energy officials announced last week that they would delay the tendering process for an oil and gas block auction until a clearer regulatory framework for the sector is in place.
The postponement of the process, which was expected to be held by the end of the year, was announced on September 4 at the 2nd Myanmar Oil, Gas, and Power Summit in Yangon.
“At the present time, we are putting great emphasis on transparency and the rule of law,” Minister for Energy U Than Htay said. “We need some time to consider and assess before we launch our next international bidding round.”
The first round of tenders for exclusively onshore blocks took place in August last year.
Although no definitive date for the tenders was given, officials said the end remained a target. The minister said the tender would likely contain 10 offshore and 10 onshore blocks, which industry insiders said look more prospective than those blocks tendered last year
The summit attracted 300 representatives from some of the sector’s leading firms, including Shell, ConocoPhillips and General Electric, most of who were drawn by Myanmar’s prospectivity and strategic location between energy super-consumers India and China.
European and US companies have long eyed Myanmar’s energy market Western years of sanctions have gifted the advantage to firms from Thailand, China and South Korea.
Exceptions are French company Total S.A. and US firm Chevron, both of which had operations in Myanmar before sanctions were levelled.
Despite not being in violation of any laws, both companies have suffered years of criticism from watch groups and human rights organisations that have accused the firms of helping to fund Myanmar’s military regime.
At the centre of these criticisms is state-run Myanma Oil and Gas Enterprise (MOGE). MOGE has long been surrounded by accusations of corruption and cronyism amongst its ranks.
National League for Democracy leader Daw Aung San Suu Kyi said MOGE “lacked both accountability and transparency” in a June 14 speech in Geneva, Switzerland.
Veteran US Senators John McCain and Joe Lieberman sounded further alarm in July when they applauded US President Barack Obama’s easing of sanctions but remained deeply suspicious of MOGE.
“We are concerned that doing business with MOGE runs the risk of setting back Burma’s democratic reforms, rather than reinforcing them, as is our common goal,” Mr Lieberman and Mr McCain said in a joint statement.
An MOGE official, who asked not to be named, admitted that the enterprise had suffered from corruption in the past. The official attributed at least some issues to the lack of an international bidding process for oil and gas blocks, which lead to companies with close government ties being awarded lucrative contracts.
“Previously we were not doing a bidding process,” the official said, “so they [companies] submitted the proposal, if there were four or five companies that submitted proposals for review, some of the contracts, some of the time a little bit favoured a person,” he said.
“Now a very popular word is ‘crony’, if the people are very close with the authorities you are the one to get the blocks.”
Another issue of discussion at the summit was the long awaited foreign investment law. The 94 proposed amendments, many viewed as overly protectionist, were being discussed in the combined houses of parliament on September 7.
Although oil and gas is not one of the 13 sectors in which foreign investment will be capped at 49 percent, oil and gas companies are required to take on a Myanmar partner and enter into a production-sharing contract with MOGE.
“Regulations requiring foreign energy companies to partner with state-owned enterprises such as MOGE in exploration and production will expose businesses to complicity in corruption, poor safety standards, and human rights violations,” said Giulia Zino, senior risk analyst at risk analysis company Maplecroft.
The stipulation in the latest foreign investment law draft that foreign firms must employ 25pc of Myanmar employees within two years of operation, 50pc after four years, and 75pc within six years is proving cause of concern for potential investors.
Space on offshore rigs is at a premium, with every person needed to contribute for smooth operation and maximised efficiency. Burdensome unskilled labour poses a threat not just to production, but the safety of fellow employees and environmental protection.
“When personnel don’t have the requisite safety certifications it is very difficult to accept them onboard,” Christopher Drew, country manager for Twinza Oil Limited said during a roundtable discussion.
Another frustration for delegates was the unwillingness of the Ministry for Energy to provide clear answers on when geological data for the proposed oil and gas blocks would be provided to prospective investors.
“There is a certain limit to what we will show the foreign company but to some degree you will see it, I think,” said U Than Minn, chief geologist at MOGE.
According to Mr Drew the problem does not stem from MOGE trying to withhold information but rather their lack of capacity in making data easily accessible to interested parties.
The 2nd Myanmar, Oil Gas and Power Summit was held at the Sedona Hotel and organised by the Singapore-based Centre for Management Technology.