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Energy giants gauge Burma’s potential ahead of tender

As international energy giants flock to Rangoon for the 2nd Myanmar Oil, Gas and Power road show this week, western and Asian operators are scoping out investment opportunities in Southeast Asia’s final frontier market.

After western governments eased sanctions targeting the country, Burma’s oil and gas industry has seen increased attention from American and European multinationals that are eager to secure a piece of the action.

“Many multinational petroleum companies including Shell, BP, BG ConocoPhillips, Chevron and many others have shown great enthusiasm to invest and keen interest to conduct upstream petroleum exploration in Myanmar [Burma]’s petroleum sector,” union minister Than Htay told a crowd of more than 300 attendants at the MOGP conference today.

Despite these international energy giants knocking on its door, the Burmese government has yet to release dates for the much-anticipated international tender, although industry insiders said it could be announced later this month.

“The blocks for this bidding round are under consideration and assessment and hope to be finalised in due course,” said Than Htay.

The Ministry of Energy said 29 lucrative offshore blocks will be offered alongside 34 onshore blocks in the next bidding round, and Burma’s untapped offshore and deep water oil and gas reserves are tipped as being certain to lure in big name western energy firms.

“US firms are interested in offshore, not onshore,” said Ken Tun, CEO and president of local firm Parami Energy, which has a 22 percent stake in an onshore block alongside Indian operator Jubilant.

“These guys want to play big and the big games are all offshore,” he said.

Edwin Vanderbruggen, a partner in specialised advisory firm VDB Loi, said western energy companies were ramping up their interest in post-sanction Burma.

“They’re looking at the opportunities with interest, gathering information and doing feasibility studies,” said Vanderbruggen. “For many of them, this is the first time they’ve actually studied a Myanmar deal, so there is a learning curve.

“Whether this interest will translate into actual deals by the biggest players does not only depend on Myanmar itself, but also on the opportunities and returns the investors have elsewhere,” said
Vanderbruggen.

Representatives from Dutch-British multinational Shell are in negotiations with the Burmese government for at least one offshore block, said an industry insider, although the company declined to confirm these reports.

Chevron, Exxon Mobil and Conoco Phillips were part of a delegation of about 40 US firms that visited Burma in July and are tipped to be the next big players in the country’s oil and gas scene, said Nopporn Wongsatitporn, associate director of gas and power at leading strategic and financial advisory services firm AWR Lloyd.

However, Wongsatitporn said stringent reporting requirements and compliance issues imposed by their home government mean incoming US firms would need to watch their step so not to fall foul of American sanctions.

“As an energy expert, the major challenge faced by western oil companies investing in Myanmar is identifying an experienced local partner free of ties to officials blacklisted in the US,” he said.

All foreign firms investing in the oil and gas sector are required to take on a local partner and enter into a production sharing contract and partnership with the government entity MOGE which oversees licencing and holds a majority stake in all onshore and offshore blocks.

But while western energy companies are expected to make their presence felt, they won’t be tipping the balance against eastern firms just yet, said Jared Bissinger, a PhD student from Australia’s Macquarie University who is studying Burma’s economy.

“Myanmar’s oil and gas sector has many more firms from Asia than the west, and it will stay that way for quite a while,” said Bissinger.

“Part of the reason for this is simply geography – Myanmar’s location, comparatively far from the west makes it more economical to export oil and gas to Asian countries. Remaining sanctions, like the import ban, play a role too, as does the SDN [Specially Designated Nationals] list,” said Bissinger.

Asian players including Korea’s Daewoo, Thailand’s PTT EP, Malaysia’s Petronas and Chinese firms SINOPEC and CNOOC currently dominate the resource-rich country’s oil and gas scene.

French multinational Total is leading the push to boost western presence in Burma’s lucrative oil and gas industry after announcing plans on Monday to team up with Thai operator PTT’s Exploration and Production arm (PTT EP) to explore an offshore field.

Japanese firm JX Nippon Oil and Gas Exploration Corp will hold a 15 per cent stake in PTT EP’s Block M11 and Total E&P Myanmar will take 40 percent, while the Thai energy giant will remain the operator at 45 percent.

Currently, the token western presence is made up by Total, which has been in Burma since 1992, pre-dating international sanctions and operates the Yadana gas field as part of a consortium made up from America’s Chevron, PTT EP and the Myanmar Oil and Gas Enterprise (MOGE).

-Kate Kelly is a pseudonym for a journalist working inside Burma.

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