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Page added on September 23, 2014

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The great new oil and gas frontier of Myanmar, warts and all

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Myanmar, the Southeast Asian country still called Burma by many people, is rapidly emerging from almost 50 years of military rule and related economic isolation.

The country, which is slightly smaller than Texas and home to more than 50 million people of many ethnicities, religions and language groups, has great potential. Apart from known and hoped-for oil and gas resources the country also has substantial tin, zinc, copper, tungsten, lead and coal resources, as well as jade, other gemstones and hardwoods.

A few days spent in the former capital Yangon earlier this month proved a real eye opener. Those five decades of isolation have led to a many idiosyncrasies and problems, making it a struggle for most foreign investors to do business there.

Credit card acceptance is virtually nil. The maximum permissible daily bank transfer is $25,000. The internet, where available, is slow. There are frequent power cuts. The roads are in a dire state, the railways not much better and only three of the country’s airports meet global safety standards.

The local MD of one western oil company that has just set up shop in Yangon says even hiring cars for his staff has been a problem. The international rental companies are not yet present and local operators want cash payment.

Among anyone under 60, levels of spoken English  and education are low. Most kids leave school after Grade 5 and the country’s once excellent universities went to rack and ruin during the decades of military rule.

Another symptom of the Myanmar’s ramshackle administration during military rule was that until last month the state had very little idea of the country’s population. Initial results of the first national census for over 30 years concluded that the country’s population was 51 million people — 9 million fewer than estimated.

But the ‘low’ national population figure is not reflected in Yangon, a bustling riverside city of over five million people, where new buildings are rapidly replacing crumbling colonial and art-deco gems.

Just a few years ago there was barely any auto traffic on the city’s streets.  International sanctions meant new vehicles cost more than an apartment, while older cars were mostly rickety British models dating from before the 1962 military takeover.

Now Yangon’s streets are choked with traffic, mainly second-hand Japanese cars whose steering wheels are on the “wrong” side, but also crowded buses, trucks and bicycle rickshaws. But no motorbikes, scooters or three wheelers;  such cheap, noisy and polluting vehicles are banned in the city, making Yangon an oddity in the region.

Another surprise: Most of the city’s taxis and buses run on LPG. Gasoline, mainly imported, costs about $1/liter, or $3.80/US gallon.

 

Cellphones, flatscreen TVs and ATMs, barely known in Myanmar just a few years ago, now abound.

But there are no billboards advertising international brands like Coca-Cola or Nescafe, or the logos of global chains such as McDonald’s or Zara. These multinationals, and many other western companies, have yet to start doing business in Myanmar. The country is still subject to some economic sanctions, although most have been relaxed or lifted since the military regime unexpectedly stepped aside in March 2011, following relatively free elections the previous year.

But what of the country’s nascent offshore oil and gas industry?

Although Myanmar has been pumping onshore oil for well over 100 years and offshore gas for over 15 years, it only produced about 16,500 b/d oil and 241,000 Mcf/day of  gas per day in 2013.

Issues including the lack of a local supply and service center, the national skills shortage and a host of regulatory and fiscal unknowns,  likely mean it will be many years before any new wells are spudded in the country’s promising deepwater blocks.

In 1988 then-Burma passed a new foreign investment law that saw some international oil companies, including Unocal (now part of Chevron) and France’s Total, venture into Myanmar in the early ’90s. Most of the other companies that went in at that time were Asian and attracted little of the same opprobrium and bad publicity as the western groups.

But, according to Vicky Bowman, a former British ambassador to Myanmar, Total, which operates the offshore Yadana gas field, drove good oil industry practice in the country before 2012.

Bowman, who has also worked in external affairs for Rio Tinto and now heads an NGO called Myanmar Centre for Responsible Business, recommends companies starting to work offshore Myanmar consider the following: the rights of workers to organize and collectively bargain; non-discrimination; land acquisition and use; resettlement; the rights of ethnic minorities, and the security of operations.

The straight-talking former diplomat opposes the traditional oil company social investments of building schools and clinics; that should be the role of the state, not private enterprise, she says. The provision of jobs and electricity are much important to local communities in Myanmar, she explains.

Another problem that has been identified since Myanmar’s started open bidding in 2012 has been the nature of some of companies awarded blocks.

Global Witness, a UK-based campaign group, asked the 47 companies awarded onshore and offshore blocks in October 2013 and March 2014 to disclose the identities of the individuals who stand behind them.

The group obtained full replies from only 11 of the 31 international companies it contacted and resorted to hand delivery of letters to some local companies in Yangon to try to get replies. Ownership of most of the local companies remains murky and many of the foreign-registered companies, such as Berlanga Holding of the Netherlands and CAOG S.a.r.l of Luxembourg, also remain unknown quantities.

“Anonymous companies are the global getaway cars for corrupt politicians, gangsters and tax evaders,” Global Witness says.

“Myanmar is a place of contacts that are personal and long standing…You have to have somebody in your organization who gets to know the country and makes friends here,” US lawyer James Finch, advised delegates at a recent upstream conference in Yangon.

Finch has lived in Myanmar for almost 20 years. Take his advice as you will, but clearly Denmark it ain’t.

Platts



2 Comments on "The great new oil and gas frontier of Myanmar, warts and all"

  1. Northwest Resident on Tue, 23rd Sep 2014 9:21 am 

    “This country…has great potential.”

    Virgin territory. Prepare to be raped and plundered. It’s the way we do business!

  2. Apneaman on Tue, 23rd Sep 2014 3:51 pm 

    Welcome to modernity. I hope you like: obesity, type 2 diabetes, loss of family, loss of community, anti-depressants, destruction of your environment and poising of your culture. We love it in the west, were addicted.

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