Home MMBIZ News Myanmar Doles Out Offshore Blocks to 13 Multinationals

Myanmar Doles Out Offshore Blocks to 13 Multinationals

International oil giants including Chevron, Royal Dutch Shell, ConocoPhillips and Total have won bids for offshore oil and gas exploration blocks off Myanmar’s western and southern coasts, according to the Ministry of Energy (MOE).

Myanmar awarded 10 shallow water blocks and 10 deepwater blocks in the Gulf of Martaban and Tanintharyi, off the western state of Rakhine, to 13 oil companies in an auction process that began last year, according to a posting on the ministry’s website last week.

Winners of deepwater blocks will be able to explore and operate the blocks on their own, while shallow water winners will need to work with a registered local partner, according to the terms of the production sharing contracts.

The ministry said production-sharing contracts would be awarded after it verifies the winning bidders’ terms and conditions.

“Considering the winning bidders include some household name international oil companies and prominent independents, this bodes well for the future of oil and gas in Myanmar and will help to lift the overall standards of the greater investment environment in the country,” Nomita Nair, partner at UK-based law firm Berwin Leighton Paisner (BLP) and part of the team leading BLP’s Myanmar Practice, told Myanmar Business Today in an email.

Multinational oil companies such as Dutch Shell, France’s Total E&P, Norwegian Statoil and ConocoPhillips won deepwater blocks, American supermajor Chevron a shallow water block and Australia’s Woodside Energy won both shallow and deepwater blocks. Other major oil companies among the winning bidders included Italy’s Eni and India’s Reliance Industries and Oil India.

Results of the tender, which the energy ministry had indicated would be released late December or early January, came out on Wednesday last week. The delay was reportedly caused because of the high volume of bids.

“The government had to first finalise the onshore bids which was also a lengthy process. The ministries have only limited resources and so to do a thorough and full analysis of each and every bid inevitably takes time,” Nomita said.

“When the tenders were first announced last year, MOGE did say that the awards could take up to year. Investors are advised to remain patient and not expect things to happen overnight.”

The ministry said it would receive $226.1 million as a “signature bonus” from the firms once exploration begins on the 10 shallow water and 10 deep water blocks – $91 million will come from shallow water block signings and $135.1 million from the deepwater block signings.

“This amount is the largest we have received in history,” the ministry said in a statement.

Myanmar’s oil and gas sector attracts the largest share of foreign investment, accounting for $13.6 billion, or 40 percent, of total accumulated foreign investment through September, according to the Central Statistical Organisation (CSO).

Most of Myanmar’s current hydrocarbon production is natural gas. According to official statistics, the country exported $3.7 billion worth of gas in fiscal year 2012-2013, mostly to Thailand, up from $3.5 billion the year before.

The country’s proven natural gas reserves totalled 7.8 trillion cubic feet (tcf) at the end of 2012, according to BP’s Statistical Review of World Energy.

A total of 160 local companies have registered with the Ministry of Energy as potential partners for winners of the shallow-water blocks, but industry sources say only a few of them have any oil and gas experience.

Contracts winners will have to complete environmental and social impact assessments and submit reports to the Investment Commission before starting operation.

“This award is in line with BG Group’s strategy to focus on securing prospective frontier acreage and enter, on average, one new basin each year,” Britain’s BG Group, which teamed up with Woodside and won four blocks, said in a statement.

Myanmar’s energy ministry said a total of 68 companies from across the world originally expressed interest in the auction, which was launched in April, with 30 firms eventually submitting proposals.

A total of 30 offshore blocks were originally up for auction and it is unclear when the remaining 10 sites will be awarded.

George Kirkland, vice chairman and executive vice president, Chevron Corp, said: “The exploration of this block is aligned with Chevron’s long-term strategy to seek opportunities to provide energy to a growing region.”

“We are pleased with the result of this bid round and the opportunity to evaluate the potential of this strategic acreage,” said Melody Meyer, president of Chevron Asia Pacific Exploration and Production Company.

“We have a 20-year history in Myanmar, and we look forward to supporting the continued development of the nation’s energy sector through the exploration of this prospective block.”

Troy Hayden, managing director and CEO of Tap Oil, which teamed up with another Australian firm ROC Oil and won the M-7 shallow water block, said, “Myanmar is potentially a world class hydrocarbons province and as part of Tap’s Southeast Asian growth strategy.”

Erling Vagnes, Statoil’s senior vice president for the region, said he was optimistic about the petroleum potential in an area that he said was “virtually unexplored.”

“With this award, we have accessed at scale in another frontier acreage with significant upside, in line with our exploration strategy,” he said. The Myanmar contract is Statoil’s first for the country.

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