The Irrawaddy Business Roundup (Dec. 6, 2014)

By William Boot 6 December 2014

Crashing Oil Prices Make Burma’s Offshore Block Winners Rethink Costs

With international crude oil and natural gas prices falling, global explorer Shell has admitted it is “clarifying” the terms of offshore development block licenses it won in Burma last March.

Nearly nine months after a group of foreign and local oil and gas companies won licenses for 20 offshore blocks in Burma’s Bay of Bengal and Gulf of Martaban no final deals have yet been struck.

Shell won the exploration and production rights on three blocks in a consortium with MOECO of Japan. Other block winners include oil giants Chevron, ConocoPhillips and Total, and smaller foreign businesses such as Woodside Energy of Australia.

But in the wake of an oil slump which has seen global prices fall more than 40% in some cases, from $116 a barrel in June to under $68 a barrel this week, oil companies are hesitating about committing large investments in new and costly exploration.

“We have to be confident in our future investment. We are clarifying details within the models of production sharing contracts with the government, trying to understand some of the language,” Shell vice president Graeme Smith told regional journalists in the Philippines, the Myanmar Times reported.

Under non-negotiable terms, the controversial Myanmar Oil and Gas Enterprise (MOGE) must be a partner in all 20 block production sharing contracts.

Surge in Visitors Obtaining Business Visas on Arrival in Rangoon

Almost 100,000 foreigners obtained business visas on arrival at Rangoon Airport between January and October, a travel trade report said.

The biggest nationality group obtaining the visas was Chinese followed by Japanese, said TTR Weekly, quoting Burma’s immigration office.

“Business visas can only be obtained through embassies or on arrival at the airport,” the trade paper said. “For the second option, they are pre-processed, based on an invitation letter and other documents. Once approved, the visa is stamped in the passport on arrival at [Rangoon’s] airport.”

Burma began issuing business visas on arrival in June 2012 but extended this system to tourist visitors in 2014.

Burma a Key Export Market Target for Russian Truck Manufacturer

Russian truck manufacturer Kamaz is targeting Burma for export sales, the company’s chief executive said.

The heavy truck maker’s plant is in Tamil Nadu in southern India and executives are eyeing both Burma and Bangladesh across the Bay of Bengal for sales, Sergey Kogogin was quoted by Myanmar Business Network saying.

Kamaz recently disclosed that it had bought out its Indian partner, the Vectra Group, ending a joint venture started in 2010.

Kogogin said Kamaz, 50% owned by a Russian state corporation, is also considering building agricultural tractors for export into Southeast Asia.

“The Asian market is indispensable to Kamaz since the Russian domestic market has not fared well over the last two years,” Myanmar Business Network said.

The Tamil Nadu factory is to be expanded to achieve an annual production capacity of 10,000 vehicles.

EU Outsider Serbia Seeks Contracts with Naypyidaw Energy Ministry

Naypyidaw’s energy ministry is negotiating with firms in Serbia to build gas or coal fuelled power plants and hydroelectric projects in Burma.

The talks follow meeting between energy minister Khin Maung Soe and Serbia’s energy minister Aleksandar Antic, the Belgrade news agency Tanjug said.

The value of contracts being discussed was over US$100 million, Tanjug quoted Antic saying.

“[Burma] wishes to strengthen its cooperation with Serbia in the energy sector and we discussed the possibility of Serbian companies joining the construction of new hydro and thermal power capacities,” Antic said without giving any details.

The Serbian firm Invest Import is at present building a 245 kilometer-long low voltage power line in Burma, Tanjug said.

Serbia is outside the European Union but has applied to become a full member.

Foreign Firms use Singapore to Piggyback Investments into Burma

A growing number of Western firms, notably from the United States, are investing in Burma via Singapore in order to benefit from Asean member agreements, a report said.

Asean—the Association of Southeast Asian Nations—is also preparing closer economic ties among the ten member countries from the end of 2015, including abolishing trade tariffs.

“They are choosing Singapore because, according to Asean agreements, we have to allow companies from any member of the association to come and invest in [Burma],” Eleven Media quoted the Myanmar Investment Commission (MIC) as saying.

MIC is referring to the Asean Comprehensive Investment Agreement.

Investing in Burma via a Singapore registered business also benefits American firms because Washington and Naypyidaw have not yet signed a bilateral free trade agreement, said MIC.

Burma Likely to Stay on UN Country Poverty List for ‘Another 15 Years’

Burma is unlikely to move out of the United Nations’ Least Developed Countries list before 2030, the UN Development Program said.

Despite rapid economic growth in the last three years, per capita income remains low, as does Burma’s status on the United Nations’ human asset index and the economic vulnerability index.

“Low incomes, poverty and economic vulnerability continue to keep [Burma] on the world list,” Igor Bosc, senior program advisor for the United Nations Conference on Trade and Development, told a press conference on Monday.