusiasm of the private investors. The whole process was further complicated by the issue of gas export to India through pipelines raised by the World Bank in 1995 on the ground that when PSC operators would start selling gas to Bangladesh in large quantity, the country would face a balance of payments crisis. Almost simultaneously, the international oil companies initially having no agenda to export gas also started arguing that there was no ready gas market in the country and therefore investment would no longer be attractive. The idea created a controversy as to whether the gas reserves in Bangladesh are sufficient enough to justify pipeline export or, the country itself has a market potential to use its reserves for domestic consumption and industrial purposes. At present the production of gas has significantly been increased but the expanded market and enhanced demand could not be fulfilled with the produced volume of gas.  
''Main sources of income'' Agriculture 64.83%, non-agricultural labourer 5.02%, commerce 16.15%, transport and communication 0.36%, service 2.77%, construction 0.83%, religious service 0.43%, rent and remittance 0.88% and others 8.73%.


Key provisions of the present model PSC includes following:
''Ownership of agricultural land'' Landowner 51.62%, landless 48.38%; agricultural landowner: urban 28.72% and rural 55.39%.


''Contact area ''Block size ranges from 1,650 to 13,500 sq km. Two blocks can be in one contract if geologically justified and in offshore, more than two blocks are allowed to include in one PSC. Separate work programme is necessary for each block.
''Main crops'' Paddy, jute, potato, groundnut.


''Term of exploration''''' '''seven years (basic period of three years plus two extensions of two years each).
''Extinct or nearly extinct crops'' Sesame, linseed.


''Production ''''''''For each area 25 years from the contract effective date for an oil field and 30 years for a gas field, subject to an extension of five years on mutually agreed terms.
''Main fruits'' Mango, Jackfruit, coconut.


''Relinquishments ''25% of contract area at the end of the third year and an additional 25% at the end of the fifth contract year are to be relinquished. All areas which are not declared production areas are to be relinquished at the end of the seventh contract year. First relinquishment will be waived if the contractor has completed an exploratory well within three years of the initial exploration period.
''Fisheries, dairies and poultries'' Fishery 43, dairy 44, poultry 39.


''Repatriation of profit''''' '''Repatriation of all the profit as per PSC provision will be allowed.
Communications facilities' Roads: pucca road 8.5 km, semi-pucca road 15 km, mud road 110 km; waterways 50 nautical miles.


''Production sharing''''' '''Petrobangla and the contractor shall allocate any petroleum from the contract area between themselves in tranches according to total average daily production over the contract period in a mutually agreeable terms separately before and after the cost recovery period.
Extinct or nearly extinct traditional transport' palanquin.


''Cost recovery''''' '''Biddable up to 40% for oil and 50% for gas.
''Noted manufactories'' Cold storage for preservation of fish, fish processing industry.


''Valuation of gas''''' '''The pricing for associated gas would be on a cost plus basis, while for non associated gas it will be 75% of the international price of high sulfur fuel oil with negotiated discounts. To encourage exploration in offshore areas associated or non- associated gas from such fields will be priced at 25% higher than the gas from onshore areas.
''Cottage industries'' glodsmith, blacksmith, potteries, woodworks.


''Tax and duty''''' '''No duty will be levied on machinery, equipment and consumables imported for petroleum operations during the exploration, development and production stage. Companies will be free of all corporate tax and such other taxes as are determined under the terms of PSC.
''Hats, bazars and fairs'' Hats and bazars are 5, fairs 4; most noted of which are Ajmiriganj, Kakaieo and Shibpasha bazars.


''Deductible costs''''' '''Operating costs, exploration costs and other capital costs.  
''Main exports'' Shrimp, dried fish, paddy.


Other payments to government: Discovery and production bonuses biddable and applicable as specified in the agreement not cost recoverable.
''Access to electricity'' All the wards and unions of the upazila are under rural electrification network. However 10.13% of the dwelling households have access to electricity.


''Annual contract service fee''''' '''Negotiable, but not less than US$ 50,000 per block. This cost is recoverable.
''Sources of drinking water'' Tube-well 95.21%, pond 2.67%, tap 1.63% and others 0.49%.


''Annual training fee''''' '''US$100,000, not recoverable.
''Sanitation'' 11.75% (rural 10.08% and urban 21.88%) of dwelling households of the upazila use sanitary latrines and 80.47% (rural 83.11% and urban 64.44%) of dwelling houses use non-sanitary latrines; 7.78% of households do not have latrine facilities.


''Export of gas''''' '''Contractor may export natural gas (contractor - cost recovery and profit gas; Petrobangla - profit gas) in the form of liquefied natural gas subject to negotiation with government. Petrobangla will compensate contractor for relinquishment of rights for required volume of discovered and apprised natural gas located west of Padma-Jamuna rivers up to a maximum 1 TCF. The required volume represents the minimum volume estimated to be economically recoverable for domestic use.
''Health centres'' Upazilla health complex 1, union health and family planning centre 1, family planning centre 2, clinic 4, mother and child welfare centre 1, charitable hospital 1, satellite clinic 1, diagnostic centre 1, private clinic 1.


Domestic consumption: Contractor shall provide pro rata up to 25% of his profit oil at 15% discount and remaining, if required at full fair market price in convertible currency.
''NGO activities'' Operationally important NGOs are [[BRAC|brac]],[[Asa| asa]], CARE, Vision. [Jiban Kumar Chanda]


The commercial energy sector and the economy as a whole remain excessively dependent on natural gas. On the other hand insignificant investment was made for the exploration and production of natural gas for long period of time. As a result shortfall of gas supply has become a regular phenomenon in the country. It will be impossible to meet the demand of natural gas from the proven and recoverable reserves after 2011 if we continue to produce gas at the present rate. If the probable gas reserves can be recovered the discovered gas may meet the demand until 2015. And gas supply demand may be met until 2019 if the possible gas resources are recovered. At the same time exploration activities for oil and gas needs to be enhanced for meeting the growing demands.
'''References''' Bangladesh Population Census 2001, Bangladesh Bureau of Statistics; Field report of Ajmiriganj Upazila 2010.


Earlier in 1989 Bangladesh was divided into 23 blocks for the purposes of exploration of oil and gas out of which 5 blocks were in the offshore territory and 17 were onshore blocks. Onshore areas of the country ware comparatively better explored and considerable gas reserve has been discovered here. Success in securing gas resource discovery from the offshore areas was so far limited.
[[Category:Upazilas of Bangladesh]]


Under these circumstances new initiative for oil and gas exploration in the offshore areas of the country was undertaken in 2006. A new draft Model Production Sharing Contract was prepared. This draft Model PSC includes the following significant features: i) The territorial offshore area of the country was divided into 28 blocks which are limited within 2,611 &#8211; 7,400 squire kilometre areas; ii) The new PSC has included the Mandatory Work Program which was absent in the older version of PSC; iii) The old PSC did not have clear policies on Insurance and Bank Guarantee commensurate to the market cost and the new PSC included them; iv) The cost recovery limit in the new PSC is fixed at 55% maximum. This provision was biddable and negotiable in the older version of the PSC; v) Similarly in the profit sharing section the minimum rate of profit sharing rate has been fixed in the new PSC depending on the gas production rate changing the old PSC provision for determining the rate of profit sharing through negotiation and bidding; The profit sharing allocation has been defined for shallow offshore blocks at a rate of 55% and for the deep offshore blocks at a rate of 50%. v) Among the other significant amendments the new PSC imposed the liability of payment of Corporate Income Tax to the Contractor. Also the dispute resolution section refers to the Bangladesh Arbitration Act, 2001 and the arbitration to take place in Dhaka. In case of transfer of more than 50% shares of the company mandatory requirement for prior approval from Petrobangla is needed.
[[Category:Local Government]]


Petrobangla invited international tenders for bidding in the 28 offshore blocks of Bangladesh within the scope of the new model PSC 2008 in February 2008. Seven international companies (CNOOC China, Longwoods Ltd., Tallow Bangladesh, Comtrac Services, Korea National Oil Company, Cnoco Philips and Santosh International) participated in the bidding process. Out of 28 offshore blocks no bidder was attracted for 12 (block nos. 4, 6, 7, 8, 19, 22-28) blocks. Petrobangla has scrutinised the proposals submitted by interested oil and gas exploration companies for offshore blocks in 2008 and placed its recommendations to the government for decision. If approved new initiatives will be taken for oil and gas exploration activities in the offshore blocks. [Mushfiqur Rahman] [Rahman, Mushfiqur  Country Manager, Asia Energy Corporation (BD) Pvt Limited]
[[bn:আজমিরিগঞ্জ উপজেলা]]
 
[[bn:উৎপাদন বন্টন চুক্তি]]

Latest revision as of 20:04, 13 October 2023

Ajmiriganj Upazila (habiganj district) area 223.98 sq km, located in between 24°27' and 24°40' north latitudes and in between 91°09' and 91°25' east longitudes. It is bounded by sulla and baniachang upazilas on the north, Baniachang and mithamain upazilas on the south, Baniachang upazila on the east and ITNA upazila on the west.

Population Total 99294; male 51383, female 47911; Muslim 70753, Hindu 28442, Buddhist 9, Christian 40 and others 50.

Water bodies Main rivers: Kalni, kushiyara, Khaikal; Ghaniabanga, Bagha and Dhiga beels are notable.

Administration Ajmiriganj Thana was formed in 1922 and it was turned into an upazila in 1983.

Upazila
Municipality Union Mouza Village Population Density (per sq km) Literacy rate (%)
Urban Rural Urban Rural

1

5

68

89

14381

84913

443

48.89

32.81

Upazila Town

Area
(sq km)

Mouza

Population

Density
(per sq km)

Literacy rate
(%)

5.74

2

14381

2505

51.95

Union
Name of union and GO code Area (acre) Population Literacy rate (%)
Male Female

Ajmiriganj 13

4861

11495

10089

44.57

Kakailseo 67

7611

12661

11781

31.24

Jalsuka 54

6161

7416

6914

32.69

Badalpur 27

17461

10059

9334

41.62

Shibpasha 81

9414

9752

9793

24.50

Source Bangladesh Population Census 2001,Bangladesh Bureau of Statistics.

History of the War of Liberation During the war of liberation in 1971 a prolonged eighteen hours encounter between the freedom fighters and the Pak army was held on 16 November in which freedom fighter Jagatyoti was killed. Besides, the Pak army brutally killed 11 innocent villagers.

Religious institutions Mosque 60, temple 35, tomb 5.

Literacy rate and educational institutions Average literacy 35.28%; male 40.13%, female 30.12%. Educational institutions: college 2, secondary school 6, primary school 88, kindergarten 1, madrasa 6. Noted educational institutions: Jalsuka Krishna Govinda Public High School (1876), Paharpur Basanta Kumar High School.

Cultural organizations Library 2, literary society 1, auditorium 1, cinema hall 1, playground 2.

Main sources of income Agriculture 64.83%, non-agricultural labourer 5.02%, commerce 16.15%, transport and communication 0.36%, service 2.77%, construction 0.83%, religious service 0.43%, rent and remittance 0.88% and others 8.73%.

Ownership of agricultural land Landowner 51.62%, landless 48.38%; agricultural landowner: urban 28.72% and rural 55.39%.

Main crops Paddy, jute, potato, groundnut.

Extinct or nearly extinct crops Sesame, linseed.

Main fruits Mango, Jackfruit, coconut.

Fisheries, dairies and poultries Fishery 43, dairy 44, poultry 39.

Communications facilities' Roads: pucca road 8.5 km, semi-pucca road 15 km, mud road 110 km; waterways 50 nautical miles.

Extinct or nearly extinct traditional transport' palanquin.

Noted manufactories Cold storage for preservation of fish, fish processing industry.

Cottage industries glodsmith, blacksmith, potteries, woodworks.

Hats, bazars and fairs Hats and bazars are 5, fairs 4; most noted of which are Ajmiriganj, Kakaieo and Shibpasha bazars.

Main exports Shrimp, dried fish, paddy.

Access to electricity All the wards and unions of the upazila are under rural electrification network. However 10.13% of the dwelling households have access to electricity.

Sources of drinking water Tube-well 95.21%, pond 2.67%, tap 1.63% and others 0.49%.

Sanitation 11.75% (rural 10.08% and urban 21.88%) of dwelling households of the upazila use sanitary latrines and 80.47% (rural 83.11% and urban 64.44%) of dwelling houses use non-sanitary latrines; 7.78% of households do not have latrine facilities.

Health centres Upazilla health complex 1, union health and family planning centre 1, family planning centre 2, clinic 4, mother and child welfare centre 1, charitable hospital 1, satellite clinic 1, diagnostic centre 1, private clinic 1.

NGO activities Operationally important NGOs are brac, asa, CARE, Vision. [Jiban Kumar Chanda]

References Bangladesh Population Census 2001, Bangladesh Bureau of Statistics; Field report of Ajmiriganj Upazila 2010.