November 24, 2011 / 6:42 AM / 8 years ago

Analysis: Despite reforms, Western oil firms avoid Myanmar

YANGON (Reuters) - Myanmar’s reputation as one of the world’s most isolated and secretive states is changing rapidly, but many foreign investors remain wary of exploring for oil or gas there, leaving the sector open to Indian, Thai and Malaysian firms.

Myanmar closed its biggest oil and gas exploration tender in years in August, a few months after it cautiously started political reforms, and the government is now processing the bids.

Details of the tender are still trickling out, but oil industry executives say Western oil companies were conspicuously absent, leaving regional firms as the main contenders.

U.S. firms are barred from new investments in Myanmar under government-ordered sanctions, but there were no expressions of interest from Europe. Some executives say the blocks on offer were not particularly lucrative.

Chinese oil firms, historically dominant in Myanmar, appear lukewarm to the bidding for 18 onshore oil and gas blocks because of concerns over the blocks’ prospects. Additionally, bilateral ties have been strained since September, after Yangon shelved a China-backed dam in the north of the country.

Industry sources in Myanmar said the tender had attracted about 50 bids, but further details were not available.

“They probably have attracted as much as 50 bids, but each field may have been counted as a separate bid, so the number of individual companies bidding are very likely much lower than 50,” said H.S.Yen, a consultant at FACTS Global Energy.

“They may have only attracted a single bid from a European company. I certainly don’t see a major company that isn’t already present in the country venturing into Myanmar given the risks of doing business there and the small reserves size.”

So far only Thailand’s PTT Exploration and India’s ONGC Videsh have publicly expressed interest in this tender, with ONGC saying it is evaluating data. A senior official in Yangon has said Malaysia’s Petronas is among the bidders.

Petronas said it has no comment on the matter at this point. The firm had said it has ongoing studies for unconventional oil in Myanmar.

Japan’s Marubeni Corp also said it does not comment on individual auctions, while Mitsubishi Corp and Mitsui & Co Ltd declined comment on anything related to bids.


A Reuters survey of European and Asian firms showed that global majors such as Total SA, which already leads the $1 billion Yadana gas project in Myanmar waters in the Andaman Sea, would not take part in the tender. “Total did not take part in the Myanmar bidding round,” its spokeswoman said.

Christophe de Margerie, the French major’s CEO, said last month Total would like to play a bigger role in the Southeast Asian country but wanted to first see concrete signs of increased democratisation.

“We decided that ... it was important to be in Myanmar but that we will not invest until things are getting better ... I do hope that will happen,” he said.

Myanmar ushered in a civilian government in March after 49 years of harsh military rule, but many of its top leaders are former generals. Nevertheless, reforms picked up pace as authorities initiated talks with opposition icon Aung San Suu Kyi, released political prisoners and reached out to armed ethnic groups to end decades of violence.

The moves were breathtakingly fast by Myanmar’s standards, and U.S. President Barack Obama has said he has been encouraged. Secretary of State Hillary Clinton is to visit Yangon next week to explore new ties, a major endorsement of the Myanmar government.

But U.S. officials have warned that sanctions will only be lifted after concrete and sustained signs of progress.

Western oil firms such as Royal Dutch Shell appear to be taking a similar tack. Sources said the major, which has plans to expand in Vietnam, is not eyeing Myanmar.

Only one Western firm, Soco International, has recently signaled interest in Myanmar, though the British independent, which is producing oil off Vietnam, would not comment if it was bidding for licenses.

“We are always looking to improve our exploration portfolio and Myanmar is a country that we think could offer opportunities,” said deputy chief executive Roger Cagle.

Other Western firms such as Premier Oil Plc, which discovered the Yetagun gas field in 1992 but in 2002 sold its entire Myanmar business to Petronas, as well as Tullow Oil and Cairn Energy said they did not take part in the tender.

Russia’s Gazprom, which had been reported to have made enquiries about Myanmar’s upstream possibilities on a recent visit, declined comment, though sources said they did not bid. Norway’s Statoil, Spain’s Repsol and Italy’s ENI also would not comment.


China’s big three oil firms — Sinopec, China National Petroleum Corp and CNOOC — were also lukewarm toward the tender.

CNOOC said it did not put in a bid, but there was no immediate word on whether the other two were involved.

“We looked at the data packages for the tender. They didn’t look very promising,” said an executive familiar with Sinopec’s overseas investment. “The key is how good these blocks are for us to gauge if they are a profitable investment or not. The political factors are less important to us.”

China’s big three oil firms are operating in Myanmar and by early 2007, held 13 exploration and production contracts, or about a third of those Yangon has signed with foreign firms.

“CNPC already has quite a few blocks there. The best assets of Myanmar are offshore, and mostly natural gas. Its onshore blocks are not so good. We did a lot of evaluation before,” said an industry adviser.

Another executive said three deepsea contracts off Myanmar that CNPC signed in late 2006 proved much less valuable than expected. After completing minimal exploration works, CNPC pulled out part of its team there.

Myanma Oil and Gas Enterprise data showed Myanmar has 115 million barrels of onshore and 100 million barrels of offshore proven oil reserves. The proven onshore gas reserves are 400 billion cubic feet and offshore are 16 trillion cubic feet.

BP Statistical Review figures showed that Myanmar’s proven gas reserves tripled in the past decade to around 800 billion cu m (28 tcf), equivalent to more than a quarter of Australia’s.

This compares with China’s proven oil reserves of 14.8 billion barrels, Malaysia’s 5.8 billion, Vietnam’s 4.4 billion and Indonesia’s 4.2 billion barrels, at the end of 2010, according to the BP Statistical Review.

“These reserves, though modest by global standards, are enough to generate interest among regional economies. Myanmar is strategically located between China and India and is viewed as an important source of hydrocarbons for their growing energy requirements,” said Subramanya Bettadapura, Director, Energy & Power Systems, Asia Pacific, at Frost & Sullivan.

China’s lack of interest this time and hopes for more liberal economic, fiscal and administrative policies as reforms continue could spur other Asian firms to venture into Myanmar.

“Traditionally, China has had the inside track to these projects, but now the government wants to make the competition more open. So apart from the Chinese you could see the Indians, Thais and Malaysians involved,” said Tin Maung Maung Than, Senior Fellow at the Institute of South East Asian Studies.

Writing by Ramthan Hussain; Reporting by Chen Aizhu in BEIJING, Florence Tan and Francis Kan in SINGAPORE, Yuko Inoue in TOKYO, Liau Y-sing in KUALA LUMPUR, Nidhi Verma in NEW DELHI, Tom Bergin in LONDON and Muriel Boselli in PARIS; Editing by Raju Gopalakrishnan

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