‘Romantic North’ reserves vital to domestic energy supply

Oil consumption in Myanmar is likely to double by 2025, meaning that new discoveries are essential to meet energy demand for the future without relying too heavily on imports. But some fear the dream of finding large proven reserves may not be realised.

The likelihood of finding commercially viable reserves in recently awarded onshore and offshore blocks was a major topic of debate at the 2nd Myanmar Oil and Gas Conference in Yangon on May 19. Many participants voiced fears that finding proven reserves may turn out to be more difficult than anticipated.

“How big is the potential onshore? There is romantic, big potential in the North. Geologists get emotional about these big structures,” said Peter Cockroft, adviser to Pacific Hunt Energy, which won two onshore blocks in the 2013 bidding round.

Offshore, expectations are pinned on the deepwater blocks, where no reserves have yet been proven. “It is these deepwater blocks that will play a key role in Myanmar’s energy future,” said U Than Tun, director for offshore at Myanma Oil and Gas Enterprise (MOGE).

It is as yet unclear whether exploration will produce vast or limited reserves. In response to a question on his level of optimism about the exploration phase, U Than Tun said that according to MOGE’s geologists, the probability of success is between 20 percent and 50pc.

Since 2011, 25 onshore blocks and 20 offshore blocks have been awarded to international companies through joint ventures with local partners. However, seismic acquisition activities, site surveys and exploration drilling can take up to 10 years. Production is unlikely to begin at any of the recently awarded blocks until 2028, according to senior geologists.

In the meantime, Myanmar’s energy consumption of 42,000 barrels (bbl) per day of oil is likely to double by 2025, according to Daw Wah Wah Thaung, executive engineer at MOGE. “With the current production capacity, increasing oil consumption could only be covered by importing more refined petroleum products,” she said.

Total current production is 55 million cubic feet per day of natural gas from the onshore fields and 7000 barrels of condensate, and around 2 billion cubic feet per day of natural gas from the offshore fields. At present, Myanmar’s supply of natural gas can only meet 50pc of demand, added Daw Wah Wah Thaung.

By 2020, offshore production is expected to reach 2.25 billion cubic feet per day, as three more blocks will have begun production, but production at the Yetagun field will be in decline.

This means that the country will continue to heavily rely on imports. While global oil prices are likely to remain between US$50 and $60 per barrel for the next two years, according to a Natixis cross-expertise study published in April, over the medium to long term it could become expensive for Myanmar if the next few years of exploration are unsuccessful.

U Kyaw Kyaw Aung, an executive geologist in MOGE’s planning department, was clear on the importance of discovering large reserves. “To sustain energy supply and conserve energy security in Myanmar, many more giant fields need to be discovered in both the onshore and offshore area within one decade,” he said.

At present, Myanmar has proven oil reserves (onshore and offshore) of 459 million barrels per day (mmbbl), and provable reserves of 190mmbbl, according to Daw Wah Wah Thaung. In terms of natural gas, Myanmar has 11.8 trillion cubic feet (tcf) of proven reserves, and 155tcf of provable. The country will also have access to the Southeast Asia Crude Oil Pipeline, which will import crude oil from the Middle East from mid-2015, she said.

China National Petroleum Corporation holds a controlling stake in the pipeline, while MOGE owns the rest. Myanmar will receive an annual road right fee of $13.81 million, as well as a transit fee of $1 per tonne of crude for the next 30 years. The pipeline is designed for up to 2 million tonnes of crude a year. “Myanmar has the right to take 50,000 barrels per day, according to the contract,” said Daw Wah Wah Thaung.

As a result of Myanmar’s fast-growing energy needs and uncertainty over whether exploration will produce results, future policy will ensure that domestic requirements will be prioritised, said U Kyaw Kyaw Aung.

“Myanmar’s limited crude oil production and refining capacity are insufficient to meet domestic demand, making the country a net oil importer. Today, the policy of the Ministry of Energy is to prioritise all future oil and gas supply for domestic use.”

In addition, Myanmar is taking further steps to develop its hydrocarbon resources, he said. These will include a bidding round next year for 13 offshore and 14 onshore blocks, as well as MOGE’s own efforts to develop resources across 10 blocks.

The Ministry of Energy will also develop its existing facilities and infrastructure, he said, through joint venture projects, and through privatising MOGE according to a public-private partnership model.

Finally, the ministry is preparing the necessary studies for unconventional hydrocarbon exploration. We are considering options to fulfill our domestic energy needs,” said Daw Wah Wah Thaung. “Liquefied Natural Gas is one of the options to find a solution.” In terms of other primary energy resources, Myanmar has 108,000 megawatts of hydro, 711 million metric tonnes of coal, an available annual sustainable wood fuel yield of 19.12 million cubic tonnes, wind power of 365.1 terawatt hours (TWh) per year and solar power of around 51,973.8 TWh per year, according to statistics from the energy planning department at the Ministry of Energy.

Myanmar has a total of 104 oil and gas blocks including 53 onshore and 51 offshore blocks. At present, 16 onshore and 19 offshore blocks are in operation, according to a Ministry of Energy source. Foreign capital pledged to Myanmar’s oil and gas sector is nearly $17 billion, and $2.6 billion had been invested by the end of January, according to statistics from the Myanmar Investment Commission.

Source: Myanmar Times

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