Burma Business Roundup (Saturday, Oct. 20)

By William Boot 20 October 2012

Gas Exports to Thailand face Old Regime Test

The Thai state oil explorer PTTEP has denied the Burmese government’s claims that it has the right to reduce the volume of gas currently being exported to Thailand.

Naypyidaw wants to “buy back” some of the gas being sold to Bangkok to help develop Burma’s own economy—primarily to provide fuel for a gas turbine power plant to be built in Rangoon.

The agreement, signed with the former military regime and the much-criticized Myanmar Oil and Gas Enterprise (MOGE), permits PTTEP to import one billion cubic feet of gas a day from Burma. Naypyidaw has told the Thais it has the right to retain about 20 percent of this—200 million cubic feet.

PTTEP chief executive Tevin Vongvanich told Reuters that there was no buy-back clause in the agreement. He said the two sides are “cooperating” to meet the gas demands of both countries, he said.

“This is the tip of an iceberg that could crash into relations between the Burmese and Thais,” energy industries analyst Collin Reynolds told The Irrawaddy on Oct. 19.

“The Thais clearly do not want to reduce their gas take from Burma but the Burmese are going to need more gas to fuel their expansion plans for electricity generation. It will be interesting to see how they resolve this one. It could be there will be some trade-off between this issue and the stalled Dawei [Tavoy] port plans.”

However, PTTEP’s Tevin seems quite emphatic about the terms of the old MOGE deal. “What we produce that is beyond Thailand’s needs, we will give to Myanmar,” he said. “There has been no change or renegotiation of any existing contracts.”

Japanese Telecom Giant Moves into Burma

One of the world’s biggest telecommunications infrastructure providers has established an office in Rangoon.

Japan’s NTT Communications, ranked 29th in the Fortune Global 500 companies list for this year, said it was readying itself for the coming new market offering telephone and other communications in Burma.

The Tokyo-based giant’s Thailand subsidiary has established the Rangoon office.

President Thein Sein met executives of NTT in Japan in April during a visit to drum up investment support for Burma.

NTT is the latest of a growing number of foreign telecommunications companies seeking access to what is seen as a potentially lucrative virgin market.

Earlier this month the large Malaysian firm Axiata Group with mobile telephone service interests across Asia said it wanted to work in Burma. And the Norwegian Telenor Group has also expressed interest in entering the country.

The Naypyidaw government has indicated that it will permit four telephone operating licences—two for domestic firms and two for foreign investor companies.

Bangkok Firm Joins Max Myanmar for Building Boom

Thai engineering firm LV Technology (LVT) has formed a joint venture with Burma’s Max Myanmar Group, a business noted for its links with the Burmese military.

The Bangkok stock exchange-listed company specializes in cement-making technology. It will buy a 15 percent stake in Max Manufacturing, a small cement producer.

The investment will involve renovating two cement factories near Naypyidaw and will enable production to increase from 500 million metric tons a year now to 2,600 tons by the end of 2013 and 4,200 tons after 2014, according to a statement by LVT Managing Director Hans-Jorgen Nielsen.

“The cement business in Myanmar is expected to see rapid growth such as that seen in Thailand 30 years ago,” Nielsen said.

LVT has been running at a loss and Nielsen hopes the investment in Burma will take his firm back into profit as demand for cement grows with the country’s economic development.

Funding for the joint venture, financial details of which have not been disclosed, will be aided by selling off part of an LVT subsidiary in India, Nielsen said.

Australian Oil Firm Signs Daewoo Deal for Offshore Exploration

Woodside Petroleum of Australia has become one of the first Western oil companies to move into Burma in the post-military regime era.

The firm is joining South Korea’s Daewoo International to develop the offshore AD-7 block next to the Shwe gas field in the Bay of Bengal, according a Reuters report.

Woodside will take a 40 percent share in the block which is regarded as a promising location for more gas discoveries.

“The deal gives Woodside a leg up over other Western energy companies eager to get into Myanmar,” said Reuters.

The area of sea around AD-7 is an “exciting frontier exploration area,” Woodside Chief Executive Peter Coleman said in a statement on Oct. 18.

The two firms plan to carry out seismic surveys of the large block during 2013.

The Burmese Ministry of Energy is planning to hold an auction for licenses covering 20 or more oil and gas blocks in the country, but the event has been delayed following criticism from some big Western firms over the continued involvement of MOGE, which is seen as being tainted by links to the former military regime.