Historical Overview

Myanmar has been exporting oil as early as 1853. The Burmah Oil Company (BOC) created in 1886 made the first discovery of oil in Yenangyuang in 1887.[1] Following the successfully exploitation of oil in Yenangyuang, speculators explored Arakan state. Records indicate that British spectators were exploring the Arakan fields for oil as early as 1833 although the first commercially British oil well did not strike oil until early 1878. Like in other places, pre-colonial production of oil in Arakan had been focused on meeting local needs. Yet, when European explorers arrived, they began to lease land for the commercial exploitation around the 1870s.

Although oil was produced at Arakan islands Ramree and Cheduba Island, it never reached the levels of Yenangyang and subsequently declined of Arakan oil fields was due to internal and external factors. The oil supplied by the wells remained low, internal problems within the oil companites, and cheapter imported American oil were all contributing factors.

Government-owned company Myanma Oil Corporation (MOC) was established in 1963 to overseas exploration, development, production and marketing  of oil and natural gas.[2] As a colony of Great Britain, its open market economy depended on exports of agricultural products and non-renewable resources like oil and gas.[3] After independence in 1948, export earning made up a significant part of the Gross Domestic Product.  Political events in the country had a major impact on the oil and gas sector.

After the 1962 coup and the country’s ascent to socialism that followed for 26 years, the economy closed its doors to foreign investment. As a result international trade dramatically dropped.  As part of the socialist reforms, foreign firms in some sectors were nationalized including Burmah Oil Company (BOC)[4], which later became part major shareholder of British Petroleum.[5] Burmah Oil was then converted to Myanma Oil and Gas Enterprise (MOGE) in 1963.[6]

In 1977, the government suspended all foreign participation in offshore exploration.[7] MOC was then transferred to the Ministry of Industry No. 2 in 1977, and in 1985 to the Ministry of Energy. During the early to late 1980s, the country had limited success in oil exploration in part because of the limited domestic skilled drillers and the policy banning foreigners from exploration.

After the 1988 uprising, socialism was abandoned and reforms instituted to encourage foreign direct investment.[8] In the same year, Burma had to import oil for the first time. The government moved to a more open-market economy and passed foreign investment legislation allowing for foreign participation in the economy permitting 100% ownership of foreign companies (Law #10/88). The oil and gas industry began relying on outside technology and capital to revive its oil and gas industry. In 1988, the oil and gas industry accounted for approximately 34% of all foreign investment in Burma[9].

From 1980 through 1990, production of crude oil was cut in half, although production of natural gas more than doubled. In the early 1990s, foreign companies were required to sign production sharing contracts with the relevant entity and were described as “tough” because of required “large signature and production bonuses”[10]. Companies often described Burma as a challenging work environment, stating poor infrastructure, chronic shortages of electricity, and inconsistent policies as major barriers[11].  Many foreign companies in the early 1990s decided to leave the country after their high investments in exploration were unsuccessful.[12]