Western Firms Eye MOGE Deals in Rangoon

A boy exercises outside Pyar Pon Township with the Yadana gas pipeline project in the background. (Photo: Reuters)

Big names in the international oil and gas industry rubbed shoulders in the Sedona Hotel in Rangoon on Monday as Burma’s Ministry of Energy seeks to lure investment in offshore and onshore exploration.

It is expected that Energy Minister Than Htay will announce a bidding process for a dozen or more exploration licenses to whet the appetites of the likes of Royal Dutch Shell, ConocoPhillips, Chevron’s Unocal, China National Offshore Oil Corporation (CNOOC), Nippon of Japan and Essar Oil of India.

These multinational companies figure prominently among scores of industry representatives booked to take part in the four-day forum running until Sept. 6.

It is the second such promotional gathering this year. The first, in March, drew a muted response from Western firms, and half of the 18 offered onshore development blocks failed to find takers. But this second forum looks potentially more promising for Burma, with several multinationals actively participating.

The giant Dutch-British group Shell will give a seminar on Burma’s potential for offshore deep water oil and gas exploration, while ConocoPhillips of the United States will talk about onshore prospects.

Unocal, which is part of the US’s Chevron Corporation, and the Chinese state oil giant CNOOC are sponsoring lunches at the Sedona during the four days.

The Singapore-based Center for Management Technology (CMT)—co-organizers of the event—said details of new deep and shallow-water block licenses plus more new onshore licenses will be unveiled by the state-owned Myanmar Oil & Gas Enterprise (MOGE).

It is not yet clear how many new blocks will be offered, but according to one hydrocarbons map there are at least 26 offshore blocks not yet licensed for exploration.

The forum, officially labeled the 2nd Myanmar Oil, Gas and Power Summit, will also seek to attract interest from foreign companies in investing in Burma’s dilapidated and inadequate electricity generating and distribution sector.

“[The conference] aims to bridge the connection between potential foreign investors and local companies to tap into the potential in the booming oil, gas and power sectors,” said CMT. Workshops during the four days will be “focusing on joint ventures, project financing and the geological outlook,” it said.

In addition to hydrocarbons exploration and development, the Ministry of Energy said it is also looking for foreign investment in commensurate infrastructure such as ports, pipelines and offshore rig platform marine support services which barely exist in Burma.

Discussions are also planned at the forum on investment in hydropower dam projects and potential power plants to be fuelled by natural gas and coal.

Burma has less than 10 percent of the electricity generating capacity of its neighbor Thailand with a similar-sized population.

“I think we will soon see some inward movements by some of the Western oil super-majors, in particular there will be keen interest in securing deep-water offshore blocks along Burma’s central coast,” Bangkok energy industries analyst Collin Reynolds told The Irrawaddy on Friday.

“I suspect that what will happen is bids will be made, and accepted for blocks, and then there might be an actual lull in any activity until there is greater clarification on the new foreign investment law currently going through Burma’s political system. I doubt if any company is going to pour money blind into a venture with knowing the full legal consequences.”

Under new rules already in place, all new oil and gas exploration and production ventures by foreign firms must include a local company. This is similar to the rules of engagement in other Southeast Asian countries.

In Malaysia, Indonesia and Vietnam, and to a less extent in Thailand, the state-owned oil company always takes a stake in foreign ventures. There are other problems for would-be investors—the tainted, junta-linked MOGE remains at the heart of the sector.

Just last week a risk assessment company underlined the perils of associating with MOGE, which had been blackballed by the US government for its close links with the military junta.

MOGE continues to be central to all agreements in the oil and gas industry, even if it has virtually no capability of carrying out oil and gas exploratory work, unlike state-controlled Petronas of Malaysia, PetroVietnam or Indonesia’s Pertamina.

In a speech to the International Labor Organisation in Geneva in June, opposition leader Aung San Suu Kyi urged foreign companies to boycott MOGE until it was reformed and gave an account of its murky past. However, Washington has since watered down its attitude by merely requiring US firms to report if they work with the Burmese agency.

But by dealing with MOGE, foreign investors will be exposed to “a whole spectrum of risks, ranging from poor labor, environmental and safety standards to corruption, forced labor and other human rights violations,” risk assessor Maplecroft said.

“A strong network of strong cartels with vested interests in fuel import and distribution and close ties to the military elite also present very high barriers to entering the downstream business,” said Maplecroft.

The UK firm also noted that Burma’s inadequate infrastructure and administrative skills are “considerably slowing the introduction of reformist policies and implementation of regulations.”

“In the short term, the biggest concern for anyone considering investing in [Burma] is the government’s dependency on foreign expertise to manage administration, infrastructure and energy and finance projects,” it commented.

Participating in the forum does not come cheap. Foreign delegates are each being charged fees ranging from US $2,395 to $3,395, depending on the number of workshop sessions they attend.

Domestic firms will pay much less to participate, and by the end of this week some could well be much better off from the partnerships they hope to forge.


One Response to Western Firms Eye MOGE Deals in Rangoon

  1. the only evil on the plant is human unconsciousness.. on an individual and collective level..they say.. well could there be anyhting more spirtitually and morally unconscious than western firms trying to increase the use of fossil fuel at this time on the planet..
    sometimes it is simply breathtaking… the sheer self centredness and blindness of these companies and there employees..
    lord buddha help us all!!

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