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Myanmar opens doors to Big Oil, but investment pitfalls still lurk

Date: 28/07/2013
Source: Yahoo News
Myanmar opens doors to Big Oil, but investment pitfalls still lurk

It was only a few years ago that oil giants Chevron and Total were accused of propping up Myanmar’s military junta by helping it export oil and gas, earning them the ire of human rights groups. Yet with decades of political isolation over – and most Western sanctions gone or waning – this country of 60 million is now safe for Big Oil.

That’s why top officials from top energy companies have been quietly beating a path to the capital city of Naypyidaw over the past few months.

They’re looking for more details on 30 untouched offshore oil and natural gas drilling sites that the government is now opening up to foreign exploration. Earlier this month the government shortlisted more than 60 companies, including some of the biggest players – Shell, ExxonMobil, and ConacoPhilips – to make final bids, and the winners will be announced later this year.

That there is a race at all marks a stark turnaround: For decades after World War II, Myanmar's rich reserves of oil and natural gas were off limits for foreign companies. More recently, sanctions kept most Western companies out.

But plenty of tricky questions remain – both for the companies and for Myanmar’s people. Violence against the Muslim Rohingya diaspora in western Rakhine state – near where much of the fuel is located – may give some companies pause. And the country’s oil and gas agency is plagued with mismanagement and cronyism.

Plus, Myanmar’s government is under increasing pressure at home to address its own considerable energy shortages – and not simply export away its oil and gas riches as it did in the past.


Satya Ramamurthy, of consulting group KPMG International, says the new government seems to be trying to chart a “pragmatic” course and “apply an approach which takes into consideration the country’s current situation,” while recognizing that foreign oil and gas companies want to make money, and have the potential to be lucrative for Myanmar (also known as Burma).

Myanmar is no stranger to the global energy market. Indeed, Scottish oilmen started exporting crude from this corner of southeast Asia in the late 1800s, when it was controlled by Queen Victoria.

Myanmar has proven natural gas reserves of 10 trillion cubic feet, and ranks 36th among natural gas producers worldwide – with most of it going to neighboring Thailand ­­– according to the United States Energy Information Administration. The country has proven petroleum reserves of 50 million barrels.

The companies that win the rights to operate the oil and natural gas sites will be required to enter into a production-sharing agreement with the state-run Myanmar Oil and Gas Enterprise. The agency’s dismal reputation helped earn the government a dead-last ranking in “resource governance” by the Revenue Watch Initiative, a New York-based non-profit watchdog group, in a May report.


The Myanmar government has promised to join the Norway-based Extractive Industries Transparency Initiative, an international transparency standard that many countries have pledged to abide by. And the US State Department has promised to help Myanmar modernize the agency.

Still, the Shwe Gas Movement, a coalition of activists who have vocally opposed a recently-completed Chinese-built pipeline across Myanmar, warned investors in a report last week that Myanmar’s laws won’t protect local communities, and that until they are reformed, foreign investment in energy “should be put to a halt.”

Mr. Ramamurthy of KPMG says that companies weighing whether they can be confident their investments will be protected, environmental considerations and the potential displacement of people. “I think that does weigh on the minds of investors,” he said during a visit to Naypyidaw.

And what it means for one of the biggest economic concerns facing Myanmar – jobs – remains unclear. Myanmar’s opposition leader, Aung San Suu Kyi, noted at a June press conference that “the extractive industry does not create many jobs.”

Topic: FDI in Myanmar
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The population of Myanmar is about 60 million. The main language spoken in the country is Myanmar though English is also widely spoken and understood. ... More

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