Myanmar Oil and Gas Sector
Myanmar is one of the world’s oldest oil producers. It is estimated to have huge oil and gas reserves, however few fields are currently producing and most deposits remain unexplored. According to the data of Ministry of Gas Enterprise (MOGE), the country’s production in oil & gas sector from April 2017 to March 2018 stood at 1,603,783 barrels of condensate and 649,704 Mscf of natural gas produced in offshore blocks and 1,317,039 barrels of oil and 706.853 Mscf of natural gas produced in onshore blocks. Since from 1st April 2016, Ministry of Electric Power (MOEP) and Ministry of Energy (MOE) were composed into one Ministry as the Ministry of Electricity and Energy (MOEE).
The MOEE (which is the primary authority responsible for the management of electricity and energy sector in Myanmar) decides on oil and gas policy. It has oversight of three state-linked firms which include:
- Myanmar Oil and Gas Enterprise (MOGE) is responsible for exploration/production and land transmission of oil and gas through a 2,488 km onshore transmission pipeline network and, to oversee Production Sharing contracts (PSCs) entered into with private investors.
- Myanmar Petrochemical Enterprise (MPE) has oversight of three refineries, five urea fertilizer plants and a number of other processing plants.
- Myanmar Petroleum Products Enterprise (MPPE) oversees retail and wholesale distribution of petroleum products.
In addition to these enterprises, the MOEE organisation chart includes the Oil and Gas Planning Department (OGPD) which is responsible for energy policy formulation, coordination and the discussion of Energy Development Programmes. OGPD is also responsible with MOGE for tendering oil and gas blocks (onshore, shallow water offshore, deep water offshore) in Myanmar and for managing contracts, exploration and production and sale of oil and gas.
Joint ventures with MOGE
All foreign participation in oil and gas activity takes place through joint venture arrangements with MOGE.
There are three types of contracts governed in oil and gas sector in Myanmar, as mentioned below –
- Production Sharing Contracts (PSCs): for offshore and onshore projects;
- Performance Compensation Contracts (PCC): for onshore projects; and
- Improved Petroleum Recovery Contracts (IPRs): for onshore projects.
In October 2013, Myanmar awarded 18 onshore oil and gas blocks and in March 2014, it awarded 20 offshore oil and gas blocks, of which ten are deep water blocks and the other ten are shallow water blocks. Of the 16 onshore blocks, 13 is carried out under the terms of a PSC with the MOGE, whether the foreign investor has a local partner or not. The three remaining blocks are improved petroleum recovery (“IPR”) blocks. All contracts are not disclosed, but only one contract being publicly available executed for the Yedana project can be found available online for the reference.
Myanmar is open to international exploration and production in oil & gas sector, and major international oil companies are making significant investments using updated technology to locate new sources of hydrocarbons.
Myanmar Production Sharing Contracts
The MOEE has published an update information relating to extractive industries in Myanmar which is Extractive Industries Transparency Initiative (EITI Report 2017-18). The MOEE has also released standard Terms and Conditions of productions sharing contracts for onshore blocks, offshore blocks and deep-offshore blocks.
Pursuant to Notification 15/2017 oil and gas exploration is listed among economic activities which are permitted in accordance with the approval of the relevant Ministry. To date foreign oil and gas companies have been required to work in cooperation with local companies. Pursuant to Rule 22 of Notification 35/2017, foreign capital should not exceed 80% of the total capital of joint-venture companies engaged in economic activities which are prohibited or restricted such as oil and gas exploration. This restriction does not expressly apply to joint ventures between a foreign investor and the state.
For additional information on the oil and gas sector in Myanmar, please refer to Charltons’ presentation “Advising Oil and Gas Companies in Myanmar“.