First-step analysis: the oil market and regulation in Myanmar

General

Describe, in general terms, the key commercial aspects of the oil sector in your country.

Oil production has taken place in Myanmar for more than 1,000 years. The first export was in 1854. The Bama Oil Company discovered the onshore Yenangyaung oil field in 1887. The oil and gas sector was nationalised in 1962.

At present, there are 17 onshore blocks and three main offshore blocks in production. According to the US Energy Information Administration, as of December 2020, output of oil and condensate from these fields was around 8mb/d (million barrels per day). The offshore Yadana (Total, Chevron and PTTEP) and Yetagun (Petronas, Nippon Oil and PTTEP) natural gas projects began production in 1998 and 2000 respectively under gas sales contracts to the Thai state oil company PTT. Yadana’s gas production rate, according to industry sources, was estimated to be 759mmcf/d (million cubic feet of natural gas per day) on average over January to October 2020, with production declining. Yetagun produced an average of 1,751bbl/d (billion barrels per day) of condensate in December 2019. Its gas production rate, according to industry sources, was estimated to be 59mmcf/d on average from January to October 2020, with production declining. The offshore Shwe (Daewoo International, plus four partners including Myanmar Oil and Gas Enterprise (MOGE)) natural gas project, which exports gas to China and domestic factories, produced natural gas of approximately 536mmcfd on average from January to October 2020. The offshore Zawtika (PTTEP and MOGE) commenced production and sales in March 2014 to Thailand and its gas production rate, according to industry sources, was estimated to be around 320mmfc/d on average from January to October 2020.

MOGE is reported to be planning to begin the next bidding round but no estimated date has been announced. In the past two years, there have been reports that the Ministry Of Electricity And Energy (MoEE) was reviewing its standard terms of production sharing contracts (PSCs) and that the Myanmar government planned to implement a new Petroleum Exploration, Drilling and Production Law, a draft bill of which was issued in 2018 and revised in 2019. These measures were intended to support the issue of a further round of tenders. However, the implementation of this new legislation has been delayed, and a further round of tenders for offshore blocks remains pending.

In addition, a state of emergency was declared in Myanmar on 1 February 2021, which is likely to affect planned new investments and expansions in Myanmar’s oil and gas sector, and further delay the proposed tenders for offshore blocks. 

What percentage of your country’s energy needs is covered, directly or indirectly, by oil or gas as opposed to nuclear or non-conventional sources? What percentage of the petroleum product needs of your country is supplied with domestic production?

Current energy production in Myanmar fails to meet its demands. Regarding Myanmar’s population, 70 per cent live in rural areas. The Myanmar Times has reported that 46 per cent of Myanmar's population lack access to energy, while 80 per cent of residents in Yangon, the largest city in Myanmar, are connected to the grid.

Over half of Myanmar’s energy supply is reportedly from hydropower and gas.

Energy consumption by type is shifting in favour of hydropower and other renewable energy sources.

Importation of liquefied natural gas (LNG) has been permitted recently for power projects. Since June 2020, import of LNG started at Thilawa near Thanlyin and is feeding a 350MW power station. A first shipment was sold by Petronas via VPower at Bintulu LNG plant. There have been a few hiccups, but shipments appear to have resumed in October 2020. Importation of gasoline and diesel has also been permitted in recent years as a supplementary source of energy.

Does your country have an overarching policy regarding oil-related activities or a general energy policy?

There are many laws regarding oil-related activities that date back to 1918; these are largely based on the British legal codes of pre-independence Indian statutes. In 2016, the Myanmar Energy Master Plan and the National Electrification Plan were issued.

Is there an official, publicly available register for licences and licensees? Is there a register setting out oilfield ownership or operatorship, etc?

Certain information, including names of contractors and maps of exploration blocks, are available on the MoEE (formerly Ministry of Energy) website at www.moee.gov.mm. Oilfield ownership or operatorship, even if listed in a register for internal government records, it is not publicly available.

Describe the general legal system in your country.

Myanmar has a hybrid legal system comprising colonial-era statutes that codified English common law, modern legislation developed in Myanmar, and customary laws, particularly in relation to family and inheritance law.

More broadly, Myanmar has a developing legal system, and lacks clear precedents to confirm the legal position in many areas. Since the country opened to foreign investment in 2011, the Myanmar government has been developing its understanding of, and administrative practices regarding, its laws, in parallel with reforming and updating such laws. As a result, the guidelines and regulatory practices of Myanmar government agencies may conflict with the terms of the law itself.

Regulation overview

Describe the key laws and regulations that make up the principal legal framework regulating oil and gas activities.

Current key legislation governing oil and gas in Myanmar include the following laws, regulations and notifications:

• the Oilfields Act 1918;
• the Oilfield Rules 1936;
• the Petroleum Rules 1987;
• the Essential Supplies and Services Law (Law No. 13/2012);
• the Oilfields (Labour and Welfare) Act 1951;
• the Petroleum Resources (Development Regulation) Act 1957 (subject to be repealed by the new Law Relating to Petroleum Exploration, Drilling and Production);
• the Law Amending the Petroleum Resources (Development Regulation) Act 1969;
• the Myanmar Petroleum Concession Rules 1962 and Notification No. 615/2015;
• the Petroleum and Petroleum Products Law 2017; and
• Notification No. 100/2013 of the then Ministry of Energy (now the Ministry of Electricity and Energy (MoEE)) relating to the importing, storage, transportation and distribution of petroleum and petroleum products.

The old petroleum laws mainly deal with rights characterised as concessions. Although the above-mentioned laws relating to petroleum are still applicable, in practice, investors generally enter into production sharing contracts (PSCs), performance compensation contracts, improvement of marginal recovery agreements (IPRs), and reactivation agreements. The terms and conditions of these contracts govern the process as long as they are not contrary to the laws in force.

The above laws are mostly based on the British legal codes from pre-independence Indian statutes. Although the terms and conditions of PSCs largely govern exploration and production (E&P) operations, the above-mentioned Oilfields (Labour and Welfare) Act 1951 is of continuing importance to contractors and their service companies.

Environmental regulations have also become part of the legal framework regulating oil activities.

Of equal importance in the oil and gas sector are the State-Owned Economic Enterprises Law (under which the Myanmar Oil and Gas Enterprise (MOGE) is assigned responsibility for the E&P sector under PSCs with private companies), the Myanmar Investment Law of 2016 (MIL) (which superseded the Foreign Investment Law of 2012 (FIL)) (under which permits are granted by the Myanmar Investment Commission (MIC) to approve oil and gas sector projects, including the terms and conditions of draft PSCs).

The following rules for the 2016 MIL were enacted in 2017:

• MIC Notification No. 35/2017 – the Myanmar Investment Rules – was passed on 30 March 2017;
• MIC Notification No. 10/2017 – Designation of Development zones – was passed on 22 February 2017;
• MIC Notification No. 13/2017 – Classification of Promoted Sectors – was passed on 1 April 2017; and
• MIC Notification No. 15/2017 – regarding types of restricted activities – was passed on 10 April 2017.

In the case of employment and labour, the following employment and labour-related laws are applicable to the petroleum sector in Myanmar:

• the Leave and Holiday Act of 1951; the Amended Law for Leave and Holiday Law of 2014;
• the Factory Act of 1951; the Amended Law for Factory Act of 2016;
• the Labour Organisation Law of 2011; the Labour Organisation Rules 2012;
• the Settlement of Labour Dispute Law of 2012; the Settlement of Labour Dispute Rules and the Amended Settlement of Dispute Law of 2014;
• the Social Security Law of 2012; the Social Security Rule;
• the Minimum Wages Law of 2013; the Minimum Wages Rule;
• the Employment and Skill Development Law of 2013; and
• the Payment of Wages Law of 2016.

On 29 August 2019, the MoEE issued Notification No. 356/2019 prescribing the working conditions of workers on the Yadana, Yetagun, Shwe and Zawtika Gas Fields under the Oilfields (Labour and Welfare) Act of 1951. Under this notification, the normal working hours of such workers will be 12 hours per day, and workers will work continuously for 28 days, followed by 28 days of holidays at full pay (inclusive of weekends and public holidays).

The Ministry of Natural Resources and Environmental Conservation (MONREC) issued the National Environmental Quality Emission Guideline (EQEG) on 29 December 2015 as Notification No. 615/2015. The EQEG provides the basis for the regulation and control of noise and vibration, air emissions and liquid discharges from various sources in order to prevent pollution for the purposes of protection of human and ecosystem health. The EQEG applies to the onshore and offshore oil and gas sector, including seismic exploration, exploratory and production drilling, development and production activities, offshore pipeline operations, offshore transportation, tanker loading and unloading, ancillary and support operations, and decommissioning.

The Environmental Impact Assessment (EIA) Guidelines – Onshore and Offshore Oil and Gas Developments of 2019, regulating how to write and submit an initial environmental examination (IEE) or EIA and Environmental Management Plan, of the Environmental Conservation Department of the MONREC  was published in 2019. These Guidelines were developed to provide guidance to proponents on how to conduct EIAs and IEEs for upstream offshore and onshore oil and gas projects. The Guidelines also assist the MONREC and the Environmental Conservation Department of the MONREC in their review of EIAs and IEEs.

See the new Companies Law 2017, which came into force on 1 August 2018, which repealed the Company Law 1914. See also the draft new Law Relating to Petroleum Exploration, Drilling and Production issued on 13 August 2019.

Are there any legislative provisions that allow for expropriation of a licensee’s interest and, if so, under what conditions?

MIL 2016 includes a prohibition against nationalisation.

May the government revoke or amend a licensee’s interest?

Yes.

Identify and describe the government regulatory and oversight bodies principally responsible for regulating oil exploration and production activities in your country. What sanctions for breach may be imposed by the regulatory and oversight bodies?

The MoEE is the primary government agency responsible for the oil and gas sector. Entities within the MoEE that are influential in energy projects are:

• the Oil and Gas Planning Department (OGPD) (formerly Energy Planning Department), which is responsible for negotiating PSCs with foreign oil companies); and
• MOGE, which is responsible for E&P of petroleum within Myanmar and has exclusive rights to carry out all oil and gas operations with private contractors.

MOGE is both a regulator and operator. The MoEE and MIC also have some regulatory roles. If there is a breach or default, the PSC may be terminated.

What government body maintains oil production, export and import statistics?

The MoEE maintains some statistics on oil production, which are presented at workshops from time to time. Some statistics can be found on its website.

The MoEE issued the Myanmar Energy Statistics 2019 on 11 March 2019, which is the result of a four-year development project, and fills a gap in the statistical knowledge of Myanmar’s energy and electricity sectors. In May 2020, the MoEE issued the Myanmar Energy Outlook 2040, analysing the future outlook for energy demand and supply based on the Myanmar Energy Statistics 2019.

The Myanmar Energy Monitor is the sector’s leading source of information, research and analysis (see www.energy.frontiermyanmar.com).

Law stated date

Give the date on which the information above is accurate.

31 May 2020.