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Andrew L. Fawthrop is the President and Managing
Director of Chevron Bangladesh, a wholly owned subsidiary of Chevron
Corporation.
Fawthrop has worked in South Asia for three years. Prior to that he was
responsible for energy operations in West Africa, Latin America, the
Caspian Region and Europe from 1998 to 2002. He has also worked on
exploration, development, power and pipeline projects in West Africa,
Brazil, China, Russia, the Gulf of Mexico, Alaska, Indonesia, Egypt and
the North Sea.
Andrew L. Fawthrop holds BSc degree from the University of London (1973)
and MSc degree in Marine Earth Science from University College London,
which he received in 1974.
As he led a huge task of completing the development work of Bibiyana gas
field, Energy & Power Editor Mollah Amzad Hossain talked to Andrew
Fawthrop ahead of beginning of production from the field. Following are
the excerpts:
EP: Chevron is now the biggest international oil company (IOC) in
Bangladesh. After starting production from Bibiyana, Chevron will supply
25 percent of country’s total gas production to the national grid. How do
you look into Chevron’s involvement in Bangladesh’s energy security?
Andrew: In Bangladesh we are a very reliable source of gas. We are
providing increasing quantities of gas every year. Last year, we had more
than 99.8 percent reliability and supplied 20 percent of the total gas
consumption. So, Petrobangla and GTCL can depend on us as far as delivery
of the required gas is concerned. Our production is growing steadily to
meet the increasing demand in the country. Chevron is a company that
provides a strong contribution to long-term energy security to the
country, as such it can be considered a part of the future for Bangladesh.
EP: It is alleged that Bangladesh didn’t show wisdom in allowing
IOCs under the production sharing contracts (PSCs). The government now has
to purchase gas at a rate of US$ 3 from the IOCs and sale at US$ 1.5. How
do you evaluate IOCs’ participation in Bangladesh’s energy sector?
Andrew: You know as an experienced energy reporter, that this
information, which is commonly considered by all a fact, is actually
untrue. For example, from our Jalalabad field, we sell 20 percent of the
gas for US $ 2.75 and the rest of the gas we give to the government at
zero cost. On top of that you would have to remember that there was zero
government investment. This means the real price remains closer to 75
cents and they sell the gas at US $ 1.5. Therefore, on every million cubic
feet (mcf) gas we have given, they make a considerable profit. The
government is making the same profit on the gas produced from our
Jalalabad and Moulvibazar fields.
The Production Sharing Contract is clearly a benefit rather than a burden.
Once the cost recovery is finished, over two or three years, there will be
low cost gas available to Petrobangla for about 20 years.
EP: Do you face any problem working in Bangladesh, and to what
extent do you think that Bangladesh is being benefited from having Chevron
working in this soil?
Andrew: We are transferring technology every day. More than 90
percent of our staff is Bangladeshi. If you go to our fields you may see
only one or two experts who are expatriates. We have extensive training
going on in the country and we send some of our young professionals to
other operations to learn and come back to apply their expertise at home.
Fifty percent of my management team is Bangladeshi. Moreover we not only
train our own people, we train people who are working with us as
contractors. We keep them trained to make sure they help us maintain our
high safety standards. We even provide them with assistance to keep them
abreast of the international management practices of bidding and other
work procedures. We believe that by spreading the expertise we are
empowering local people.
If you go to Jalalabad, you may find only one foreign expert there and in
some other field you may encounter two or three. Very high percentage of
national staff is there. And they are also in leadership positions.
EP: We know that Chevron has a problem with Petrobangla regarding
the wheeling charge. Why this problem couldn’t be resolved?
Andrew: We are working as a partner of Petrobangla. We get good
support from Petrobangla on many things. Not only do we get support from
Petrobangla, but also from the Ministry of Energy & Mineral Resources,
Land, Commerce, Customs, DC offices, local administration, and Department
of Environment, BOI, Ministry of Forest, Department of Explosives, BIWTA,
LGED and many others who help us acquire land, give us permission to
conduct seismic surveys, assist us in our endeavor to acquire permits and
even to build our plants and lay down the pipelines. The nature of our
work involves interactions with many government departments. We get lots
of support on all our activities from the government and Petrobangla.
However, not everything runs perfectly every day. But on the whole,
Bangladesh has certain regulations that are congenial for foreign
investment. The PSC has defined the relationship between IOCs and the
government quite efficiently. Our cooperation is increased on the basis of
this contract.
We have a dispute regarding the wheeling charges. Fortunately, the
contract has a clause in it to resolve disputes and we are following the
contract.
EP: Petrobangla claimed Tk 3,800 crore as compensation for
Magurchhara blowout. But, Chevron, from the beginning, has been saying
that the matter had been resolved through a supplementary agreement. Also,
Environment Ministry claimed compensation. Why this problem couldn’t be
resolved?
Andrew: On the compensation, it was clearly resolved by the
supplementary agreement.
EP: Indian press reported that Chevron is in discussion to sale out
its Bangladesh operation to an Indian company. What’s the truth?
Andrew: No we are not.
EP: We know Chevron has partnership with Cairn in blocks 5 and 10.
Do you still have the partnership?
Andrew: No we do not. We don’t have a partnership with the Cairn in
Block 5 or 10. Our operation is limited to Blocks 12, 13, 14 and 7.
EP: You already completed seismic survey in block 7. Do you expect
any discovery? When will you go for drilling?
Andrew: You are correct. We have completed a very successful
seismic program in Block 7 last year. It was done with more than two
million kilometers of driving and over 25 thousand of boat hours, all of
which were done very safely. We have the seismic data in our office
computers now and we are analyzing that data. This will take several
months and we will make a decision with our partners what to do either at
the end of this year or early next year.
EP: What’s the main challenge concerning hydrocarbon exploration in
Bangladesh?
Andrew: There are two challenges for offshore at the moment. One is
to find out where the prospect lies and other is to measure how big the
prospect would be. There is no seismic data available to determine in
which areas the prospect lies. And, as a result, we are also unsure of how
large a prospect lies ahead of us.
EP: How do you evaluate BAPEX, the only nationalized E&P Company of
the country? What’s your suggestion for its further development?
Andrew: The support that we get from BAPEX is valuable. For example
we have BAPEX’s seismic data in Block 12. Their crews were made available
to us. BAPEX has very competent people and we have worked with them
together on several projects and we are continuing our work with BAPEX.
They are our partners in Block 7. We have regular meetings with them and
we provide information to keep them updated on our operations and they
also contribute their experience to us.
EP: You know the government is contemplating going for third round bidding
for exploration in the deep sea. Will chevron take part?
Andrew: We will certainly evaluate the technical data when it becomes
available and we will evaluate the commercial terms when they become
available. If it looks prospective and if it looks like we can make a
reasonable return on the capital, we would have to risk exploring, then we
will go for the 3rd round bidding. If you have the seismic data you can
have a better and faster program. If there is nothing in the block to
begin with it will not make any sense.
EP: The tariff of gas and power in Bangladesh is solely dependent on the
executive decision of the government. Do you support the idea, or, the
tariff should be market-based?
Andrew: The government has the right to make executive decisions whether
it is market based or fixed tariff. The government has the right to
choose. The only thing the international or local companies will ask for
is that whatever the decision is, it remains stable and predictable so
that we can choose to invest. That is proper if conditions are stable. So,
if they choose a fixed price for electricity, that’s fine. If they choose
market, we need to know, so that we can prepare how we work. These are all
15 to 20 years projects. Whether it’s a gas field or power plants, we need
stable terms for 15 to 20 years. The government can choose what it wants
and the companies will work with what the government chooses. We spent 15
million dollars in 1998 and 1999 in the exploration project at Bibiyana.
We will get the first dollar back in 2007. With a long-term project we
need consistency. We can’t spend US $ 15 million in 1999 and get the money
back in different set of rules. The government can decide on a path and
then keep it stable for smooth operation of the project.
EP: What the government should do for involvement of domestic private
sector in hydrocarbon exploration?
Andrew: As I have mentioned, many of our local contractors are working for
us, and more than 10 million hours for Bibiyana field alone have been the
contribution of the local contractors. So we have a very high number of
domestic Bangladeshi contractors for our projects. The issue of domestic
capital in exploration work is for local entrepreneurs to decide. The cost
of exploring in a block starts at 7 or 8 million dollars and there is a
risk of no return.
EP: Do you have any plan to involve local entrepreneurs as your partner?
Andrew: We involve many contractors and many service providers and we
spend a lot of money in Bangladeshi companies, so they are involved
already. We have a very high-level of local involvement in our work. A lot
of people think that Chevron’s operation involves 100 percent foreign
expatriates. But the number of expats working for us stands at only nine
percent currently.
EP: What kind of qualitative changes you are expecting following the gas
production from Bibiyana? When will Bibiyana be able to produce gas at its
full capacity?
Andrew: By 1-10 March, we will begin production from Bibiyana at a rate of
150 to 200 mmcfd. Within a few weeks, we will have 300 mmcfd available and
by the third quarter of this year, we are expecting to have 600 mmcfd
available, which is the maximum capacity of the plant.
EP: Is Chevron considering to set up any gas-based power plant beside
Bibiyana?
Andrew: We don’t have any plan right now but there are many companies
interested in the power sector. There are several donor agencies
interested in providing financial assistance to this project. The problem
for power plant in Bangladesh is that it is difficult to get assurance of
gas supply. So, if a power plant is constructed next to the gas plant, it
will certainly get the assurance of stable and reliable gas supply and it
will certainly help mitigate the power crisis. |