Offshore bidding opens under relaxed framework

The government is set to launch exploration offers for all 26 offshore blocks today under a significantly relaxed framework featuring lower qualification thresholds, reduced entry costs and a series of commercial safeguards aimed at lowering investor risk in the Bay of Bengal.

The Bangladesh Offshore Bidding Round 2026, which will replace the Model PSC 2024, introduces major revisions to the country’s offshore production sharing framework, including revised gas pricing mechanisms, pipeline investment support and additional financial incentives for unsuccessful exploration wells.

The earlier framework failed to attract any international oil companies in the previous offshore bidding round, which took place between March and December 2024, despite a three-month extension.

With the new round, Bangladesh is opening all its offshore blocks for the first time, including 11 shallow-water blocks (SS-01 to SS-11) and 15 deep-sea blocks (DS-08 to DS-22).

Companies with experience of producing 5,000 barrels of oil per day or 75 million cubic feet of gas per day in any offshore area will be eligible to participate in the 11 shallow-water blocks bidding process, according to the new bidding documents seen by The Daily Star.

For deep-sea blocks, the requirement is set at 10,000 barrels of oil per day or 100 million cubic feet of gas per day.

With the new criteria, Petrobangla is expected to open opportunities to hundreds of mid-sized exploration entities. The earlier thresholds effectively narrowed competition to only a handful of global supermajors.

For both options, bidders previously needed to demonstrate global operator capability of at least 15,000 barrels of oil per day or 150 million cubic feet of gas per day in the 2024 round.

Sector insiders said the earlier thresholds effectively excluded many mid-sized offshore operators and narrowed competition to only a handful of global supermajors.

With the new criteria, Petrobangla is expected to open opportunities to hundreds of mid-sized exploration entities.

While the 2024 round linked gas pricing directly to a flat 10 percent of international Brent crude, the 2026 framework introduces “floor and ceiling” protections.

Under the updated model, gas prices are uncoupled by depth, offering 10.5 percent of Brent crude for shallow-water blocks and 11 percent for high-risk deep-water blocks.

By calculating the price boundaries using the lowest and highest average Brent prices over the preceding five years, the new model effectively shields both foreign investors and the national exchequer from sudden shocks in the global energy market, according to insiders.

The mechanism ensures a minimum floor and a maximum ceiling price based on a five-year average of the Brent price. It means that if global prices fall sharply, gas prices cannot drop below a minimum level calculated from the lowest five-year average. If prices spike, the gas price will not exceed the ceiling.

Duty exemptions have also been widened.

While the previous round offered tax waivers on imported equipment for petroleum operations, the 2026 framework explicitly extends the benefit across exploration, development and production activities.

The 2026 framework also allows bidders to apply for two adjacent deep-sea blocks under a single contract -- a provision officials say could improve operational efficiency and help companies spread geological and infrastructure risks across larger connected areas.

The government has also reserved the right to limit the number of blocks awarded to a single bidder, meaning no single corporate giant can monopolise the Bay of Bengal’s resources.

Energy experts say the revised structure indicates a strategic shift away from rigid, silo-based bidding arrangements that previously discouraged broader participation.

The latest framework further introduces a financial protection mechanism for unsuccessful exploration wells.

Under the model contract, contractors will receive increased profit-sharing percentages if they continue exploration after unsuccessful drilling outcomes.

If the first exploration well becomes dry or commercially non-viable and the contractor proceeds with a second well, the contractor’s profit share increases by 1 percent.

If the second well yields the same result and the contractor continues with a third or subsequent well, the profit share then increases by 2 percent.

Under the MPSC 2026, Petrobangla will continue to hold the first right of refusal for purchasing the contractor’s share of gas.

However, if Petrobangla fails to provide written notice confirming a market outlet within six months of submission of the evaluation report, the contractor will be allowed to independently identify buyers within and beyond Bangladesh.

It permits the use of pipelines of local distribution companies for such sales subject to negotiated distribution service charges.

Merely raising gas prices or offering financial incentives will not automatically attract foreign companies, said Maqbul-E-Elahi Chowdhury, former member of the Bangladesh Energy Regulatory Commission.

The key lies in creating a stable investment environment and reducing bureaucratic complications.

“Simply increasing prices does not mean companies will rush in -- you have to create the right investment environment,” he said, adding that international companies seek quick decision-making and smooth administrative support.

They want equipment clearance to happen quickly when they bring machinery into the country. In reality, files move endlessly through ministries and bureaucratic layers before approvals are granted, he said.

He welcomed the relaxation of qualification criteria in the 2026 offshore bidding round, saying earlier conditions discouraged mid-sized companies.

While the new provision offering additional profit shares for dry wells is a positive step, the core challenge remains: data accessibility and investment conditions.

“The data centre should have been fully opened at least three months before the bidding round… You cannot expect someone to agree to a marriage proposal without even seeing the bride or groom properly.”

Bangladesh has historically controlled seismic and exploration data too tightly, discouraging foreign investors and argued that the objective should not be revenue from data sales but wider access to maximise national benefit, he added.

Information and promotional packages for the new bidding round will be available from June 1, with the final bid submission deadline set for November 30.

The information package will cost $100, down from $300 earlier, while bidding documents will cost $7,000, compared to $10,000 in 2024.