Despite capacity constraints, oil & gas industry still promising

Win Khaing, a member of National Energy Management Committee and chairman of United Engineering Co Ltd, said the industry itself brings a lot of opportunities for foreign investors to do business in the newly-opened nation.

“Probable and possible uncontracted gas would amount to 4,000 MMCFD over 30 years. It definitely indicates the level of optimism in possible recoverable resources,” he said.

Currently, most of the proven remaining gas has been contracted to Thailand and China, despite a huge domestic demand. Myanmar produces 1.3 BCFD [billion cubic feet per day] of natural gas while it consumes 250 to 300 MMCFD [million cubic feet per day]. Seventy-five per cent of its natural gas production is exported to Thailand and China.

In an effort to supply the domestic market, the Yadana project is supposed to ramp up supply to 200 MMCFD for Yangon; the Shwe project is supposed to ramp up supply to about 100 MMCFD; and the Zawtika project aims to supply about 60 MMCFD, Win Khaing said.

To him, investment opportunities for foreign investors include exploration and production in petroliferous onshore and offshore blocs; rehabilitating to marginal fields and enhancing suspended fields and declining fields; commissioning new plants; floating storage units (FSU), floating storage and offtake facilities; CNG refueling stations; research and development; and trading, marketing and retailing of petroleum products.

Graeme Smith, vice president for exploration in Asia and Australia of Royal Dutch Shell, shared the optimism.

“Growing global energy demand, driven by rising population and improving standards of living, means the world faces a major challenge. A predicted global population of 9 billion by 2050 will require unprecedented amounts of energy. Deepwater oil and gas have a huge role to play in meeting those needs. And those countries, like Myanmar, that can access and supply that energy, are expected to reap the economic rewards,” he said.

Last week, Shell and its partner Mitsui Oil Exploration Co Ltd signed exploration and production sharing contracts with Myanma Oil and Gas Enterprise (MOECO) for three deep-water blocks. The step marks Shell’s return to upstream operations in the long-isolated nation.

Under the agreements, Shell will assess the potential of deep-water blocks AD-9 and AD-11 (Rakhine Basin) and MD-5 (Tanintharyi Basin). The three blocks together cover some 21,000 square kilometres. They are located approximately 300 kilometres offshore in water depths ranging from 1,800 to 2,700 metres. Shell is the operator and has a 90 per cent interest in the three contracts with MOECO holding the remaining 10 per cent.

“The three blocks offer an exciting frontier exploration opportunity to apply the advanced deep-water technical capabilities we have built up around the world over the past three decade. Exploration is the first part of a journey defined by long-term commitment,” said Smith.

Mitsuo Hidaka, president and chief executive officer of Mitsui Oil Exploration CoLtd, echoed Smith’s view.

“The Myanmar economy has grown dramatically in the last couple years and will undoubtedly continue to grow into the future. Through our participation in E&P (exploration and production) activities, we would like to play a role in the contribution to the robust development of the economy and energy security of Myanmar,” he said.

Hidaka insisted that Myanmar is one of MOECO’s core business areas and that the firm aims to further expand its business in the region.

“Despite the recent volatility in oil prices and the impact it has had on investments in the global energy sector, we remain steadfast in our commitment to the exploration of these three blocks given the importance we place on our future relationship with Myanmar,” he said.

Soe Myint, chairman of the Myanmar Geoscience Society and former director-general of the Energy Planning Department, has the different point of view.

“Myanmar’s energy landscape does not look good. Myanmar produces 20,000 BOPD [barrels of oil per day] while it consumes 70,000 BOPD. It is still a very low level of consumption. And we are importing more than 70 per cent of the total consumption,” he said.

Soe Myint added that although Myanmar has abundant hydroelectricity resources, it is exploiting less than 6 per cent of its potential.

“Currently, Myanmar’s electricity consumption per capita is a mere 200 kWh, while Myanmar exports electricity to China. The Ministry of Energy is awarding as many as 72 blocks out of 104 blocks [to private companies]. Eight blocks are retained by MOGE, and the remaining 24 blocks may be offered to international players through a tender process in the near future,” he said.

According to Soe Myint, lack of capacity is the biggest issue for the Ministry of Energy.

“In terms of human strength, MOGE does not have enough staff. It does not have the strength or capacity to handle even these 72 blocks,” he said.

In order to improve Myanmar’s energy prospects, Soe Myint suggested focusing on energy efficiency, demand-side management, more oil imports, oil stockpiling, renegotiation on gas and electricity, aggressive E& P and expansion and upgrading of the gas pipeline grid.

To him, opportunities for foreign investors include services for booming E&P industry, farm-in opportunities, financial services, legal services, EPC [engineering, procurement, and construction] works for oil stockpiling facilities, IPPs [independent power producers], CPPs [central processing platforms] , and PPPs [public-private partnerships] opportunities in the electricity sector.

Soe Myint said sees a brighter future for the industry in the years to come.

“At the present rate of exploration activities, new discoveries are imminent, and new productions could be realised within the next ten years. These new productions are to be prioritised for domestic use according to the government policy. It will be better if we can fill domestic demand,” he said.


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