Thu 19 Jul 2012
Filed under: Business / Trade
At a Singapore investment conference this week, Burmese officials renewed their call for foreign oil and gas companies to explore 23 new offshore blocks.
The offer is likely to lure major US energy companies and others, since the EU, US and other nations have lifted or suspended sanctions of various types.
The offer covers 17 deep-water blocks and six shallow-water blocks located in the Rakhine, Mottama and Tanintharyi offshore areas in the Bay of Bengal and Andaman Sea, said a Dow Jones Newswire article.
The offshore blocks will be awarded through “direct negotiations” with Burma’s state energy company Myanma Oil and Gas Enterprise (MOGE), which will hold a stake of between 15 to 25 per cent in each project. The foreign companies also will be required to partner with a local Burmese company.
The offer was presented by Aung Kyaw Htoo, a senior energy ministry official. Other details said the foreign firms would have up to a six-year exploration period followed by a three-year tax holiday upon the start of production. The contractor will pay a 30 per cent income tax and a 12.5 per cent royalty will apply, according to Dow Jones.
Wire reports said in June that MOGE had signed nine agreements to allow firms including Malaysia’s Petronas, Thailand’s PTT and India’s Jubilant to explore for oil and natural gas onshore. The new blocks have not been explored by foreign firms, officials said.
Burma has 17 oil fields and five gas fields in production on land. Two offshore gas fields – Daewoo International’s Shwe project and PTT Exploration & Production’s Zawtika project – are currently under development and are due to begin production next year, the presentation said.
Burma has a reserve of 2.1 billion barrels and 25 trillion cubic feet of gas, according to the energy ministry’s presentation.
Burma’s opposition leader, Aung San Suu Kyi, who spent a total of 15 years under house arrest under the former military regime, warned this month that MOGE “lacks both transparency and accountability” and warned foreign governments against allowing their companies to partner with the enterprise until it improves its business practices to meet international standards.
Burma’s Parliament is expected to approve a new foreign investment law by the end of July, which will give foreign companies tax breaks and allow them greater freedom to lease land from private owners.
Whether or not now is the right time for energy companies to make the move into Burma is open for debate.
Soe Myint, a retired director general from the Ministry of Energy, was quoted in the Bangkok Post in April saying that Western oil companies would lose out to Asian competitors if they did not act quickly.
“If you keep staying in a wait-and-see mode, I can tell you that you will be too late [to invest],” Soe Myint told the newspaper.
In July 2011, Myanmar called for tenders for exploration of 18 onshore blocks, which resulted in seven companies being awarded nine onshore blocks. The companies included Thailand’s PTTEPI, Malaysia’s Petronas, Swiss firm GeoPetrol, CIS Nobel Oil from Russia, EPI Holding Ltd from Hong Kong and Jubilant Oil from India.
Burmese officials have also called for help in building a new refinery capable of processing 56,000 barrels per day, a new liquefied petroleum gas factory and liquefied natural gas facilities on Made Island in Rakhine State.
Meanwhile, the Burmese government struggles to meet the country’s electricity demands, handicapped by its antiquated grid distribution system. The country’s major cities suffer long periods of blackout and erratic service, and many businesses depend on private electrical generators.