Thu 26 Jun 2014
Filed under: Business / Trade,International,News
A Kazakh gas magnate, a furniture maker and two brothers once under international sanctions are part of a colourful cast flocking largely unnoticed to Myanmar’s emerging oil frontier.
The fast-opening southeast Asian country has handed out dozens of onshore and offshore oil blocks via opaque auctions that campaigners warn have at their worst recalled the secretive days of military rule.
Critics say the sell-off is a worrying regression from a widely praised mobile phone licence round last year that drew big international interest to the populous frontier economy.
While no evidence of graft has emerged, the oil rights sale has raised awkward questions ahead of the Myanmar government’s effort next week to join the Extractive Industries Transparency Initiative, the flagship programme aimed at combating natural resource-linked corruption.
Juman Kubba, an analyst at Global Witness, the London-based campaign group, says: “Myanmar’s most valuable assets are being sold off but in many cases citizens have no way of knowing who is truly benefiting. Bringing the real winners of new investment into the open is crucial to tackling corruption, and turning talk of reform into a reality.”
Companies from around the world are preparing to sign for 36 blocks in some of the world’s least-mapped oilfields, with data scant after decades of dictatorship and isolation from the west. Provisional winners announced in October and March include Chevron of the US, the UK’s Royal Dutch Shell, India’s Reliance Industries and Petronas of Malaysia.
But the auctions have also attracted a clutch of foreign and local companies about which little has been revealed by the quasi-civilian government in power since 2011. The ministry of energy’s announcements on its Facebook page simply list names and contacts of the winning businesses, along with limited details of contract terms – but not the “signature bonuses” the companies have agreed to pay.
One Myanmar analyst who asked not to be named describes the oil auction as “second rate” and a “missed opportunity”, compared with the openness of the mobile phone licence sale that ended in success for Norway’s Telenor and Ooredoo of Qatar.
Matthieu Salomon, Asia-Pacific programme manager of the Natural Resource Governance Institute, a non-governmental group, says: “You do not change a political culture of decades of secrecy and no communication overnight. It is habit – and it is probably also a symbol of tensions within the government between people we would call reformers and some more conservative parts of the apparatus.”
Many of the oil auction winners have themselves been as uninformative as the Myanmar authorities. Only 13 of the 47 successful international and local bidders responded to questions from Global Witness about who owns them, according to research published by the group on Thursday.
Myanmar oil’s more mysterious players include Berlanga Holding of the Netherlands and Caog of Luxembourg, both of which are linked via a UK company – also called Berlanga – to Shyngys Kulzhanov, a Kazakh energy entrepreneur. Mr Kulzhanov is sole director of Berlanga UK, which is owned by the Netherlands’ Berlanga and ultimately controlled by a Bermuda-based trust business, according to its 2012 accounts. Caog is also named as part of the same group of companies.
Myanmar oil and gas exploration areas
The 44-year-old Mr Kulzhanov, who is listed as having an address in London’s Belgravia, developed oil and gas interests in Kazakhstan after the collapse of the Soviet Union. He focused on the lucrative export market for energy to fuel the rapid growth of neighbouring China, playing a part in deals such as a 2009 venture with Xinjiang Guanghui Industry to send gas for liquefaction over the border.
Both Berlanga companies declined to respond to questions. Caog and Mr Kulzhanov could not be reached for comment.
Other auction winners have backgrounds that raise questions about whether they are part of the network of what are locally dubbed “cronies” of the former dictatorship. IGE and UNOG, which won four blocks between them, have historically been controlled by Pyi Aung and Nay Aung, sons of a hardline pro-military politician, according to local media and US diplomatic cables published by WikiLeaks.
Pyi Aung is married to the daughter of Maung Aye, the former junta second-in-command, while the brothers have a taste for Hummers and have amassed wealth across industries including timber, construction, rice and energy, according to a 2008 US cable. Both men were placed under EU travel bans and asset freezes that were lifted last year along with other Myanmar sanctions, as part of an effort to encourage the transition to civilian rule.
Neither IGE nor UNOG responded to requests for details on their ownership or to questions about Pyi Aung and Nay Aung. The brothers could not be reached for comment.
A third group of successful oil bidders are perhaps the most incongruous: Myanmar companies that often have little or no record in the energy industry, but have been brought on board because of rules forcing foreign bidders for many fields to take on a local partner.
Win Precious Resources, winner of an onshore block with Thailand’s PTTEP, is a mining company that says it has decided to expand into energy. “We have no experience but we can invest,” said Nwe Ni Swe, business development manager of Win’s parent company.
Another triumphant local business, Lin Win, promotes itself on its website as a teak furniture manufacturer. Its international partner Transcontinental, an Australian energy group, says it learnt about the Myanmar oil opportunity from the Lin Win founder’s daughter, who for many years held a senior position in Transcontinental’s property business.
Simon Trevisan, Transcontinental’s managing director, says his company needed a Myanmar tie-up and went via someone it knew and trusted, rather than seeking out one of the few existing local energy companies. “These were more important reasons than gambling on an unknown with potential for some oil expertise – even if such a partner could have been identified in the time available,” he says.
Lin Win did not reply to a request for comment. Myanmar ministry of energy officials declined to respond to questions about the auction submitted by phone, email and fax.
Myanmar’s Kachin state at the heart of illicit economy
A policewoman stands beside seized drugs during a destruction ceremony marking the UN’s international day against drug abuse and illicit trafficking in Yangon on June 26 2013
The resource-rich Kachin state is at the centre of a power struggle between China’s encroaching economic interests and ethnic militias
Defenders of the bidding process say the scant information published about the auctions may reflect more the absence of external pressure to be accountable, rather than an attempt to conceal wrongdoing.
An executive at one winning bidder acknowledges the lack of transparency, but says the energy department has made efforts to show it is keeping corruption at arm’s length. “We were told by government officials to stay away from the ministry and the capital while the decisions were being made,” he says. “They did not want to be influenced by lobbying – or anything else.”
Whatever the Myanmar government’s motives, the result has been an often confusing and obscure process that some feel has set a disturbing tone in a country long plagued by misuse of its rich natural resources. As one official at a successful local bidder says: “We want to keep it as low profile as possible – because the oil industry is dirty.”
Additional reporting by Jack Farchy in Moscow