State-run Bangladesh Petroleum Exploration Company (Bapex) and Australian Santos are mobilising rigs and all necessary equipment to commence hydrocarbon exploration at offshore Magnama structure in the Bay of Bengal this winter, officials said.
"Both the firms are readying works like engagement of drilling contractors and purchase of drilling equipment to kick off the exploration," Petrobangla chairman Istiaque Ahmad told the FE.
It would be the Bapex's first-ever offshore exploration programme, he said, adding that the Santos-Bapex joint venture plans to initiate drilling at Magnama-2 well.
"We are hopeful of starting drilling at Magnama by February next," Bapex's managing director Md Atiquzzaman said.
Magnama structure is located within block 16 areas where now-shut Sangu well is located.
Santos's predecessor UK's Cairn Energy discovered natural gas presence in Magnama penetrated by a single exploration well around eight years ago.
The water depth of Magnama ranges to 20 metres from nearby onshore Kutubdia Island.
Cairn had drilled the exploration well in Magnama in 2008 and subsequently carried out 213 line kilometres 2D seismic survey in early 2010, a senior Bapex official said.
Interpretation of the survey had indicated natural gas presence in the Magnama structures that consisted of a number of stacked structural stratigraphic reservoirs with at least four zones marginally intersected in the Magnama-1 discovery well, the official added.
After acquiring Cairn's Bangladesh assets, Santos was seeking a JV partner to initiate drilling of Magnama structure over the past several years and Bapex came up in response.
Bapex entered into a 'binding offer agreement' with Santos to carry out offshore drilling jointly in June this year.
Bapex will pay Santos US$ 16.50 million as 'sunk cost' for involving with the joint venture (JV) to explore the offshore well.
Some exploration activities worth around $ 92.30 million were carried out at Magnama, located under the block -16 area so far.
Santos attains the majority stake of 51 per cent in the JV while Bapex will have 49 per cent stake.
Before the deal, Santos had owned 100 per cent stake of the Magnama structure following acquisition of Cairn Energy's interest in Bangladesh in November 2010.
The drilling cost has been estimated at $ 26 million where Bapex will bear the cost of $ 12.70 million.
Bapex would have the opportunity to carry out oil and gas exploration in offshore for the first time under the JV with Santos, the Bapex managing director said.
It would help adapt Bapex's technical know-how in offshore exploration, he added.
Bapex only drilled onshore gas wells inside the country in gas fields either owned by Bapex or different state-run gas marketing and distribution companies.
Currently, it has seven gas producing fields across the country from which it produces around 95 million cubic feet per day (mmcfd) of natural gas against the fields' overall capacity of 143 mmcfd.
Apart from the JV with Bapex, Santos has another JV with Singapore's KrisEnergy over oil and gas exploration in shallow water in the Bay of Bengal under block SS-11.
Santos and KrisEnergy already carried out 2D in the block and have planned to carry out further exploration there, said a senior Bapex official.
To date, the Bapex has inked one 'controversial' JV with Canadian Niko Resources to develop some 'abandoned' onshore gas fields, including Feni and Tengratila, said officials.
Gas production and exploration from Niko-operated fields, however, remained suspended for around a decade following a row over payment for gas and compensation for gas-field blowouts.
The Bapex was a 'sleeping' partner in the Niko-Bapex JV and had a carried-over stake of 20 per cent while the remaining 80 per cent was with Niko.
Bangladesh's entire natural gas production now comes from onshore gas fields after the closure of Santos-operated offshore Sangu gas field in October 2013.