Ronoc - Myanmar Investors Newswire
December/ 12 / 2013
Myanmar Investors' Newsletter

Myanmar - Oil and Gas

 

Over the next decade Myanmar's oil and gas industry is set to attract a wave of capital that has the potential to financially dwarf all other ongoing projects in the country. Analysts predict over USD 50bn will be needed to explore and develop the blocks currently in tender, with room for multiples of this figure depending on exploration results. As the 60+ international oil and gas firms begin negotiating their contracts for 48 onshore and offshore blocks, a clearer picture of the scale of this wave will come to light, and investors along with local partners, regulators, and suppliers should be positioning themselves to take full advantage when it hits.

 

History

 

Myanmar exported its first barrel of oil in 1853, making the country one of the world's oldest oil producers. Even though the industry was nationalised in 1962 and all fields were controlled by the military regime, some fields, such as the Yenangyaung field discovered in 1887 and the Chauk field discovered in 1902, are still in production today.


Others have already been subcontracted through Product Sharing Contracts (PSCs) to third international parties, including French giant Total, Malaysian state-controlled Petronas, Daewoo, PTT-EP, China National Offshore Oil Corporation (CNOOC), and many others exploring and/or developing a total of 31 blocks by 2007. 

 

Tender

 

In the past negotiations for Myanmar's lucrative oil and gas blocks were made in private, drawing the scorn of some international observers and transparency regulators. But this time round a relatively clear and open tender process has seen 18 onshore blocks and 30 offshore blocks negotiated.


The major fields suspected to be containing much larger reserves are the offshore blocks, where 11 shallow and 19 deep water blocks have attracted the attention of the world's largest oil and gas players. Bidders were allowed to choose a maximum of 3 blocks each, and were obliged to partner with at least one local company for the shallow areas. For the deepwater areas, it is expected firms will be able to operate independently, where they must provide the technology and expertise needed for developing the fields. Some of these deepwater blocks sit in more than 2000ft of water, where little is known of the complex geology and operators will be taking huge financial risk to explore the areas.


While the full list of participants and their chosen blocks is unknown, Shell is known to have bid for three blocks in partnership with Japan's Mitsui Oil Exploration Company, Chevron has eyes on two blocks, Statoil and ConocoPhillips have bid for two blocks, ExxonMobil for two blocks, BG Group and Woodside Energy have together submitted bids for four blocks via two partnerships, and Total has bid for two blocks.

 

The future

 

After the recent opening of an extended pipeline to China, Myanmar now hosts 2278 miles of pipeline to its neighbours, providing the much needed infrastructure to export its gas abroad. It is expected, however, that should the current blocks prove to contain large reserves, additional infrastructure will be needed to sustain exports.


While sources disagree on the numbers surrounding the oil and gas sector in Myanmar, some 20 trillion cubic feet of natural gas reserves have already been proven offshore, and another 80 trillion cubic feet of "probable and possible" reserves have been identified. 


Yet many believe the potential for much greater reserves may surface once the bidders begin exploration, and are willing to invest heavily to discover the true nature of the geology in Myanmar. For a country with an estimated GDP of around USD 60Bn facing a similar amount of FDI in a single sector, analysts expect the effects to stretch into all areas of the country's economy.


Investors will begin to see a clearer picture as more information is published, but the oil and gas sector in Myanmar promises to lead a tremendous wave of FDI over the coming decade.

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About Ronoc
Ronoc is an investment and advisory firm established in 2007. We specialise in emerging markets retail banking and have offices in New York, London, Dublin, Yangon and Ulaanbaatar. Through our extensive experience of working and investing in the emerging markets, we have developed strong local networks and tailored strategies for operating in challenging political and economic settings. Read more
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