The gas field in Habiganj has a proven reserve of 2.4 TCF (trillion cubic feet) of gas. Some 300 MMCFD (million cubic feet) of gas is expected from the field by December 2006.

Production in the hydrocarbon mine, from where once the US company had intended to export gas to India, will be gradually increased-- 400 MMCFD by October 2007 and 600 MMCFD by December 2008.

Unocal Bangladesh Chief Andrew L Fawthrop and Petrobangla Director (PSC) Raihanul Abedin initialed the deal on behalf of their respective sides at Petro Centre.

Now the GPSA will go to the law ministry for vetting. The final agreement is expected to be signed in a month, on approval of Prime Minister Khaleda Zia.

Negotiations for the Bibiyana deal had begun in early June 2004 after the government approved a $ 230 million development budget for the field, but stalled over the wheeling charge issue.

Unocal paved the way for signing the GPSA for Bibiyana by agreeing in a "side letter" that the issue would be resolved in line with the arbitration on a similar argument for Jalalabad field.

The US company had made it a point that the government cannot deduct 4.5 percent wheeling charge for its Jalalabad or other fields as the company does not market gas.

Rather, it came up with the observation that the company pumps gas up to a certain point into Petrobangla pipeline carrying gas through its own pipeline from the wells in Jalalabad.

Another argument was that the international oil company (IOC) does not get the tariff equivalent to one paid by the end-users rather it gets the wellhead price.

Unocal sought an arbitration on the wheeling charge issue for the Jalalabad gas field, now producing about 150 MMCFD after Shell-Cairn won a similar case for its offshore Sangu gas field.

According to production-sharing contract (PSC), the government can deduct 4.5 percent wheeling charge if an IOC markets its gas using the Petrobangla pipelines.

Like Unocal, the Shell-Cairn combine had also built pipeline to carry gas up to a certain point of pipeline of Petrobangla. As in case of Jalalabad and Moulvibazar, the Unocal will construct pipeline from Bibiyana to carry gas to a certain point of national gas grid.

Earlier, Unocal had also signed a GPSA with the Petrobangla for Moulvibazar gas field, which is expected to go into production by the first quarter of 2005, with a similar "side letter". The field initially will produce 70 MMCFD, rising up to 100 MMCFD in course of the operations.