Myanmar to Launch Offshore Oil, Gas Bidding Round in April

YANGON, Myanmar - Myanmar plans to launch a long-awaited bidding round for 30 offshore oil and gas blocks in April, which is likely to attract participation from international oil majors, a senior official said Monday.

The auction of exploration rights will be another step in the rapid opening-up to foreign investment in Myanmar since a civilian government took over in March 2011 after five decades of military rule. Western countries have eased most sanctions on Myanmar and the country's reform process was backed by a visit by U.S. President Barack Obama in November.

The government of the impoverished and isolated Southeast Asian country is now seeking billions of dollars in investments to tap the oil and gas reserves believed to lie in largely-unexplored offshore areas.

The government had initially planned to put the blocks on offer last year, but the bidding round was postponed amid concerns from foreign investors over transparency in the industry. The government has pledged to strictly follow international standards in the bidding process, Myanmar's Energy Minister Than Htay told an audience, including representatives of Chevron Corp., Total SA and ConocoPhillips, at a conference in the country's capitol Yangon.

Representatives of the companies present at the meeting declined to comment.

Myanmar's first tender of onshore blocks announced in 2011 proved somewhat disappointing, with only nine of 18 blocks allocated. A second tender--also for onshore blocks--was announced in January, but is unlikely to draw attention from major foreign players, as most are awaiting the more promising offshore fields to come on offer.

"The major companies are more interested in the offshore blocks," Mr. Htay said in an interview.

Myanmar's government still faces criticism over its close ties to the former military junta and lack of transparency. Opposition leader Aung San Suu Kyi, who spent 20 years under house arrest under the former regime, last year criticized the business practices of the government's exploration and production arm, Myanma Oil and Gas Enterprise, or MOGE, and warned foreign governments against allowing their companies to partner with it.

Since then, Myanmar has sought to join the Extractive Industries Transparency Initiative, a Norway-based program aimed at tackling corruption in the mining and energy sectors in developing countries.

"Up until now, all projects were based on direct negotiation, but from now on we are going to apply an international tendering system," said Mr. Than Htay.

The government is planning to announce the offshore tender in late-April, said Zaw Aung, director of planning at MOGE.

While the financial terms for foreign investments in offshore projects have been settled, Mr. Zaw Aung said it is still under discussion whether foreign companies will be allowed to take full ownership of the offshore projects. On onshore and shallow offshore projects, foreign investors are required to team up with a local partner.

"We are now recommending our local companies to participate in onshore and shallow water blocks," Deputy Energy Minister Htin Aung said. "For the deepwater, it's very risky and highly capital intensive so our people may not have the financial or technical capabilities."

Myanmar's current daily production stands at less than 20,000 barrels of oil and close to 1.4 billion cubic feet of gas. Most of the output comes from two projects that were agreed with the former military junta--the offshore fields Yadana, operated by Total with Chevron as partner, and Yetagun, operated by Malaysia's Petronas.

The Shwe and Zawtika offshore projects, operated by Daewoo International and PTT Exploration & Production, respectively, are expected to start production this year and lift Myanmar's total gas output to around 2.2 billion cubic feet a day by 2015.

Copyright (c) 2012 Dow Jones & Company, Inc.

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