The race to build an off­shore en­ergy base

The Myanmar Times - - Front Page - STEVE GIL­MORE s.gil­more@mm­times.com

With oil and gas ma­jors plan­ning to ramp up their Myan­mar op­er­a­tions, the need for a lo­cal off­shore sup­ply base is be­com­ing crit­i­cal.

WITH oil and gas ma­jors plan­ning to ramp up their Myan­mar op­er­a­tions the need for a lo­cal off­shore sup­ply base is be­com­ing crit­i­cal. Myan­mar Oil and Gas En­ter­prise (MOGE) is pre­par­ing to is­sue a ten­der to build and op­er­ate mul­ti­ple bases, while a Sin­ga­porean joint ven­ture is hop­ing to re­ceive ap­proval for its own sup­ply base in the next few months.

World prices for oil and liq­ue­fied nat­u­ral gas may have fallen in re­cent years but Myan­mar au­thor­i­ties have high hopes for the coun­try’s pro­duc­tion of both com­modi­ties. The gov­ern­ment an­nounced in April that in­ter­na­tional com­pa­nies had started sur­veys at al­most half of the 20 off­shore-blocks awarded in a 2013 bid­ding round.

Sev­eral in­ter­na­tional firms are now pre­par­ing to step up ac­tiv­ity in Myan­mar. Aus­tralian com­pany Wood­side made two gas dis­cov­er­ies ear­lier this year and is pre­par­ing a “sig­nif­i­cant drilling cam­paign in 2017”, the firm said in its half-year re­sults pub­lished last week.

The an­tic­i­pated in­crease in ac­tiv­ity, how­ever, high­lights the lack of off­shore sup­ply fa­cil­i­ties, and lo­cal and for­eign firms are well aware there is a lu­cra­tive op­por­tu­nity to pro­vide such in­fra­struc­ture.

MOGE owns the coun­try’s only ex­ist­ing sup­ply base – at Thaketa near Yan­gon. But this is largely un­suit­able be­cause of a lack of wa­ter depth and is in se­ri­ous need of up­grad­ing, ac­cord­ing to An­dre Wheeler, chief ex­ec­u­tive of Asia Pa­cific Con­nex, who is help­ing Sin­ga­porean firm 2 Fish with its plans to con­struct an off­shore sup­ply base in Mawlamyine.

Oil and gas firms in Myan­mar mainly use sup­ply bases in Thai­land and Sin­ga­pore, de­priv­ing Myan­mar of valu­able eco­nomic ac­tiv­ity, said U Than Lin, deputy man­ag­ing di­rec­tor at MOGE. A Wood­side spokesper­son said the firm uses a com­bi­na­tion of Sin­ga­pore, Ranong in Thai­land and Myan­mar’s Thaketa.

“The money is flow­ing to [those other coun­tries],” said U Than Lin. “Also if we have a sup­ply base in Myan­mar it will eas­ier to bring the ma­te­ri­als to the op­er­a­tions, be­cause there will be less dis­tance to travel.”

Lo­cal and in­ter­na­tional firms are well aware that the right to build and op­er­ate a base would be lu­cra­tive.

“We have had many in­ter­ested per­sons com­ing in and mak­ing pre­sen­ta­tions,” said U Than Lin. He said MOGE is plan­ning on is­su­ing a ten­der for the con­struc­tion and op­er­a­tion of sev­eral off­shore sup­ply bases this year, but needs to find an in­ter­na­tional con­sul­tant to help with the process.

The state-owned en­tity has long recog­nised the need for a new sup­ply base, which would make the coun­try’s oil and gas in­dus­try more ef­fi­cient and cre­ate lo­cal em­ploy­ment op­por­tu­ni­ties.

An off­shore sup­ply base (OSB) pro­vides a raft of fa­cil­i­ties, in­clud­ing berths for sup­ply and con­struc­tion ves­sels, cranes and lift­ing equip­ment, he­li­copter res­cue fa­cil­i­ties, ware­houses, and waste man­age­ment and oil spill equip­ment.

MOGE in­vited bids from in­ter­ested com­pa­nies for a joint ven­ture in the first half of last year, and re­ceived 52 ex­pres­sions of in­ter­est (EOI) from lo­cal and in­ter­na­tional firms.

But the process then stalled and none of the firms that sent EOIs were se­lected. U Than Lin said those EOIs would not be ig­nored, and that MOGE will con­tact those firms when it holds its planned ten­der.

Myan­mar needs two or per­haps three off­shore sup­ply bases, but for the num­ber de­pends on in­put from the in­ter­na­tional con­sul­tant, he said. Any one firm would only be al­lowed to op­er­ate one base. “We don’t want a monopoly,” he said.

He did not pro­vide fur­ther de­tails of the ten­der’s struc­ture, but said that MOGE will not pro­vide the land for the base. The state-owned en­tity said last year that it would not pro­vide any cap­i­tal for a joint ven­ture OSB.

Oil and gas in­dus­try fig­ures sug­gested that the lack of off­shore fa­cil­i­ties was a factor in US firm Chevron’s de­ci­sion to put its Myan­mar as­sets up for sale, as re­ported by Reuters in April. Chevron has a 28.3 per­cent non-oper­a­tor in­ter­est in the Yadana gas­fields blocks M-5 and M-6, and is in­volved in the pipeline that sends the gas to Thai­land.

A Chevron spokesper­son, how­ever, said the lack of off­shore sup­ply bases had not af­fected the firm’s po­si­tion on its Myan­mar in­vest­ment. There has been no de­ci­sion yet on whether to sell the Myan­mar as­sets, and the firm would only pro­ceed with a sale if it could “re­alise at­trac­tive value”, the spokesper­son added.

But ad­di­tional sup­ply and lo­gis­tics in­fra­struc­ture could make Myan­mar’s oil and gas in­dus­try more eco­nom­i­cally ef­fi­cient, the Wood­side spokesper­son said. He de­clined to com­ment on whether the com­pany would be pre­pared to in­vest in an off­shore base, but said it sup­ported MOGE’s ef­forts to cre­ate one.

While MOGE works on its ten­der, 2 Fish sub­sidiary Myan­mar Off­shore Sup­ply Base (MOSB) is hop­ing to re­ceive ap­proval from the Myan­mar In­vest­ment Com­mis­sion (MIC) by the end of the year to build and op­er­ate a sup­ply base, chief ex­ec­u­tive Leonard Oh told The Myan­mar Times.

He added that it re­mains un­clear ex­actly what cat­e­gory of li­cense op­er­at­ing an off­shore sup­ply base will re­quire, but said that the MIC had ac­cepted the ini­tial ap­pli­ca­tion be­cause un­der MIC no­ti­fi­ca­tion 49 an off­shore sup­ply base was not one of the ac­tiv­i­ties that re­quired a joint ven­ture with the Min­istry of En­ergy.

The planned Mawlamyine fa­cil­ity would dras­ti­cally re­duce the trav­el­ling time for oil and gas firms with Myan­mar op­er­a­tions, which would oth­er­wise have to travel to Sin­ga­pore or Thai­land, he said.

Mr Oh said his firm has an agree­ment with the Mon State gov­ern­ment to lease 46 acres of land for 50 years, with a stan­dard op­tion of two 10-year ex­ten­sions. This lease will come into ef­fect if the MIC gives its ap­proval.

With the land cer­ti­fi­ca­tion in place MOSB re­ceived a “no ob­jec­tion” ver­dict from a re­quired list of over 10 dif­fer­ent min­istries and gov­ern­ment bodies – in­clud­ing the for­mer Min­istry of En­ergy, of which MOGE is a part, he added.

Once the MIC ap­proval is in place MOSB will is­sue its own ten­der for an in­ter­na­tional firm to build and op­er­ate the planned base. Out­sourc­ing the con­struc­tion and op­er­a­tion to a qual­i­fied in­ter­na­tional firm should re­move the pos­si­bil­ity that the new Min­istry of Elec­tric­ity and En­ergy could ob­ject to MOSB be­ing al­lowed to pro­ceed on the grounds it lacked the ex­pe­ri­ence or ex­per­tise, Mr Oh said.

‘If we have a sup­ply base in Myan­mar it will be eas­ier to bring the ma­te­ri­als to the op­er­a­tions.’ U Than Lin Myan­mar Oil and Gas En­ter­prise

Photo: EPA

A photo sup­plied by the Pe­tro­leum Author­ity of Thai­land Ex­plo­ration and Pro­duc­tion (PTTEP) shows the Yada­nar nat­u­ral gas field pipe­lines in the An­daman Sea.

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