Oil and gas contracts will be revoked unless exploration is carried out

Energy firms with permission to conduct offshore oil and gas exploration activities in Myanmar will have their contracts cancelled next year if they do not progress from the initial study period to actual exploration, sources from the Ministry of Electricity and Energy told The Myanmar Times.

The contracts will be rescinded if these firms do not proceed according to the contract terms.”They can stop if they don’t want to continue. If they want to drill, they will have to drill by next year and if they don’t drill, we will revoke the contract. If they want to conduct further surveys without drilling, they can also do so,” the sources said.

International oil and gas companies are given permission to explore for oil and gas in Myanmar after signing Production Sharing Contracts (PSC) with State-owned Myanma Oil and Gas Enterprise (MOGE), which controls the rights to the country’s offshore oil and gas blocks. The last PSCs were signed during 2014 and early 2015. Starting from 2015, the companies were granted study periods of up to one year for shallow water blocks and two years for deep water blocks.

Since then, the one-year study periods for shallow-water firms have already expired in 2016, while the firms with two-year study periods will expire by the end of 2017. “If they fail to honour their commitments going forward, the financial guarantees deposited at the Ministry of Electricity and Energy will be forfeited,” the sources said. During the study period, firms will have to conduct surveys according to their commitments, which were submitted during the tender bidding rounds.

The study period is followed by the exploration period of up to six years. During this period, surveying activities, which include seismic tests, processing and interpretation have to be done before a location to drill is selected.

There are many companies which have implemented the study period , including Shell Myanmar Energy Pte Ltd, Woodside Energy(Myanmar), ENI Co, BG Asia Pacific and Statoil.

“They have surveyed most of the areas and some have negotiated to start drilling in next year as offshore oil and gas drilling is very costly,” he said. The costs involved in deepwater drilling can total US$50 million to US$60 million.

Source : Myanmar Times

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