Myanmar possess largely untapped reserves of natural resources, in particular oil and gas both onshore and offshore.  With recent liberalisations and changes to the Foreign Investment climate, Myanmar has become a key part of most oil and gas firms forward strategy.  In this briefing we comment on recent developments in the oil and gas sector.

Onshore

Onshore development can often be less expensive than offshore operations, but is very much terrain dependant.  Operational costs can “blow out” if the geography is not conducive to such operations, however onshore exploration is still favoured by junior to mid-cap explorers. 

On 11 October 2013, Myanmar awarded sixteen onshore contracts to various foreign investors. Thirteen of these contracts fall under the production sharing contract regime and the remaining three are to be conducted under petroleum recovery contracts.

Of the 16 onshore contracts, Eni, Petronas, ONGC, Pakistan's Petroleum Exploration (PVT) and Canada's Pacific Hunt Energy Corp were awarded contracts to operate two blocks each. The Myanmar Oil & Gas Enterprise (MOGE) is entitled to a 60-90% stake of both crude and gas, depending on the volumes produced.

Offshore

Myanmar has also begun the process of selecting foreign investors that will be allowed to explore the rich oil and gas resources in the seas off of the country’s coast.

There will be thirty offshore blocks that will be held for tender, nineteen of which are deep-water blocks which are believed to have the greatest potential. Bidders can apply for up to three blocks each and foreign companies will be able to operate independently in the deep-water blocks, but must acquire a local partner for the 11 shallow water blocks.

Pre-qualification has shortlisted sixty one companies including some of the international majors like Total, Shell, Chevron, and also Australian companies are well represented  including Woodside, ROC Oil and Santos. 

MOGE and the Energy Planning Department (EPD) will hold talks with the shortlisted companies and those successful companies are expected to be announced in early 2014.   It is expected that the discussion with each company the terms of the current production sharing contract will be firm and not negotiable.

Downstream

Myanmar’s downstream industry is very much under-developed.  Currently Myanmar has just three small old refineries, which together have a capacity of only 57,000 barrels per day which is less than half of the country’s rising petrol and diesel demand.  The challenges faced by the downstream industry is security of supply, lack of relevant infrastructure and power related issues.