Santos to begin drilling in Bangladesh sea

Australian oil and energy firm Santos will begin drilling in the coastal waters off Bangladesh this week to explore hydrocarbon, a significant development in the sector, a senior official said on Sunday.

"We have agreed to allow the firm to sell its product from the new offshore structures directly to private buyers at market price," said Mohammad Hussain Monsur, chairman of the state-run Bangladesh Oil, Gas and Mineral Corporation, or Petrobangla.

He told Reuters that Santos would drill in block 16 in the Bay of Bengal, Chittagong.

John Chambers, president of Santos in Bangladesh, told Reuters it would invest $126 million for a three-well programme.

"The mobilisation of this drilling rig is a major milestone for Santos in Bangladesh," Chambers said.

He added the drilling is targeting new reservoirs identified following 3D seismic studies during 2010.

Santos first came to Bangladesh in 2007 when it acquired interests in block 16 (Sangu) and block 16 (Exploration) from Cairn Energy , then the operator.

Today, the participants in block 16 (Sangu) are Santos with 75 % and U.S.-based Halliburton on 25 % while Santos has all of block 16 (Exploration).

Santos has received expressions of interest from large privately owned industries in Chittagong that are willing to buy gas from its offshore fields in Bangladesh at market price, including fertiliser factories and power plants.

The country requires new energy sources. Petrobangla forecasts the country's gas reserves will run out by 2015 at the current consumption rate.