Petrobangla – the Bangladesh Oil, Gas and Mineral Corporation – has overhauled its offshore production-sharing framework, introducing floor and ceiling limits on oil-linked gas prices and a series of contractual reforms aimed at attracting international energy companies.
Under the revised model, published on Sunday, natural gas prices will now be directly tied to international Brent crude rates. For shallow-sea blocks, gas prices are set at 10.5 per cent of Brent crude, while deep-sea blocks are priced at 11 per cent.
This adjustment means global oil markets will now directly influence how much Bangladesh pays for gas under offshore contracts.
For deep-sea blocks, the price of one million British Thermal Units (MMBtu) of gas has been legally tied to 11 per cent of Brent crude. For example, if Brent crude hits $100 per barrel, the gas price reaches its ceiling of $11 per MMBtu.
Even if geopolitical tensions or supply disruptions drive oil above $100, the contract freezes the gas price at $11, shielding Bangladesh from excessive costs.
The model also introduces a floor price to protect investors. Should Brent crude fall to $70 per barrel, gas prices cannot drop below $7.7 per MMBtu, ensuring a minimum return for foreign operators.
For shallow-sea blocks, the same mechanism applies at a slightly lower rate, with the maximum gas price capped at $10.5 per MMBtu.
The absence of both floor and ceiling mechanisms in the 2024 bidding round was widely seen by sector experts as one of the reasons it failed to attract sufficient foreign participation.
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.
The 2026 bidding round, offering exploration for all 26 blocks, will end at 30 November this year.
The newly adopted 2026 model has also introduced the option for bidders to apply for two adjacent blocks under a single contract. Under the previous framework, separate contracts were required for each block, a process that increased administrative complexity and costs for participating companies.
Petrobangla has also revised prequalification requirements for bidders.
According to the new criteria, companies bidding for shallow-sea blocks must currently produce at least 5,000 barrels of oil per day (BOPD) or 75 million standard cubic feet of gas per day (MMSCFD).
For deep-sea blocks, the threshold has been raised to 10,000 BOPD or 100 MMSCFD.
In addition, all bidders must have active operational experience outside their home country.
Under the previous 2024 bidding rules, international firms were required to prove a massive global output of at least 15,000 barrels of oil or 150 million cubic feet of gas per day just to qualify.
Industry experts noted that these ultra-high barriers locked out a wide range of capable, mid-sized offshore companies, inadvertently killing competition by leaving the playing field open to only a tiny elite of global energy giants.
The new model also addresses one of the largest financial uncertainties associated with offshore exploration – subsea pipeline infrastructure.
Building pipelines to transport gas from offshore floating platforms to the mainland requires substantial capital investment.
Under previous contracts, companies were largely left to absorb these costs themselves, with limited opportunities to recover expenses unless unused pipeline capacity was later leased to other operators.
The 2026 model introduces a buyer-paid pipeline tariff system, under which Petrobangla will pay operators a legally guaranteed transportation fee for delivering gas to shore.
The tariff will vary automatically based on water depth, pipeline distance from offshore fields to landfall, and the volume of gas transported.
By clearly defining these payment terms in advance, the government has reduced a major layer of financial uncertainty surrounding deep-water infrastructure investments.
The revised contract also retains the provision allowing oil companies to recover up to 75 per cent of annual sales revenue to offset exploration and development costs.
While this recovery ceiling remains unchanged from earlier rounds, the 2026 model introduces tighter accounting and auditing provisions.
In earlier contracts, broad cost definitions sometimes allowed operators to classify routine operational expenses as recoverable investment costs, effectively delaying profit-sharing with the state.
The new framework separates long-term capital investment costs from day-to-day operational expenditures, closing accounting loopholes and ensuring a more transparent distribution of revenue once production begins.
However, analysts say improved pricing terms alone may not be enough to guarantee foreign investment.
Shafiqul Alam, lead energy analyst for Bangladesh at the Institute for Energy Economics and Financial Analysis, told TIMES of Bangladesh, “Investment does not come simply because terms are attractive or gas prices are increased. Before committing, investors assess the country’s overall investment ecosystem.”
“Although the current terms and incentives are significantly better than before for investors, they will still make their decisions after evaluating the broader system as a whole,” he added.
