Thursday 2 January 2014

2014 Promises to Be a Boom Year for Burma’s Gas and Oil Industry

Burma will be the focus of attention in the international oil and gas industry in 2014 as a batch of major offshore exploration licenses are awarded and more blocks are expected to be put up for foreign bidding.

Against that background, Burma is to host two major international oil industry exhibitions in Rangoon to attract more investor interest.

The winners of pending bids for 30 offshore blocks are expected to be announced soon, with some industry reports saying successful foreign companies could be named within weeks.

“The much-awaited auction of 30 offshore oil and gas sites, expected by February, is the latest test of [Burma’s] economic reforms and its emerging, yet still vague, energy policy,” said the US business website Frontier Markets on December 24.

Oil industry magazine Rigzone said license winners could be announced during January.

“Industry players are watching with interest an impending tender award by [Burma’s] Ministry of Energy for 30 offshore oil and gas exploration blocks, which has attracted bidding by several major international oil companies that were absent in previous tenders,” Texas-based Rigzone said. “The outcome of the tender will highlight the progress, or lack of one, as the country attempts to improve the climate for energy investments.”

International industry reports say the award of offshore licenses is likely to lead to the offer sometime during 2014 of more than a dozen other onshore and offshore exploration blocks, including in the Bay of Bengal and Gulf of Martaban.

Bidders for the 30 offshore blocks currently in the pipeline include major Western global energy development firms.

Shell has bid for three blocks in partnership with Mitsui Oil of Japan, while ConocoPhillips of the US has partnered Norway’s Statoil in two bids, said the energy news agency Platts. Other noted bidders include Chevron, ExxonMobil and Total.

Asian bidders include the state-owned business of PTTEP of Thailand, Petronas of Malaysia and OVL of India.

However, China’s three major state-owned oil companies are curiously remaining on the sidelines.

“The bidding is very competitive. We are just watching, waiting for better opportunities,” the president of China National Offshore Oil Corporation Myanmar Limited, Chen Zhiyong, was quoted by Rigzone saying on December 16.

Sister state firm China National Petroleum Corporation has just completed a 900-kilometer pipeline through Burma to pump gas from the offshore Shwe field in the Bay of Bengal.

The involvement of big Western industry names in the bidding is no guarantee of major oil and gas discoveries, however. The 19 deep water and 11 shallow water blocks to be licensed are a “blind” gamble, said a recent Financial Times assessment.

“This is an unusually blind auction because the [Burmese] government does not have the technical capacity to assess the geology [beneath the seabed],” the paper said.

Usually, exploration blocks put up for license come with at least preliminary survey data indicating potential if not definite oil or gas prospects.

The international oil industry is hopeful of new major gas and perhaps also oil discoveries because of the big Shwe, Yadana and Yetagun fields currently producing large volumes of gas. In addition, PTTEP is preparing to tap the Zawtika field in the Gulf of Martaban with proven reserves of 50 billion cubic meters of gas.

It is riches like these which are set to lure more oil and gas companies to Burma during 2014 for two major international industry exhibitions in Rangoon organized by London-based promotion firms.

The Myanmar Oil & Gas Week will be held February 25-27 to provide more insight for potential investors as well as the technical, financial and legal challenges they face. One of the sponsors for this event is PTTEP, whose president Tevin Vongvanich will be a main speaker.

Later in the year Oil & Gas Myanmar 2014 will be held at Rangoon’s convention center. This event, October 15-17, is seeking to attract not only upstream explorers but also refining specialists.

Along with an inadequate electricity generating capacity, Burma also suffers from a dilapidated oil refining sector. The country’s existing three small refineries can produce barely one third of local demand, which is rising as the number of vehicles on the roads rapidly expands.

The February event will examine the “infrastructure, transit and logistical requirements for developing an efficient oil and gas industry,” said London organizer ITE Group.

Who are the likely winners of licenses for the current offshore blocks up for biding? There are no clear indications given the secret nature of the bidding and the unclear procedural processes.

The Rangoon-based international law and tax advisory firm VDB Loi thinks existing foreign players Total, PTTEP and Petronas have an advantage because of their experience and the physical infrastructure they have already got in place.

The three firms “have a considerable edge over any newcomers,” a VDB Loi assessment said.

“It will not be so easy for newcomers to get over some of the specific uncertainties that are associated with oil and gas EP [exploration and production] in Myanmar.”

source: The Irrawaddy

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