Myanmar oil and gas: optimism amid oversupplies and low prices

Despite growing calls for amending their production-sharing contracts in light of plunging oil prices, oil and gas companies operating in Myanmar are still optimistic, as gas was recently discovered in Block A-6.

Xavier Preel, general manager of Total E&P Myanmar – one of the three operators of the block – said yesterday that it is a very exciting time for both Myanmar’s oil and gas industry and for the multinational player itself.

“There is gas in A-6 block. But it will take time. We need a lot of capable people and a lot of investment,” he told the Offshore Summit Myanmar last week.

Active in Myanmar since 1992, Total E&P mainly works on Yadana, the nation’s largest gas production site. It spends hugely on training, offering about 3,000 man-days on a yearly basis.

About 85 per cent of its workforce are locals and 12 local staff are on international assignment.

Korakote Pojanasomboon, manager of commercial activities and planning in Myanmar for PTT Exploration and Production (PTTEP), and Yap Kwong Weng, chief operating officer of locally-owned Parami Energy, expect the entry of newcomers in the years to come.

“Oil prices have super effects on everything. Calculation of risks and assessment of the private sector’s role in conjunction with the political change should be taken into serious consideration,” Yap Kwong Weng said.

Legislation, sustainability and flexibility are the three key issues for industry growth. Foreign firms should invest in a local firm, hire talented staff and integrate businesses in the public-private partnership structure, he said.

Korakote said the key to success for foreign companies is to get acquainted with the local business environment.

“Before we have children, we need to find a partner. Before we have a girlfriend, we need to look at many ladies to choose the best partner. This cannot happen overnight,” he said.

Competition will rise especially in deep-water exploration, prompting demand for a good team and help from the government, he said.

He expressed gratitude for Myanmar Oil and Gas Enterprise (MOGE)’s support for its projects and vowed to maintain the positive relationship. Sometimes, investors may see no return from their investment, but they would gain trust.

PTTEP’s success story in Myanmar was due to three factors.

“First, you need to have a spirit to explore. Second, you must build a strong partnership with the government and stakeholders. Third, you need to ensure long-term investment with trust.

“Finally, you need to invest in corporate social responsibility activities to grow together with the local community. We should take advantage by growing together.”

In Myanmar since 1989, PTTEP is involved in the Zawtika, Yadana and Yetagun projects, operating seven blocks and two joint venture projects.

Oil prices hitting a 13-year low at US$28 a barrel is expected to take a toll on the industry to some extent. Under the PSCs signed with the winners of 20 blocks, the winners of exploration rights must start drilling in shallow-water blocks by next year and in deep-water blocks by 2018.

However, oil prices are expected to stay well below $100 per barrel next year due to the glut.

Myanmar has been urged to change the contracts to attract new investment.

Than Minn, director of planning at MOGE, a state enterprise, was open to the call to postpone the starting date, pending the recovery of oil prices.

However, all winners must proceed with exploration or face penalties, he said.

Myanmar produces 2 billion cubic feet of gas per day mainly from four offshore projects – Yadana, Shwe, Zawtika and Yetagun – and 1.6 billion cubic feet per day or 80 per cent are exported chiefly to Thailand and China.

Source: ELEVEN

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