Despite challenges, FDI in energy sector set to surge

While Myanmar faces a host of challenges, like other developing nations, its oil and gas sector is likely to win more foreign investment in the years to come, participants in the “Offshore E&P Summit Myanmar 2014” were told.

Aung Kyaw Htoo, deputy director of the Energy Planning Department, said foreign investments in the nation’s energy sector would surge thanks to the ministry’s reforms and the upcoming 2015 bidding round, which would invite expression of interest for both onshore and offshore blocks.

“Many production-sharing contracts are yet to be signed, and more players will enter the market after the bidding round next year,” he said.

Saw Sein, project manager (oil and gas services) of Myanma Precious Resources Group, echoed Aung Kyaw Htoo’s view.

He told Myanmar Eleven in an interview that foreign investments in the sector would contribute to the real gross-domestic-product growth rate.

The International Monetary Fund sees an 8.5-per-cent real GDP growth rate this fiscal year.

According to Saw Sein, the trend will continue in the coming years. He said the outlook was brighter than before as the government has invited investments in many blocks – onshore and offshore – in the bidding round this year.

“A company needs to invest about US$20 million-$50 million if it wins the tender for an onshore block. A firm which wins the tender for an offshore block needs to invest at least $100 million.

“Mathematically speaking, if 10 firms win the tender for offshore blocks, their total investment will hit one billion dollars. Likewise, if 10 firms operate an offshore block each, their total investment will be about $500 million. So, just imagine the amount of investment inflows in the years to come,” he explained.

At the summit, foreign business people were of the same opinion as local speakers in commenting on the industry’s outlook.

Govinder Singh Chopra, managing director of Singapore-based SeaTech Solutions International, sees the oil and gas industry as the most promising sector thanks to surging power generation and oil refining.

In his opinion, capital from foreign investors will contribute to the nation’s sustainable growth.

“Myanmar is not going too fast. Instead, they [the government] are doing things gradually. They have already announced the bidding for 20 blocks. I heard they are thinking of announcing the bidding for other 15 blocks next year.

“They want to see how the results will be, and what their problems are. They will try to take care of such problems. Every block is likely to win millions of dollars of investment,” he said.

Chopra is optimistic about the nation’s future economic outlook.

“Myanmar has just started to win a lot of foreign investments. Its economy will grow very rapidly in the coming 10-15 years. In the rest of the world, the economy is not growing well. Yet, I believe the growth momentum will continue in Myanmar,” he said.

When asked about the political risk, a major concern for foreign investors, Chopra said: “People already know the elections will be held next year. I think the momentum is already there. It is very difficult to reverse or go backwards. I am guessing its direction will continue, as everybody sees it as the right direction.”

According to Chopra, the government needs to prioritise on infrastructure developments before the 2015 presidential elections, which could raise more challenges for the nation.

“Without the infrastructure [development], foreign investment cannot come in. Only when an investor ensures that the business climate is worth investing in, will he put in the money. Otherwise, it will be very difficult,” he said.

Myanmar needs to learn what other Asian countries such as Singapore and China have done to improve their infrastructure for attracting more foreign investment, he added.

As Myanmar has many things to do, the government needs to decide which it should do first, he said. It needs to prioritise on improving infrastructure because if it is satisfactory, all the others can be done easily, he explained.

“They should start with announcing some ideas on how to have infrastructure improved. Once they announce the ideas and their plans, things will become better. Secondly, the government needs to be more transparent,” said Chopra.

In his view, Myanmar should also concentrate on the oil and gas industry’s outcomes, and should encourage local business people to go into the sector.

He also highlighted the need for more skilled labour to support the industry, particularly on drilling sites.

Htu Htu Aung, director of Asia Guiding Star Services, expressed the same opinion.

He called for the development of infrastructure, such as supply bases and training centres.

Source: The Nation

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