India's ONGC Videsh Ltd. plans to bid for offshore blocks in an upcoming bidding round in Myanmar as its Southeast Asian neighbor seeks foreign investments to tap its vast unexplored oil and gas reserves, but a revision of the country's foreign investment law may create hurdles in the way of their development.
Interest in Myanmar from energy companies has risen rapidly over recent months, after the U.S. suspended sanctions that had been put in place during a military dictatorship that ran the country for almost 50 years. Last year, the military junta relinquished power, giving way to a new reformist government.
Myanmar has invited foreign energy firms to bid for both onshore and offshore blocks and a bidding round is expected as early as next month but could be delayed until later this year.
Ramesh Reddy, deputy general manager at ONGC Videsh, said his company plans to participate in the upcoming tender.
ONGC Videsh, the overseas investment arm of India's state-run Oil & Natural Gas Corp., is already a minority partner in Myanmar's offshore Shwe gas project, which is operated by South Korea's Daewoo International Corp.
Although interest is strong, little information is available about the upcoming tender, the reserves available or under what conditions foreign firms are allowed to participate. No government officials were present at a conference held in Singapore dedicated to foreign investments in Myanmar's oil and gas sector.
The Myanmar government is in the process of revising its foreign investment law for the first time in 24 years to extend corporate tax waivers to foreign firms and allow them to acquire rights to make use of private land.
But such proposals have met strong opposition from local companies, which instead are proposing protectionist measures that will restrict foreign investors far more than initially believed. One such measure discussed is to prohibit foreign firms from holding controlling stakes in investment projects in certain industries, including oil and gas.
"The investment legislation seems to be going through lots of trouble," said Rajiv Biswas, chief economist for IHS in the Asia-Pacific region. "The risk is that after the current euphoria, investors will get disappointed and leave again."
Following a tender held last year, state-owned energy company Myanma Oil and Gas Enterprise, or MOGE, said in June that it had signed nine agreements to allow firms, including Malaysia's Petronas, Thailand's PTT and India's Jubilant, to explore for oil and natural gas onshore.
The country has 17 oil fields and five gas fields in production on land. Two offshore gas fields--the Shwe project and PTT Exploration & Production's Zawtika project--are currently under development.
The Shwe project is expected to begin production of 500 million cubic feet of gas a day in late 2013 or early 2014, with most of the output to be exported to China's Yunnan province via a pipeline currently under construction, said Mr. Reddy.
Copyright (c) 2012 Dow Jones & Company, Inc.
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