As part of a new effort to attract foreign investment and strengthen the country's energy security, Bangladesh has invited international tenders for offshore oil and gas exploration in 27 blocks in the Bay of Bengal and offered a series of incentives, including gas export opportunities, tax benefits and duty exemptions.

State-owned Petrobangla on Sunday invited international tenders for exploration in 12 shallow-sea blocks and 15 deep-sea blocks under the Offshore Bidding Round 2026.

The move comes as Bangladesh continues to grapple with mounting energy shortages and growing dependence on imported fuel despite resolving maritime boundary disputes with neighbouring countries more than a decade ago.

According to Petrobangla, interested international oil companies (IOCs) have been asked to submit bids by 1:00 pm on November 30.

Under the proposed production sharing contract (PSC), foreign companies will be allowed to export gas if Petrobangla or local buyers decline to purchase it.

However, Petrobangla will enjoy the first right of refusal. Companies will also be allowed to sell gas domestically to entities other than Petrobangla if needed.

Gas pricing has been linked to international crude oil prices, with floor and ceiling limits fixed to reduce market volatility.

For deep-sea blocks, gas prices will be set at 11 percent of the prevailing international oil price, subject to a maximum of $11 per MMBtu and a minimum of $7.5 per MMBtu.

This means if crude oil trades at $100 per barrel internationally, the gas price would stand at $11 per MMBtu. 

Even if oil prices rise further, the gas price ceiling will remain capped at $11. For shallow-sea blocks, the maximum gas price has been fixed at $10.5 per MMBtu.

To make the investment climate more attractive, Petrobangla will bear the income tax liabilities of expatriate employees working under the contracts. 

Imported equipment and materials required for exploration, development and production activities will also enjoy full customs duty exemptions.

The draft contract stipulates a nine-year exploration period. During the first four years, companies must complete geological surveys and either two-dimensional or three-dimensional seismic surveys. 

Two years will then be allocated for drilling exploration wells, followed by three years to move into production.

Petrobangla said geological surveys will be mandatory for all contracted companies.

Selected firms will also be required to provide substantial bank guarantees at different stages of the project. A company must deposit $3 million before starting surveys, followed by $20 million before drilling wells, and another $20 million before commencing commercial production if oil or gas is discovered.

Under the cost recovery mechanism, foreign companies will recover their investments from the sale of oil or gas. However, annual recovery cannot exceed 75 percent of total costs.

The remaining profit oil or gas will be shared between Petrobangla and the contractors.

In shallow waters, Petrobangla’s share will range from 40 percent to 65 percent, while in deep-sea areas the share will range between 35 percent and 60 percent.

The government has also relaxed labour welfare obligations for investors. Instead of contributing the standard 5 percent of profits to the workers’ welfare fund as required under Bangladesh’s labour laws, the offshore investors will pay only 1.5 percent.

Investors will have to bear the cost of building pipelines needed to transport oil or gas from offshore fields. Pipeline costs will depend on distance, water depth and the size of discovered reserves.

State-owned exploration company BAPEX will receive a mandatory 10 percent stake in shallow-sea blocks, though it will not hold any share in deep-sea projects.

Under the proposed arrangement, gas field contracts will initially remain valid for 25 years, while oil field contracts will run for 20 years, with provisions to extend both by another 10 years.

Petrobangla expects offshore exploration activities to begin by the end of 2027 after completing the tendering and contractual processes.

An earlier offshore bidding round was launched during the interim government period, but although several companies purchased tender documents, none eventually submitted bids.

MSH

Companies and organisations will be required to file tax returns on the income generated by employee welfare funds from the current fiscal year and pay a 27.5 percent tax on the earnings. 

The Income Tax Act 2023 incorporates the provision, lifting the tax exemption and amnesty on the compulsion to file returns for funds such as provident funds, gratuity funds and workers' profit participation funds maintained by the private sector.

The law, however, has exempted government-managed provident funds from taxation, raising questions.

TIM Nurul Kabir, executive director of the Foreign Investors' Chamber of Commerce & Industry, said there were many other avenues to collect tax.

"Employees benefit from provident funds after their retirement. So, the authority should not slap taxes on retirement benefit."

He said while levying the tax, the government has not treated provident funds of the private and public sectors equally.

"It is discriminatory," he said, adding that they would appeal to the tax authority for the withdrawal of the tax on income from provident funds.

Debabrata Roy Chowdhury, director for legal, regulatory and corporate affairs at Nestlé Bangladesh PLC, said the introduction of income tax on trust funds would lower the overall income from such schemes.

"This will have an adverse long-term impact on retired employees of private organisations."

Chowdhury urged the authority to address the issue in line with the spirit of the government's initiatives aimed at ensuring social security for private sector employees.

"The recent introduction of the universal pension scheme for private sector employees is a good example of that."

A senior official of the NBR, on condition of anonymity, said the income of government-managed provident funds was exempted in line with the Provident Fund Act 1925.

He said provident funds under the private sector had been historically exempted and there was no requirement to submit tax returns. As a result, it was unclear whether the funds were properly utilised.

"From now onwards, we will see proper disclosure."

The tax official said the contribution of payroll tax is about 3 percent of the total income tax although it should increase as the economy is growing.

Md Shahadat Hossain, a former president of the Institute of Chartered Accountants of Bangladesh, said income from investment in savings certificates, where people invest as a source of future earnings, is already taxed.

"From that perspective, the imposition of tax on provident and other employee welfare funds seems okay."

However, Towfiqul Islam Khan, senior research fellow at the Centre for Policy Dialogue, said social protection for private sector employees was low.

"Provident and other workers' welfare-related funds provide little social protection. The imposition of tax will increase inequality. But there can't be any discrimination in taxation between private and government provident funds."

Khan, citing the latest income tax law that replaced the Income Tax Ordinance 1984, said the NBR tried to find new avenues to increase tax collection and improve the nation's revenue-gross domestic product ratio, which is one of the lowest in the world.

"We can see the desperation of the tax authority to boost collection. This ultimately reveals the inability of the NBR to catch the tax evaders and illicit money makers."