Over the last few weeks we have seen several significant developments within Myanmar, and I thought it appropriate to give a general update regarding the oil and gas sector as well as the upcoming elections on November 8.
General election update
The preliminary candidates list has now been announced, with 6,189 candidates registered. The two main political parties, the ruling Union Solidarity and Development Party (USDP) and the opposition National League for Democracy (NLD), have each nominated more than 1,000 candidates.
There has been a realignment of the parties and there have been some very interesting movements. The most important shift has seen Aung San Suu Kyi announce that the NLD will work with Shwe Mann (the ousted chairman of the USDP) in the lead up to the general election. The move comes following the removal of Shwe Mann and 11 others from their positions by President Thein Sein on four weeks ago. Shwe Mann has attracted criticism from members of the USDP for backing Aung San Suu Kyi’s campaign for constitutional reform. It is also noteworthy that Aung San Suu Kyi has urged minority ethnic groups not to rush into signing ceasefire agreements with the ruling party – despite this, President Thein Sein has proceeded with these talks with a fair degree of success.
The DLP has also chosen not to register any candidates from the Generation 88 Group, a move that has surprised many. The 21 members of the group were excluded from the list and in a surprise move, their leader Ko Ko Gyi was left off. This group were active in the pro-democracy events in 1988 and it is suggested that this decision could hurt the DLP chances in the urban centres. Further evidence of the NLD moving from a broad based group, to one of contesting the election in its own right is the NLD not responding to the United Nationalities Alliance (ethnic group alliance) request that the DLP do not contest seats in ethnic regions. These are significant exclusions when one considers post election, when this fragile democracy has to bring a divided people together. Furthermore it supports the notion that a ‘third force’ in Myanmar politics is emerging, suggesting that we will see a coalition government in place.
Oil and gas update
Whilst the political machinations have played out in the public, we have also seen significant progress and developments within the oil and gas sector, indicating the ongoing confidence by all players, in the future prosperity of the sector. Since my last update we have seen:
MOGE request local and international private companies to submit proposals for the development of a new offshore supply base, which is needed to support the offshore oil and gas business, particularly as it progresses towards exploration drilling. This request will have some difficulty as there has been 52 companies express an interest in developing the new Myanmar supply bases. This has come from a wide variety of countries including Australia, Brunei, China, Indonesia, Japan, Malaysia, the Netherlands, Saudi Arabia, Singapore, Thailand, UK, the US and Vietnam. In my view this was triggered by MOGE not having a clear scope of work. All the interested parties have been given three months to submit their proposals, and without a clear scope and service requirements focus, there is potential that the MOGE to evaluation of these tenders could result in a fragmented and inappropriate supply base / support strategy. These fears appear to be gaining fruition as the evaluation process is now being delayed until March 2016 – giving them time to appoint advisors to assist the process. MOGE has not decided on the number or the location of the offshore supply bases, but potential locations include Yangon, Dawei in Tanintharyi Region, Pathein in Ayeyarwady Region, Malawmyine in Mon State and Sittwe or Kyaukphyu in Rakhine State. Companies will be required to provide their own land for the new supply base and it is likely that international firms will therefore have to team up with local partners.
Shell signed a joint development agreement with Thai companies Italian-Thai Development and LNG Plus International in Bangkok on August 19 to cooperate on developing an LNG terminal at Dawei Port. Preliminary design will consist primarily of an LNG receiving and regasification terminal at Dawei special economic zone. Initially the plan is for this LNG terminal in Dawei to serve as a place for offloading LNG for on-shipping to various businesses in Dawei and Thailand. The wider plan is to eventually supply the rest of Myanmar, and reducing (if not eliminating) the requirement to ship south around Singapore. Dawei is an ambitious project in Tanintharyi Region. Part of the project’s rational is to provide direct transport links from Bangkok to the Andaman Sea, instead of requiring goods to be shipped through the Strait of Malacca. It is also seen as part of the One Road One Belt strategic initiative that is being rolled out by China.
Finally we see that Tap Oil has signed the latest PSC agreement with MOGE for Block M-7 in the Moattama basin offshore Myanmar. Tap holds 95% participating interest in the block and has assumed operatorship. Tap Energy (M7). and its local joint venture participant Smart E&P International signed the PSC with MOGE on August 26. The next step for the JV partners is to undertake an 18-month environmental and social impact assessment and study period followed by an option to proceed to a three-year commitment exploration work program. Tap anticipates that it will spend $2.75m on the block up to and including the study period, which has a minimum expenditure requirement of $2m.
In my view, the political state of affairs in Myanmar has some issues still to resolve, but there is a groundswell of goodwill that suggests these will be amicably resolved. The key to assisting Myanmar in achieving its democratic objectives is the delivery of sound economic development, in which the oil and gas sector will make a significant contribution. All the signs are that the country still presents a wonderful opportunity.