Burma Awards Onshore Oil and Gas Blocks to International Firms

By Simon Lewis & San Yamin Aung 11 October 2013

RANGOON — Burma’s Ministry of Energy has named nine international companies, including Russian, Italian and Canadian firms, as winners of tenders to explore onshore territory for oil and gas reserves, according to an official announcement.

An announcement posted on the ministry’s website Thursday said 13 blocks had been awarded to firms that, if they find oil or gas, will enter into production sharing contracts with the Burmese government. Three improved petroleum recovery (IPR) blocks were also awarded.

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Oil wells on the banks of the Irrawaddy River in Chauk, Magway Division. (Photo: Reuters)

ONGC Videsh Limited of India, Eni of Italy, Petroleum Exploration (PVT) Ltd. of Pakistan and Canada’s Pacific Hunt Energy Corp. were awarded two blocks each to explore with a view to entering profit-sharing agreements with the government.

Brunei National Petroleum Co., CAOG S.a.r.l. of Luxembourg, JSOC Bashneft of Russia and a consortium of Thailand’s PTTEP South Asia Ltd. and Palang Sophon Offshore were all awarded one block each.

The firms will enter into joint ventures with the state-owned Myanmar Oil and Gas Enterprise (MOGE). According to the standard terms of onshore production sharing contracts, posted on the Ministry of Energy’s website, companies will have to give MOGE at least 60 percent of profits after they have recovered the expenses of exploration. They will also pay 12.5 percent in royalties, as well as taxes on their own profits.

The terms say companies will have to sell at least 20 percent of crude oil and 25 percent of natural gas produced to the domestic market at a 10 percent discount from the market price.

Petronas Carigali, the exploration arm of Malaysia’s state-owned oil company, also won one of the production sharing blocks, as well as an IPR block in Shwepyitha Township, Rangoon Division. IPR refers to the use of advanced methods to extract more oil and gas from a field than can be extracted through traditional drilling.

Two more IPR blocks, in Irrawaddy and Pegu divisions, were awarded to MPRL E & P Pte., Ltd., which is registered in the British Virgin Islands but run by Burmese businessman Michael Moe Myint.

The blocks cover areas of varying size in the Irrawaddy River basin, a region known to contain large deposits of hydrocarbons that the government hopes to tap into to fuel Burma’s development and provide state revenues.

Another round of bidding for 11 shallow-water and 19 deepwater offshore oil and gas exploration blocks is also underway and the winners are expected to be announced early next year.

Thursday’s announcement said 26 companies submitted a total of 54 bids in the competitive tender for the onshore blocks.

“[The Ministry of Energy] chose from them based on the selection criteria: the specified exploration period, the plans of each company and the expected expenses, ratios of sharing oil and gas [with the government], the experiences and financial conditions of each company, the signing bonus proposed by the company, etc.,” it said.

Details of the winning bids have not been made public.

The announcement also said the companies would need to have an environmental impact assessment and a social impact assessment approved by the Myanmar Investment Commissionbefore they start work on the blocks.

Myint Zaw, deputy minister of energy, told a conference last month said he was hopeful the new tenders would yield new onshorereserves, and improve the current level of oil and gas production.

“Total inland production of crude oil is [so far] only 600 million barrels plus, and natural gas only 1.4 trillion cubic feet. However, I’m told by my expert geologists that Myanmar still has lots of onshore potential still remaining to be discovered,” Myint Zaw said last month.

“Our country Myanmar is awaiting technology, expertise and funds to discover new onshore reserves of petroleum.”