Daewoo Bows to Burmese Pressure to Sell Gas to China
South Korea’s Daewoo International has finally bowed to pressure from the Burma regime to agree to sell to China most if not all of the large Shwe gas reserve in two offshore wells, say analysts.
In a minimum legal statement to the Seoul stock exchange, secretive Daewoo confirmed only that the â€œpreferred buyerâ€ of the Shwe gas would be a Chinese company.
Most industry observers say this means the Chinese state PetroChina company.
Daewoo, which has the majority concession on the A-1 and A-3 blocks off the Burmese west coast near the port of Sittwe, had long resisted a sale to China.
Other contenders for about 6 trillion cubic feet (200 billion meters) of recoverable gas included India, Japan, Thailand and South Korea itself.
A buyer for the gas has been in contention for more than one year. For a long time India was the preferred buyer. Then China muscled in.
â€œFor the last six months there have been a succession of contradictory statements about this big gas sale, but I think most observers knew that once China entered the bidding it was over, not matter what Daewoo and Indian government officials kept saying,â€ noted energy commodities consultant Collin Reynolds in Bangkok.
The outcome is a double blow to India, whose two state owned energy companies-GAILÂ and onGC Videsh-have a combined 30 percent development investment shareholding in the two Shwe fields.
Daewoo holds a 60 percent stake and says it has invested tens of millions of dollars. Smaller stakes are held by Korea Gas and Myanmar Oil and Gas Enterprise.
Both India and China have said they would build pipelines through Burma to transport the gas home if they won the bidding.
Alternative plans involved building a plant in Sittwe to compress and chill the gas for sea transport-a common method nowadays. This would have enabled Daewoo to sell to several customers including Japan, Thailand’s PTT and Korea Gas.
â€œThe irony is they would for sure all have paid more for the gas than China is likely to do,â€ said Sar Watana, a Bangkok-based commodities analyst.
Bank’s Capital Expansion Shows ‘Confidence in Future’
Claims by Burma’s First Private Bank company that it is planning to double its capital â€œin order to receive more deposits from the general public and hence to expand our capacity to extend loansâ€ appear to reverse recent regime policy.
Earlier this year the state Central Bank of Myanmar told commercial banks to limit customer deposits to 3 million kyat (US $2,300) per week. This was because the banks could find no way to lend out deposits and turn a profit.
â€œBurma’s central bank currently caps the interest rate that banks can charge on loans at 17 percent per annum,â€ said Burma Economic Watch editor Sean Turnell of Macquarie University in Australia.
â€œWith inflation currently running at between 40 to 50 percent, lending money is a luxury that few Burmese can afford,â€ said Turnell.
For Burma’s farmers, the situation is worse: for unexplained reasons the country’s commercial banks are barred by the junta from lending to them.
Farmers can borrow only from the state Myanma Agricultural Development Bank and are then limited to about 10 percent of what they seek.
First Private Bank-business slogan: â€œThe Bank We Trustâ€- describes its main purpose as the â€œprovision of loans for private businesses and for small industrial ventures.â€
First Private told Burmese media that its plans to increase its authorized capital-from 5 billion kyat ($227 million) to 10 billion-was a â€œshow of confidence in the future.â€
Turnell said since the 2003 banking crisis â€œthe [Burmese] financial system remains essentially moribund.â€
Bangladesh Plans to Open Bidding for Oil, Gas Exploration
Bangladesh plans to open bidding for more oil and gas exploration in the Bay of Bengal.
The Dhaka government says it needs to open up more blocks for exploratory drilling because of a looming domestic shortage.
Petrobangla says bids might be opened before the end of this year. Petrobangla has previously claimed that its territorial waters contain 13 trillion cubic feet of recoverable gas.
The only current producing block is operated by Cairn Energy of the UK, near the port of Chittagong. It delivers about 170 million cubic feet of gas a day, all used in Bangladesh.
Other companies already carrying out exploratory drilling include the US’s Chevron and Total of France.
The Burma regime recently rejected a proposal by Bangladeshis to acquire Burmese gas from the Shwe field, also in the Bay of Bengal, to be used to fuel agricultural fertilizer factories in western Bangladesh. Dhaka said it would trade fertilizer for gas.