Myanmar, lodged between India and China, is expected to open up for oil and gas exploration and offer an additional 30 offshore blocks by the end of the year. The deadline to submit a bid is June 14.
Oil and gas has been prevalent in the country for decades, but under a military regime that lasted almost five decades, investments all but dried up. It would be nothing short of an economic miracle for Myanmar to open up to foreign investors and begin to see the first real growth in a long time.
Myanmar is going to rely on additional investment to unlock its gas potential, on which growth is largely dependent. The energy and agriculture industries will need a combined $320 billion through 2030 to see an annual economic growth of 8 percent. It’s a frontier that has been so bogged down by its own military, and those who can get in first will likely be set for years to come.
The intrigue is definitely there. When the country did the same thing with its onshore exploration, 75 letters of interest were submitted to obtain licensing, and now that interest in offshore reserves is expected to go even higher since the licensing round opened in April.
Right now, Exxon Mobil Corp. (NYSE: XOM), Woodside Petroleum Ltd. (ASX: WPL), and Oil India Ltd. (NSE: OIL) are among the energy companies vying for a share of Myanmar’s estimated $75 billion in fuel abundance.
Myanmar sits between two of the world’s biggest economies, and since and so much of its prospective areas are still unexplored, the future looks bright.
Sanctions, technical capacity, regulations, and disinterest from foreign firms have heavily stunted the country’s realization of its potential in both gas and oil.
Only last year did Myanmar become a democracy, and even still it is in tumultuous times; the government has been accused of destroying mosques, blocking aid to Muslims in peril, and using mass graves since violence began last June.
The one major pitfall under its government regime was the limited amount of avenues for it to raise the finances needed while international sanctions were in place. The nation entered into contract with neighboring Thailand and China to raise funds, and this limited the amount available for domestic use.
But the potential is there, and maybe even bigger than anticipated. In the long-term, Myanmar is important, as it is one of the last Asian countries to open up.
At this moment, reserves are thought to be quite modest; it’s really all about potential and the future of Myanmar.
Natural gas is by far its most important source of income. The country has 7.8 trillion cubic feet of proven natural gas reserves.
Domestically though, supply isn’t meeting demand. Less than half of its own needs will be met as demand is expected to increase domestically to 700,000 Mcf/d in 2013; supplies are around 300,000 Mcf/d.
Some estimates have its proven reserves as high as 10 trillion cubic feet, and that’s still only 1.9 percent of known deposits in the Asia Pacific. With foreign investments, Myanmar can begin to realize its full potential and also begin to help itself.
That’s why these offshore blocks and the June 14 deadline are so important. There are 11 shallow water blocks and 19 deepwater available for licensing.
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Getting Involved and Moving Forward
In addition to the big players mentioned earlier who are looking at the offshore blocks, others are throwing their hats into the ring.
Onshore, there’s France’s largest oil producer Total SA (NYSE: TOT), Italy’s Eni SpA (NYSE: E), and India’s Oil and Natural Gas Corporation Limited (NSE: ONGC) who have qualified for exploration. Korea Gas Corp. (KRX: 036560), the world’s biggest LNG buyer, PTT Exploration& Production Plc (OTC: PEXNY), along with Malaysia’s Petrolium Nasional Bhd have done the same.
There certainly is no fear from leading world energy companies to invest in Myanmar. It may be a rocky road, but it is getting smoother every day.
Even President Barack Obama praised Myanmar for the progress it has made towards democracy after he met with President Thein Sein on May 20. There is still concern over the amount of violence and religious minorities, but actions are being taken to combat that.
Foreign investment in Myanmar natural gas is at the forefront of the new democratic agenda. Steps taken by the new government have been applauded applauded, like the formation of a National Energy Management Committee and an Energy Development Committee that will strengthen the energy sector of Myanmar.
The country has 16 foreign companies working on 17 onshore blocks, and 15 are currently exploring offshore, all partnered with the state-owned Myanmar Oil and Gas Enterprise.
Myanmar has come a long way in a very short time. June 14 will mark another step in the right direction.
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