Dhaka: The Cabinet Economic Affairs Committee on Wednesday in principle approved the Energy Division's proposal to sign the final deal with South Korean Posco Daewoo International Corporation for oil and gas exploration in the deep sea block DS-12.

The Cabinet body approved the proposal along with four others in a meeting held with Finance Minister AMA Muhith in the chair.

The other proposals include awarding contract to develop Chinese Economic and Industrial Zone with Chinese government's financing, awarding contract to PowerPac East West-GasMin Consortium to develop and operate Mirsarai Economic Zone, and construction of Khanjahan Ali Airport Construction under Public-Private Partnership (PPP). 

Officials said state-owned Petrobangla earlier signed an initial deal with South Korean company Posco Daewoo for the block DS-12 on December 7 last year. After the Cabinet body's nod, both will move for signing the final contract which will allow Posco Daewoo to start physical works for the block DS-12.

Official sources said the government kept option for export in the proposed deal.

The government processed the proposal of Posco Daewoo under the 'Prompt Power and Energy Supply (Special) Act-2010' which means there was no open competitive bidding process in awarding the contract.

After the discovery of any gas, the South Korean company will offer Petrobangla to buy its portion of gas to be obtained under production sharing contract (PSC), according to the export provision.

If Petrobangla refuses to buy gas, Posco Daewoo will offer a third party within the country to buy it. If the third party refuses, the Korean company will be allowed to export, said Petrobangla official.

Official sources said the price of gas was set at $6.5 per unit (1000 cubic feet) in the proposed deal.

As per the proposed contract, Posco Daewoo will conduct a 2D seismic survey and drill an exploration well during the first two years. If the block is found to be potential, then the company will conduct a 3D survey, officials said.

That means when there will be any gas discovery, the government will get its own portion and also buy gas from the IOC at this rate which it will get as its share under production sharing contract (PSC).