The agreement, which gives ConocoPhillips the right to explore two offshore blocks which lie in disputed waters in the Bay of Bengal, was approved by the cabinet earlier this month, PetroBangla chairman Hossain Monsur told AFP.

"The agreement now comes into effect immediately. ConocoPhillips will search for oil and gas only in undisputed areas in blocks 10 and 11 -- some parts of which are also claimed by India and Myanmar," said the head of the state energy group.

Monsur dismissed protestors' allegations that Bangladesh would not benefit from the deal, saying the arrangement would help end the country's chronic power shortages.

Activists have called the deal "suicidal" for the country, with the National Committee on Protection of Oil, Gas and Ports, a left-leaning umbrella group of opponents of the deal, saying the agreement was tantamount to theft.

"This agreement is meant to solve the country's energy crisis but it will not do that," said Anu Muhammad, a leader of the committee, who alleged that ConocoPhillips would export 80 percent of the gas found in the blocks.

The two blocks were also at the centre of a tense stand-off between Myanmar and Bangladesh in November 2008, which flared up when Myanmar escorted a South Korean gas exploration company into the disputed stretch of the Bay of Bengal.

India also claims certain sections of the Bangladeshi offshore blocks, which experts have predicted contain major reserves of gas. Large reserves have been discovered in India and Myanmar's uncontested portions of the bay.

Bangladesh is urgently trying to locate new sources of energy as the government has said the nation's current gas reserves may run out by 2014-2015 at present consumption rates.

Existing gas supplies -- essential for cooking, generating electricity and running buses and cars -- are massively overburdened, with supply around 1,900 million cubic feet of gas per day against demand of more than 2,400 mcft.

Copyright AFP (Agence France-Presse), 2011