Burma will become increasingly dependent on imported crude oil and refined fuels over the next ten years because of a lack of planning and investment, an industry report has forecast.

A rise in crude oil imports is highly likely in spite of an expected upsurge in onshore and offshore exploration in coming years, while underinvestment in refining capacity will necessitate more imports of petrol and diesel, said Business Monitor International (BMI) in a study of Burma’s energy resources. BMI is an international business risks analysis company based in London.

“We see production steadily declining for the next 10 years as no major plan to boost condensate [a form of light oil] output from offshore gas fields has been announced or even discussed,” said BMI.

“The onshore licensing round awards are expected to provide strength to the weak oil production outlook. Currently our forecast sees this [oil] sector in decline through to 2020 and beyond. We believe that [Burma] will become increasingly dependent on oil imports in the coming decade, despite renewed exploration and enhanced resource recovery onshore.”

Burma produced around 20,000 barrels of oil per day in 2013, according to various estimates, but BMI is forecasting that this could slide to under 17,000 barrels per day by 2023. This takes into account a drop in oil and condensate volumes from the major Yetagun offshore gas field while small onshore producers maintain steady output.

BMI said it bases its predictions on published data on Burma’s oil and gas reserves and expected production over the next few years. Figures from the Myanmar Oil and Gas Enterprise and the US Energy Information Administration suggest that Burma’s “proven” reserves of hydrocarbons total 540 billion cubic meters of gas and around 50 million barrels of oil, it said.

“Given both the high level of interest from major international oil companies and the prospectivity of [Burma’s exploration] acreage, we recognise that our reserves forecasts are heavily conservative. However, in light of the early stage of exploration we choose to maintain our conservative outlook,” the BMI assessment said.

Twenty new offshore blocks were awarded in March to 15 foreign firms, from major international players Chevron and Royal Dutch Shell to smaller independents such as Woodside Energy of Australia.
However, there is no time frame yet on when exploratory work will begin in the blocks, some of which are in deep water. The shallow water blocks require a domestic partner to operate.

The blocks were awarded in a process that has been going on since the middle of 2013 and initially involved 61 firms. The block winners are still engaged in negotiations with the Ministry of Energy and several other state agencies over terms and conditions.

The government has said it will not allow any new gas or oil discoveries to be exported until Burma’s domestic needs are satisfied. Until now, most gas has been exported.

Thirty offshore blocks were originally offered and no reason has been given why only 20 were awarded. The ministry has indicated that more onshore blocks could be offered in a new bidding round before the end of this year.

Burma will likely have to import higher volumes of petrol and diesel because the country “will struggle to find investors willing to support its refining sector with limited markets for its products,” the study said. “As consumption increases, we expect [Burma] to increasingly rely on fuel imports.”

Burma has three small refineries but they are in such poor repair that they produce barely one third of the official 55,000 barrels per day combined capacity, said a separate report on Burma recently by industry weekly Asian Oil Monitor.

“An increasing volume of processed fuel, much of it diesel to operate factory and small town power generators, is imported,” Asian Oil Monitor said.

“Fuel demand has rocketed following an easing of restrictions on car imports, although [Burma] has only about 20 vehicles per 1,000 people compared with 250 in Indonesia and 370 in Thailand, Asian Development Bank statistics say.”

Thai Oil plc, part of Thailand’s state-owned PTT oil and gas monopoly, was reported earlier this year to be negotiating with the Myanmar Petroleum Product Enterprise to renovate two of Burma’s three refineries, but no more has been heard on this, said Asian Oil Monitor.

A relatively small domestic market and refinery expansions across the Asia Pacific region have reduced opportunities for Burma to take forward earlier hopes of becoming an oil products export hub, said BMI.

“We remain bearish on the government’s plans to significantly increase the country’s fuels production in the short-to-medium term, given limited commercial opportunities that would encourage the necessary investment to realise this,” it said.

Link: http://www.irrawaddy.org/business/burmas-oil-production-tipped-decline-fuel-imports-increase.html