Burma Awards Offshore Oil and Gas Deals to Foreign Firms

By Simon Lewis 26 March 2014

RANGOON — Burma’s Ministry of Energy on Wednesday announced that it has awarded international firms, mostly from Western nations, 20 areas in its waters to explore for oil and gas.

The government has invited international firms to come in and help bolster state revenues by tapping into Burma’s oil and gas reserves, and large multinationals were among the winners in the latest tender. Following the announcement, watchdog groups called for heightened transparency from companies and the government as the search for energy resources in Burma is set to accelerate.

The latest announcement means that companies including Anglo-Dutch firm Royal Dutch Shell, France’s Total, Italy’s Eni, Norway’s Statoil and Conocophillips from the United States will explore Burma’s deep waters in the Bay of Bengal, where large quantities of energy-producing hydrocarbons may be held.

Shallower waters will be explored by a number of Indian companies and Western firms including US oil giant Chevron.

An announcement posted on the Ministry of Energy’s Facebook page named the winning companies from a shortlist of 61. The winners will now enter into negotiations with the government over the terms of their exploration contracts, in which they must partner with state-owned firm Myanmar Oil and Gas Enterprise.

The ministry’s brief statement said contracts will be “awarded after the agreement upon the detailed verification with Ministry of Energy on their proposed terms and conditions in accordance with the Ministry of Energy’s preferable terms and conditions as well as other factors relating to the Production Sharing Contract for relevant offshore blocks.”

The tendering round was expected to award 30 blocks in total, but only 20 winners were named Wednesday, for reasons unknown.

In 10 of the blocks, companies will be exploring, and later potentially drilling, at depths of more than 2,000 feet, an undertaking that carries high environmental and safety risks and is mainly done by large companies.

A consortium of Shell and Japan’s Mitsui Oil Exploration Company was awarded three deepwater blocks; Eni and a grouping of Australia’s Woodside Energy and Singapore’s BG Asia Pacific have two blocks each and Statoil and Conocophillips have one block together.

The remaining deepwater blocks went to Total—which already operates the Yadana offshore natural gas field and pipeline—and London-based Ophir Energy Plc.

While there were few Asian winners in the tender, Indian firms took four of the onshore blocks, with Woodside Energy and BG Asia Pacific also picking up two blocks. Chevron, Dutch firm Berlanga Holding B.V, and two Australian bids—from Transcontinental Group and from ROC Oil Co Ltd and Tap Oil Ltd combined—were also successful in the shallow-water blocks.

Economist and Burma-watcher Sean Turnell said the large number of Western firms named among the winners was “a sign of how far Myanmar has come in terms of international engagement.”

Turnell noted the absence of state-owned Thai and Chinese firms that, until the reformist government of President Thein Sein took power in 2011, secured favorable deals with the military government to extract and export hydrocarbons to their domestic markets.

Burma government officials have pledged that domestic need will be met before the products of future oil and gas projects are exported.

The offshore tender followed another competitive tender for 13 onshore blocks, awarded in October. Contracts to explore those blocks have not yet been signed, and the modest staff of the Energy Ministry now faces the task of coming to individual agreements for all 33 blocks.

Vicky Bowman, director of the Myanmar Center for Responsible Business, called on the winning companies to go above and beyond the demands of Burma’s nascent regulatory environment for the oil and gas sector. Bowman told The Irrawaddy that the large international winners should show leadership in demanding transparency and thorough social and environmental checks as the process goes on.

“Given that there is a risk of overload on the Ministries and that they have limited capacity in this area or familiarity with international best practice, it would be good if the companies who have experience of this come together collectively with the relevant ministries at an early stage to establish how to do these most effectively and bring in the advice of environmental and social experts,” she said by email.

Bowman said the companies should also work closely with local authorities in Arakan State, Mon State, Irrawaddy Division and Tenasserim Division—coastal regions that could be set for an influx of international companies launching exploration operations.

Companies should “foresee and manage the cumulative regional and local impacts their operations will have on the environment, infrastructure, services, labor markets and local populations,” she said.

Juman Kubba, an oil, gas and mining specialist at London-based campaign group Global Witness, said the awarding of exploration rights would be a test of whether the Burma government’s “rhetoric of transparency will translate to reality.”

The government is attempting to join the Extractive Industries Transparency Initiative, an international scheme to make public governments’ takings from mining or oil and gas projects. Kubba said the Ministry of Energy had begun to show a willingness to be transparent by publishing standard terms of the oil and gas contracts, but called for the final drafts of contracts to be published.

She also said Global Witness, which focuses on issues related to natural resource extraction, was beginning a project to contact all the winning companies and to ask “who pulls the strings and pockets the profits from your company.”

“If Myanmar is really to break from the secrecy and murky deal-making of its military past, getting this information out into the open is crucial,” Kubba said.

“If the international companies now moving in want their engagement in the country to be positive, they need to make this information public from the outset.”