Drilling at 3 gas fields uncertain as foreign firm plans to opt out

An Azerbaijan firm has planned to terminate its contract with Bangladesh Petroleum Exploration and Production Company Ltd (Bapex) halfway through, making its drilling works at three gas fields uncertain.

The State Oil Company of the Azerbaijan Republic (SOCAR) AQS recently sent a letter to Bapex expressing its intention to terminate its contract on drilling three onshore wells, said industry insiders.

The wells at the three gas fields are Semutang Dakkhin-1 in Khagrachhari, Begumganj-4 in Noakhali and Matherganj-1 of Jamalpur.

Sources said the OSCAR ASQ was appointed by Bapex in 2017 for conducting drilling and construction of the three onshore wells at a cost of about $33 million.

Of these, two wells are supposed to be drilled for exploration and another for appraisal purposes.

Bapex officials said SOCAR has only completed the drilling of Semutang well, but found it dry although it was a very prospective one as the field is in operation.

source involved in Semutang work said, it was initially showing that gas was coming out of the well. “But suddenly the release of gas was stopped. Possibly, it happened due to over-mudding and wrong cementing process at the drilling work,” he said.
Against the Semutang well drilling, the sources said, the Azerbaijan company was paid about $11.8 million.

But a big dispute arose when SOCAR moved to drill the Begumganj well.

According to the sources, the Azerbaijan company claimed an additional amount of $6 million in advance for preparatory works giving its interpretation to some provisions of the contract.

At one stage of the dispute, officials said, the OSCAR on June 12 sent a letter to Bapex informing its decision to terminate the contract and mentioned that it was not paid within 28 working days of completion of works which is a violation of contract.

After this letter, the Bapex officials sat in a meeting with OSCAR officials to resolve the disputes, but they failed to resolve that.

Bapex officials said SOCAR took almost double of its stimulated time which was a big violation of contract. “Even Bapex had to supply some equipment to OSCAR to help its drilling”, said an official.

Contacted, Bapex managing director Mir Md Abdul Hannan admitted about the OSCAR’s letter and its decision to terminate the contract.

Declining to give any detail of the ongoing developments between the two organisations, the Bapex chief said his organisation is trying hard to resolve the problems within the legal framework of the contract.

Meanwhile, some Bapex officials said the Azerbaijan company took up the drilling contract without any working experience in South Asian country.

They also believe that the use of weak technology, inadequate preparation, lack of proper equipment mobilisation and miscalculation of financial involvement might have been the major reasons for its move to relinquish the works.