“The firm has been permitted to explore in the deep sea blocks, and we hope to sign the production sharing contract (PSC) within two weeks so that it can begin seismic surveys and exploration in the coming winter season.”

The Cabinet Committee on Economic Affairs yesterday approved a proposal for signing a model production-sharing contract (PSC) with ConocoPhillips for exploration of hydrocarbon in the country's deep-sea blocks 10 and 11, and also a side-line agreement (SLA) for disputed areas under the two blocks.

Earlier, state-owned Petrobangla and the U.S.-based ConocoPhillips initialed a draft PSC.

The Bangladesh Cabinet body in its meeting, with Finance Minister AMA Muhith as the chair, also approved a proposal to allow state-owned Trading Corporation of Bangladesh (TCB) to directly import essential commodities for the next year.

ConocoPhillips won rights to explore the two deep sea blocks for oil and gas exploration in 2008, but could not sign the PSC with state run Bangladesh Oil, Gas and Mineral Corporation, or Petrobangla, as part of these blocks was also claimed by neighbouring countries.

As per the latest approval, ConocoPhillips is allowed to explore the areas of the blocks 10 and 11 in Bangladesh territory of the Bay of Bengal, but would not be allowed to conduct any exploration works in 30 percent of the area of block 10, and in 15 percent of the area of block 11, as these two areas are disputed by the neighbouring countries - India and Myanmar – which are also making claims, according to a Cabinet Division official.

Bangladesh went to the UN body the United Nations Convention on the Law of the Sea (UNCLOS) to settle the disputes.

"If Bangladesh wins the battle in the UNCLOS, then ConocoPhillips will be allowed to conduct exploration works at those 30 percent and 15 percent areas in blocks 10 and 11 respectively," said the official adding that the proposed SLA will provide such guarantee to the US oil major.

In the PSC, the government added an article stating, "If the discovery or exploration of oil or gas remains suspended due to any dispute during the period of discovery or exploration, neither the contractor nor his agent shall claim any compensation for the period of suspension”.

The Petrobangla chairman described ConocoPhillips' venture as the country's first effort made in the deep sea.

"We do not know anything about the prospects of the deep sea and don't have the technology to explore if there is anything valuable there. This company has been pursuing the deal with interest for a long time," he noted.

ConocoPhillips has offered to invest U.S. $111 million for the two blocks, and provided a bank guarantee for a similar amount.

The company had originally offered to invest $442.63 million U.S. dollars under four Production-Sharing Contracts (PSCs) for eight blocks.