Trans-Asian pipeline could boost Myanmar oil and gas exploration

Feb 07, 2002 01:00 AM

Myanmar's success in finding oil and gas has been patchy with more misses than hits in the 12 years since it rolled out the welcome mat for foreign explorers. Few Western companies have had the stomach to invest in the country, which has been isolated politically and economically by US and European hostility since 1990 when the military government ignored the result of democratic elections.
Even those companies willing to operate in Myanmar have to overcome hurdles ranging from a lack of capital and technology to difficult and costly terrain. The long-term energy bet for Myanmar, a country with an area the size of Britain and France combined, may be as a small, niche supplier for a Southeast Asian gas pipeline connecting regional governments.
"Myanmar may not hold much promise right now but it could be a key producer in the future, especially when the Trans-Asian gas pipeline project is completed in about 15 years," Guillermo Balce, executive director of the Asian Centre for Energy, said from Jakarta.

The Trans-Asian line aims to link the main gas supply and demand centres of Malaysia, Singapore, Indonesia, the Philippines, Myanmar, Vietnam and Thailand within the Association of Southeast Asian Nations (Asian). Myanmar already has gas pipelines, run by foreign companies, linking its fields in the Andaman Sea and the Gulf of Martaban to neighbouring Thailand.
TotalFinaElf's 410 km (256-mile) pipeline from the Yadana field can transport 900 mm cfpd of gas, while Premier Oil's 280 km (175-mile) pipeline from the Yetagun field has a capacity of 660 mm cfpd. South Korea, China and India have been knocking on Yangon's front door to get a foothold in the fledgling industry.

Myanmar's military government, facing a slump in domestic oil production and a lack of foreign reserves to import crude, ended its isolationist stance in 1989 and moved to attract investment. The decision reversed a 26-year ban on foreign participation in oil exploration and development and prompted a flood of international interest with 20 production sharing contracts (PSC) quickly signed with state-run Myanmar Oil and Gas Enterprise. But enthusiasm soon dried up.
In 1990, the military regime ignored national elections won by the opposition National League for Democracy, drawing sharp criticism from Western states, who slapped informal sanctions on Yangon leaving few oil companies willing to risk the wrath of governments or their shareholders for such uncertain rewards.

Within three years, 12 PSCs had been terminated, leaving six contracts onshore and two offshore. Analysts say contracts were also terminated because of a low success rate in finding commercially viable fields, a lack of capital and technology and a slowdown in domestic economic activity, problems that are little changed.
"Myanmar is just not attractive right now because the lack of capital and technology makes it very hard to properly exploit the reserves that are in the ground," Norman Valentine, oil and gas analyst at Edinburgh-based Wood Mackenzie said. "It's also not what you would call a big growth market because of the political and economic situation."

According to MOGE estimates, Myanmar has total gas reserves of 45.3 to 51.0 tcf and oil reserves of about 3.158 bn barrels. Analysts say most of the oil and gas is not commercially viable.
"Commercial gas reserves are probably at nine tcf, while commercial oil reserves total 120 mm barrels," said Wood Mackenzie's Valentine. Logistics costs Myanmar's inhospitable terrain also has been a deterrent as has a lack of infrastructure to support oil exploration and production.

ING Baring's Bangkok-based energy analyst Paworamon Suvarnatemee said logistical problems put a premium on production and transportation costs. Gas from Myanmar sold into Thailand was more expensive than that sourced from the Gulf of Thailand.
"The wellhead cost in Myanmar can be 50 cents to $ 1 higher (than Gulf of Thailand) at $ 3.50-$ 3.60 per mm Btu, while transportation costs are also greater," Suvarnatemee said. Despite the difficulties, companies already operating in Myanmar say the problems can be overcome.
"We have a gas sales agreement with Thailand that's fairly tight so commercially, it's a reasonable piece of business for us," said Premier Oil's Yangon-based general manager Joe Patrick. "Sure, there is not a lot of infrastructure, but that problem exists in other places like Vietnam as well. It's a problem that's inherent in this part of Asia," Patrick said.
TotalFinaElf agreed the problems were not insurmountable. "Yes, there is a lack of capital and technology, but these are problems that can be overcome," said TotalFinaElf's Yangon-based operations manager Bernard Rochet.

Source: Gulf News Online
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