Oil and gas in the capitals

	Vol. 229 No. 11
DAYSE ABRANTES, CONTRIBUTING EDITOR, SOUTH AMERICA

E&P in Myanmar: Doing business in Southeast Asia’s pariah

E&P trends in Myanmar are hard to track because of the shadowy nature of the government, but what information exists shows several lesser-known, small energy companies operating in country. Political trends that impact E&P, however, are easy to track because they are loud and prevalent in the news, especially the human rights crasckdowns on protestors and the government’s refusal to allow in sufficient foreign disaster relief in the wake of the Cyclone Nargis.

While Myanmar is mostly a gas play, there could be as much as 3.2 billion bbl of recoverable oil reserves in the country, most of it onshore. Of 16 gas and oil fields in country listed by The Myanmar Times, 10 were oil finds, but Total, which operates in the country, asserts that of Myanmar’s 170,000 bbl of oil equivalent produced per day, 90% is gas.

Government statistics cite 13 energy companies operating in country. In Myanmar’s oil sector, the key player is state-owned Myanmar Oil and Gas Enterprise (MOGE). Foreign companies in joint ventures with MOGE include China National Petroleum Corporation (CNPC), Sinopec, Essar, India-based Focus Energy Ltd. and MPRL E&P Pte Ltd. MPRL began as a Baker Hughes entity, but as of 1999, private investors own the company. Many of these companies are working as many as 19 onshore blocks.

Offshore Burma is certainly more known for its gas projects, where some of the world’s energy giants such as Total, Chevron, Petronas Carigali (Myanmar) and CNPC are working 29 blocks.

Because of the shadowy nature of the government, many energy companies do not report their progress or lack thereof, and figuring out just who is producing what and where is a bit of a puzzle. But there is at least sparse reporting.

For example, The Myanmar Times said that onshore prospector MPRL brings to Myanmar enhanced well exploitation through new seismic data acquisition for reservoir analysis and production methods, something the government needs to further exploit its aged onshore oil wells.

And more companies are piling on. In March 2007, for example, MOGE, Silver Wave Energy Pte Ltd. of Singapore, and Silver Wave Sputnik Petroleum Pte Ltd. of Russia had begun exploring for both gas and oil onshore in Myanmar’s Pinlebu region. In September 2007, India’s ONGC Videsh Ltd. signed Production Sharing Contracts (PSCs) to hunt for hydrocarbons on three deepwater blocks encompassing 25,800 sq km.

The big story in Myanmar right now, however, is not gas and oil finds. It’s the pressure on gas and oil companies doing business with the government, which in September 2007 carried out a major crackdown on waves of human rights protestors led by Buddhist monks, killing 13 and arresting 2,000. Popular disdain for the government has been common since it nullified, via force of arms, a national referendum in 1988 that called for democracy. High-profile rights activists such as Aung San Suu Kyi have challenged the government’s decision ever since and have been under various states of arrest for decades.

Moreover, as the destruction and turmoil continue to mount from Cyclone Nargis, which hit in May 2008, the Myanmar government has been reluctant to allow in badly needed foreign emergency aid, which could contribute to the deaths of thousands.

As a result, human rights groups have challenged energy companies doing business in Myanmar as supporting a dictatorial regime. Companies such as Total and Chevron have issued statements saying they would continue to do business in Burma, citing commitments to community projects, human rights improvements and provision of vital domestic energy supplies.

But this will not likely be enough as various rights and economic concerns are bound to increase pressure on the energy companies. For example, in October 2007, the Danish Labour Market Pension Fund withdrew its stake from Total’s investment in Myanmar.

And the US Congress in December 2007 approved the Block Burmese JADE Act of 2007, which not only seeks to keep Myanmar gemstones from entering the US but also seeks to penalize companies such as Chevron that do business in Myanmar-in Chevron’s case by keeping it from benefiting from tax deductions on its investment in the Yadana gas project. Chevron, which is a co-investor in Yadana with Total, says that the US government should not pressure a publicly traded company to invest in or divest from any endeavor, and that its project in country supports health and social programs for thousands.

Dr. Michael R. Smith, chief executive of the oil and gas forecasting company Energyfiles, says it’ll take more than that to scare away the majors. “The Gulf of Martaban is one of very few areas in Southeast Asia that still has significant potential for relatively large inexpensive, shallow water gas developments for export,” he says. “Thus, despite the political situation, companies remain willing to explore and develop here, probably hoping that the government will slowly reform under international pressure.”

One party that is hoping the majors slow their expansion into Myanmar is China. In early 2007, CNPC signed PSCs with the government to explore for oil and gas in three deepwater blocks off the Rakhine coast. Then, in March 2008, CNPC and Myanmar announced talks to discuss constructing a pipeline that would run 400,000 bopd from the Myanmar coast to China’s Yunnan province should they find oil offshore. And China’s CNOOC announced talks with Thailand’s PTTEP about acquiring its Myanmar assets as well.

China’s increased interest in Myanmar is natural given its ever-growing need for hydrocarbons, which causes it to focus on nearby and less costly sources of energy wherever possible. In doing so in Myanmar, China is hoping that international pressure keeps many of the energy majors from expanding their investments in the gas-rich- and maybe oil rich -country. Not subject to such nuisances, Beijing will try to move in to increase its stake there.

.