Myanmar Offshore Supply Base Debacle or Miracle in Waiting?

In a recent briefing regarding the development of an offshore supply base conducted by Asia Pacific Connex, there was much enthusiastic debate around the provision of this key infrastructure. Particular emphasis was placed on the need to improve local content in the Myanmar offshore gas developments and to create a framework to harness offshore development to grow the emerging economy of the country.

The backdrop to this discussion was the developments currently taking shape. As an example, most of the seismic and 3D recording and analysis has now been completed. The net result is that a number of companies have announced drilling campaigns for 2017. One such company is Woodside, which has announced an aggressive, four well programme in the Shwe fields in the Bay of Bengal. Another is Ophir Energy indicating that they will commence drilling in November 2017.

Over and above that, Thailand’s PTTEP has awarded Indonesia platform builder PT Gunanusa Utama Fabricators (PTG) a second contract for its Zawtika project offshore. It was reported that the total value of the project (Lot 1 and 2 ) is about $300m. The project completion date is in the second quarter of 2018. The initial contract, awarded in September, comprised engineering, procurement, construction and installation (EPCI) of two offshore wellhead platforms, associated pipelines and tie-ins for Phase 1C of the Zawtika Development Project

Whilst these developments are exciting as it demonstrates commitment and growth in an important sector in Myanmar, they are also depressing. Why depressing? Well it does highlight how Myanmar is missing out on an important revenue stream to grow its emerging economy and skills capability base. Furthermore, it is losing an important source of employment and training that allows their citizens to fully participate more in the economy, particularly if there is a need to transition local employment from fisheries that are dying.

In simple terms, due to the lack of basic infrastructure, such as an offshore supply base (OSB) we see that Woodside will get logistics support mainly out of Singapore, with minor portions supplied out of Ranong (Thailand) and Thaketa (Myanmar). PTTEP will get fabrication and logistics support out of Indonesia and Thailand. Myanmar’s natural resources are giving other countries a better return than for its citizens.

How has Myanmar got itself into this state? In simple terms, the main reason has been the lack of understanding and leadership around what is needed in terms of a supply base. In 2015 , MOGE sought expressions of interests for the development of an OSB. This was done without a scope of supply set out, resulting in 52 firms submitting their EOIs. This process came to a grinding halt when the EOIs could not be adequately evaluated as there were no criteria by which to evaluate each submission. MOGE has now announced that another tender will be put out this month, and it is in the process of negotiating / appointing the consultancy Roland Berger to oversee the process and draw up tender criteria.

However, we are already seeing some of the tensions emerging in scoping process and these issues are:

Differences in the number of OSBs required, one versus five?

Access to land and sea, particularly locations

Multiuser, integrated OSB or specialist service provision

Finance provisions

Provision of key infrastructure (electricity?)

Complicating matters further are some of the legal issues and debate that have caused these delays. These include matters such as:

Under the MIC, an OSB is a logistics base to cater to the O&G sector and does not transport or sell end product produced offshore, is there a need for MOGE involvement in the OSB?

Is MOGE tendering for a JV partner on the basis of ‘free carry’ only as the OSB approval can only be given by the MIC?

Taxation treatment, particularly when dealing with import/export duties

Bonded warehousing / Special Economic Zone status that will facilitate the use of an OSB to support drilling activities.

So where does this leave Myanmar? The Union Government needs to address these issues, and quickly. They also need to ask whether there needs to be a tender process under the auspices of MOGE, as the MIC is the only body that can issue approval for an OSB. Failing to do so will see further delays and confusion whilst at the same time an important revenue and wealth creation opportunity is lost. The choice is straightforward, continue to flounder in the debate or expedite the process by which a miracle can be delivered in the form of employment creation and revenue into the local economy in excess of $100m per annum.


Source: Author: Andre Wheeler



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