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Oilman calls on Myanmar govt to be more transparent, flexible

With 45 years of experience in oil and gas, Smart Group Chairperson U Kyaw Kyaw Hlaing knows a lot about the industry in Myanmar.

“Now that gas prices have dropped, our LNG projects will be more viable, but prices may rise again, so we need to sell the gas as soon as possible to maximise profits. By selling natural gas as quickly as we can, we can find money to aid the country’s development,” he said in a recent interview.

The bigger concern for Myanmar’s oil and gas sector, he said, is will the world turn away from oil? For example, Singapore will use solar energy for 50 percent of its electricity production by 2050, so its oil consumption will be low.

Myanmar oil firms are worried that oil and gas will become outdated, and some fear if oil and gas are produced and sold quickly, nothing will be left for future generations. But we do not have to save oil and gas for future generations, U Kyaw Kyaw Hlaing said. “What we need is education.”

He recently spoke about the global economic crisis caused by COVID-19, the effects of falling oil prices on Myanmar, and bidding for government oil and gas projects.

What are the effects of falling oil prices on Myanmar?

Thirty percent of Myanmar’s foreign income is from gas sales. When the oil price falls, the gas price does too, but there is a lag of one year. Despite the oil price fall, current gas prices are not affected but will surely suffer next year.

Myanmar has to import a lot of fuel. When the world oil price falls, imported fuel prices decline too. Previously, gas sales income was more or less equal to spending on fuel imports. As the nation develops, more fuel needs to be imported. However, more gas cannot be produced. For example, current gas production by the Yetagun project is only one fourth of the former rate and thus there is less income.

Will the government hold a surprise bid before the election?

No. Previously bids were handled by the Myanma Oil and Gas Enterprise under the Ministry of Electricity and Energy. Now the Ministry of Planning and Finance is more involved in checking whether contracts are proper for the state.

Any change has both advantages and disadvantages. It’s good that there are more checks on the activities of the energy ministry but bad that there are a lot of delays.

A new bidding round is unlikely because the oil price is falling and oil firms won’t be interested. Also, there are travel restrictions due to COVID-19, and the energy ministry is still waiting for the hluttaw to enact the petroleum law.

Most of the gas concessions up for bidding were rejected by the oil firms in previous rounds of bidding. I suggest that the energy ministry negotiate with oil operators who have concessions in Myanmar on relaxing contractual obligations that might be unfulfilled beyond a deadline.

The government should instead try to persuade them to stay in the country after their contracts are over and they relinquish their blocks. For example, it was very disappointing when Shell, which is a world leader in the industry, left Myanmar. Despite its failure to complete its contractual obligations, it had to open an office in Myanmar, hire vehicles and employ Myanmar nationals.

They were spending money that would benefit the country, and we got tax revenue from them. We should not just strictly follow the contract and say that unless you follow the rules, your block will be revoked. We should be more flexible.

What are the prospects for offshore oil and gas drilling?

Plans by MPRL, Total and Woodside to produce gas at A-6 block by 2023 have been postponed due to COVID-19. They planned to sell the gas to Thailand, but Thailand planned to reduce its gas purchases from Myanmar, so if Thailand doesn’t buy the gas, the Myanmar government will have to build power plants to use it.

Woodside found a new project in Rakhine, but I think it will pursue the project only after A-6, because how can it do both projects at once? Gas is not like oil; you can sell oil on the spot, but gas can be sold only after getting a contract from a buyer.

Myanmar has offshore gas in both shallow and deep water. Well-known US and Japanese companies once drilled where gas is currently being produced by South Korea’s Daewoo Co, but they abandoned the area after saying nothing was found. There is good potential, but timing is very important. When the oil price is high, people tend to invest, and it is the best time to call a bid.If sales are made when the price is cheap or falling, there may not be buyers.

What is your opinion of the government bidding process?

Every foreign company wants transparency in a tender. For example, when a tender was invited for telecoms in our country, which companies received how many marks was made public.

But in the oil industry, the selection process wasn’t made public. They just announced the winner but didn’t say why it won. The bidding process needs to be transparent from the start. We should learn more from other countries and experts. It should be a tender with new ideas but also transparent.

What difficulties do you have in offshore drilling?

Due to COVID-19, we had to postpone the entry of a big drilling rig into Myanmar waters between February and August. People who wanted to enter the country had difficulty getting visas, so their visits had to be postponed.

Flights have been suspended, so those who wanted to leave the country after working for 28 days at offshore blocks could not. It is even worse for Myanmar staff, as they had to quarantine when they returned and could not visit their families.

Oil companies are following the guidelines of the Ministry of Health and Sports. C crew changes are very difficult, so all drilling has stopped, and companies that provide drilling services have no work, including many Myanmar companies. It’s sad that the government is not helping those Myanmar firms with COVID-19 assistance.

What is your view of the Myanma Oil and Gas Enterprise?

I want it to be a top company like Petronas in Malaysia and PTT Exploration and Production in Thailand. We can do it, but the government should not run it. Petronas and PTTEP are owned by their governments but are allowed to run as corporations. In Myanmar, the enterprise is controlled by the government and all income goes to the state. However, only a certain amount should go to the government. The rest should go to the enterprise, which should be controlled by a board of directors including experts.

“To see the original article click link here”

Source : Myanmar Times

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