Irrawaddy Business Roundup (November 23, 2013)

By William Boot 23 November 2013

Withdrawal of 33% of Firms in Race for Burma Gas Blocks ‘Not Unusual’

One third of the foreign firms qualified by Burma’s Ministry of Energy to bid for oil and gas exploration blocks in the Bay of Bengal have withdrawn, but an industry analyst said this is not unusual.

“Of the 60 companies who put their names forward you can be sure some were just interested to get hold of more details of terms and conditions,” Bangkok independent industry consultant-analyst told The Irrawaddy at the weekend. “It’s quite likely some of the 30 blocks on offer will not be taken up and this will prompt a revision of terms and, most probably, a return of interest by potential investors. It’s the way this business often operates, more so probably in Myanmar which is still very much a frontier country for oil and gas.”

Reuters quoted an unnamed ministry official saying about 20 of the 61 firms shortlisted to make a bid for a license for one or more of the 30 blocks by a November 15 deadline had failed to respond.

Burma’s government put on offer 11 shallow-water and 19 deep-water blocks last April when it asked for expressions of interest, and then whittled down those qualified to bid for licenses to 61.

Winners of licenses are expected to be named during the first quarter of 2014.

“Acreage [blocks] that is still open or not taken up from this year’s two licensing rounds is expected to be offered in 2014 or 2015,” commented the industry magazine Upstream.

US Survey of Burma’s Resources Sector Criticizes State-Owned MOGE

Burma’s controversial state-owned Myanmar Oil & Gas Enterprise (MOGE) is singled out for criticism in an international report on the country’s transparency and accountability in the mineral extractive resources sector.

“[Burma’s] natural resource legislation does not define the licensing process, the role of governmental authorities, or the fiscal system for extractive revenues,” said the New York-based NGO Revenue Watch Institute (RWI) in a survey of 58 countries.

It ranked Burma bottom of the countries’ list with a maximum score of 8 out of a possible 100.

Foreign companies that secure licenses to explore for oil and gas “must sign a production sharing contract with MOGE and accept the risk that the government may announce policy changes at any time,” RWI said.

“Almost no information is available on the management of the extractive sector. MOGE, which also acts as a regulator and may collect payments from foreign gas companies on the state’s behalf…does not publish reports apart from occasional PowerPoint presentations aimed at investors, and these are not comprehensive,” RWI said.

Lax Laws Help Tobacco Firms Target Burma’s Appetite for Nicotine

Burma is being targeted as a prime new market for foreign cigarette companies taking advantage of a lack of tobacco control laws that have curbed smoking in many other countries, said a report from Al Jazeera.

The story on the Qatari broadcaster’s website named China’s Hongyun Honghe Tobacco Group, Japan Tobacco International and British American Tobacco among the biggest investors in the sector in Burma.

“Cigarette sales are expected to grow at between 2-3 percent a year for the next four years,” Al Jazeera said, citing research by Euromonitor.

“Activists say between one-third and half of [Burma’s] 60 million people consume tobacco in some form,” it said.

China’s largest tobacco manufacturer Hongyun Honghe and its local partner have a factory capable of producing 3 billion cigarettes a year, according to the report.

British American Tobacco, the world’s second-largest cigarette company, “plans to invest US$50m over the next five years, and employ about 400 people. Japan Tobacco International, which is number three globally, says it is in the process of setting up business in the country but declined to comment further,” Al Jazeera reported.

Burma signed the World Health Organisation (WHO) Framework Convention against Tobacco Control in 2004, “but legislation is poorly enforced, and the country has failed to implement some of the WHO’s guidelines,” Al Jazeera said.

Value of Burma’s Gold and Cash Reserves Disclosed for First Time

Burma’s central bank now holds 7.15 tons of gold in reserve, plus foreign cash reserves worth US$8.19 billion, state media announced.

The New Light of Myanmar on Nov. 13 quoted the central bank’s vice governor Khin Saw Oo telling the Naypyidaw Parliament that the gold was held in Burma, while the cash reserves were spread among domestic and banks.

The government does not often disclose details of its financial matters, leading to speculation about where revenues, in particular from lucrative natural gas projects, have ended up.

In September, following reports that the government had $11 billion in Singaporean bank accounts, the Central Bank said that only $7.6 billion was kept “legally” in overseas accounts. In the newer report, Khin Saw Oo said the figure of $8.19 billion was correct at Oct. 29.

Swiss Business Delegation Visits Burma to Assess Investment Prospects

A business delegation from Switzerland led by the state secretary for economic affairs spent two days in Burma this week to look at investment prospects, the Swiss Embassy said.

The visit follows a provisional meeting between the countries to discuss business possibilities earlier this year at the World Economic Forum. Switzerland opened its embassy in Burma only in November 2012.

Aside from seeking potential commercial investment opportunities, the Swiss government “will continue to build schools and health posts in conflict areas in southeast Myanmar [Burma], support returning displaced persons and refugees in their re-integration, assist impoverished farmers in accessing better livelihoods,” the Swiss statement said.