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Myanmar to use new hydrocarbon production for domestic needs

People stand next to the World Economic Forum logo displayed in front of the plenary hall at the Myanmar International Convention Center ahead of the WEF on East Asia in Nay Pyi Taw, Myanmar, on 5 June 2013. Photo: Dario Pignatelli/Bloomberg (Dario Pignatelli/Bloomberg)Premium
People stand next to the World Economic Forum logo displayed in front of the plenary hall at the Myanmar International Convention Center ahead of the WEF on East Asia in Nay Pyi Taw, Myanmar, on 5 June 2013. Photo: Dario Pignatelli/Bloomberg
(Dario Pignatelli/Bloomberg)

Myanmar’s deputy energy minister says natural resources will be exported only if there is a surplus

Nay Pyi Taw: In what may affect the energy security plans pursued by India and China in Myanmar, the resource-rich nation has made a precondition of its domestic demand being met before any exports are allowed. This will be incorporated in all future production-sharing contracts Myanmar plans to sign.

“Earlier natural gas was sold to the neighbouring countries as there was no significant domestic demand. Our new policy is that natural resources will be reserved for domestic demand. If there is a surplus, then we will value add and export. The idea is to meet domestic demand first," U. Htin Aung, Myanmar’s deputy energy minister, said at a press conference on Thursday.

This comes in the backdrop of the Myanmar government receiving 75 expressions of interest for its bids called for 18 onshore blocks for exploration.

Of these it has shortlisted 59 companies for the submission of final bids. Also, the government plans to award another 30 off shore blocks. The country holds 7.8 trillion cubic feet (tcf) of gas.

Contracts already signed will not be affected.

“The new rounds that we are offering has a provision that states that production is meant for first meeting the domestic demand. It is part of the agreement. The ones which we have already signed, for them we have to meet our commitments for our reputation," Htin Aung said.

Some of the Indian companies interested in these blocks are state owned ONGC Videsh Ltd (OVL), Oil India Ltd and private firms such as Jubilant Energy NV and Cairn India Ltd.

There has been considerable interest in Myanmar’s energy sector from neighbouring countries. Myanmar borders China and India, both fast-growing major economies. Of Myanmar’s overall trade of around $19 billion, China accounts for around $5 billion, and India $2 billion. Of this latter, exports account for $542.7 million and imports $1.4 billion.

“There has been a lot of interest from Indian firms. We plan to award the blocks by the end of this year," said Htin Aung.

However, concerns remain.

Among issues hindering investment in Myanmar’s hydrocarbon industry is the limited availability of information and data.

“Our firms are looking at the blocks offered by Myanmar. However, they are telling us that the data that has been offered is very unclear," said an Indian government official, requesting anonymity. “They are planning to bid. While the area is prospective, there is not much clarity."

India’s earlier attempts to secure gas supplies from Myanmar have not been successful.

For instance, even as India tried to source gas from blocks in Myanmar, in which OVL and state-owned GAIL (India) Ltd together hold a 30% stake, the Myanmar government decided to sell the fuel to China. Subsequently, OVL and GAIL took stakes of 8.35% and 4.17%, respectively, in the pipeline being constructed by China National Petroleum Corp. to move gas from the offshore blocks A-1 and A-3 to China.

“We don’t have a great view on their deep water blocks," said the chief executive of an Indian energy firm, also requesting anonymity. “We went there due to strategic reasons. While there may be some potential in their offshore, it is no reason for such euphoria. It is not another gulf of Mexico."

“Proven reserves doesn’t equal proven production. While there are new blocks (in Myanmar) open for exploration but they are away from actual production by 10 to 30 years," said Arthur Hanna, senior managing director, energy industry, at consulting firm Accenture Plc.. “There is also a requirement for clarity on pricing and the industry wants certainty of market pricing mechanism."

A total of 31 foreign companies are working in Myanmar along with state-owned Myanmar Oil and Gas Enterprise.

“There should be better co-ordination between the seven different ministries responsible for energy," said Stephen P. Groff, vice-president, operations, Asian Development Bank.

There is a growing demand for electricity in Myanmar. “Even if electricity output doubles every year, it will only be able to meet today’s needs. The demand for electricity is growing by 12%," Groff said.

The country has an installed power generation capacity of 6,300 megawatts (MW), of which hydropower generation capacity is 2,500MW. It also has a low per capita electricity consumption of 100 units.

In a separate development, the proposed tri-nation gas pipeline linking India and Myanmar through Bangladesh may not take off,as the Myanmar government is in favour of a direct link to India, said an Indian government official requesting anonymity.

The pipeline was supposed to form the backbone for a regional gas grid. “The pipeline will go along the Kaladan river as the Myanmar government wants the northern region of the country to develop. It is favourable to us as the pipeline will come to Mizoram. The two blocks awarded to Essar may be the source of such a pipeline to India," the official said.

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