Oil and gas stumbles with price drop

Some offshore exploration activities have been delayed and natural gas exports are generating lower income.

Benchmark West Texas Intermediate crude for October delivery traded for US$44.02 yesterday on global markets, vastly different from a year ago, when crude was above $100 a barrel.

Faced with dropping prices without a commensurate drop in costs, many energy companies are tightening their belt. Last year, Ministry of Energy officials told parliament there would some impacts, but it was not yet apparent whether the country would suffer.

As low prices have persisted, though, government officials now say they are causing activity to slow.

U Than Tun, an offshore director at Myanma Oil and Gas Enterprise, said some offshore exploration has now been delayed due to price fluctuations.

Speaking yesterday at the 3rd Southeast Asia Offshore Summit held in Yangon, he said a few projects are moving forward at a slower pace than anticipated.

“The planned activities in exploration and development projects have been delayed by the impact of falling internal crude oil prices,” he said.

In the offshore Rakhine basin, two offshore wells were planned in blocks AD-1 and AD-8, which are run by China National Petroleum Corporation, but only one well was sunk.

Malaysian state firm Petronas also only dug one exploration well in block M-12, though had planned two. PetroVietnam meanwhile could not complete its drilling operation in shallow water M-2.

Thai state firm PTTEP also requested extensions to evaluate hydrocarbon prospects in blocks M-11, MD-7 and MD-8, according to U Than Tun. Another PTTEP block, M-3, had a commercial discovery announced in 2013, though the development phase of the project has been slow.

Total E&P had also planned three exploration wells in M-5 and M-6 in the Mottama offshore area, though U Than Tun said it had not been supported by its partners in the process.

Still, experts are optimistic that the offshore sector is likely to be busy in the coming years. A total of 20 offshore blocks were awarded in a 2013 bidding round, and companies are only now preparing to explore with seismic surveys.

Gas revenues are also on the decline.

While production is steady, U Than Tun said natural gas prices have fallen about 30pc – less than crude prices, but still a concern.

In early 2014, the wellhead price of natural gas was $7.20 per million British Thermal Units, though the price had fallen to $5.45 by last month.

“Daily income from natural gas sales has decreased from $16 million to $12 million,” he said. “That means the country’s income is also falling.”

Gas production is at about 2 billion cubic feet per day, mostly from four major offshore platforms. Of that volume, about 1650 million cubic feet per day (mmcfd) is exported to Thailand and China, while the rest is used domestically. The exports are done under a long-term agreement, and are adjusted on a quarterly basis.

Yadana, the largest offshore field, produces 850mmcfd. Yetagun produces 350mmcfd, Shwe 500mmcfd and Zawtike around 300mmcfd. Myanma Oil and Gas Enteprise owns stakes of between 15pc and 20.45pc in the four projects. Yadana and Yetagun have been running for some time, though Shwe and Zawtika entered commercial production in 2013 and 2014 respetiviely.

Source: Myanmar Times

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