Daewoo International has a 60 percent stake in the A-1 block off the Rakhine State. Pic: Daewoo E&P Company Limited

FOLLOWING the discovery of large natural gas reserves in two of Rakhine state’s offshore blocks by Daewoo International and its partners in 2004, the region has become an attractive exploration area for international oil companies.

Daewoo International, the main shareholder and operator of the A-1 and A-3 gas fields, made the discoveries in January 2004.

Proven reserves of between 5.7 and 10.0 trillion cubic feet (TCF) of natural gas, with up to 8.6 TCF considered recoverable, quickly attracted investment from oil and gas firms from China, Malaysia and India.

“The discovery of gas deposits in the A-1 block was one of factor that attracted international oil companies to this region; in the past gas deposits like this would not have interested oil companies,” said U Chan Mya, general manager of Smart technical services company.

He said the Rakhine offshore blocks were partially explored by foreign oil companies in the 1970s but failed to yield any worthwhile results.

Between 1947 and 1976, three foreign companies – Arakan Oil Discovery Company (AODC), Total CFP and Mataban City Service International (MCSI) – were allowed to explore for oil and gas at the Rakhine offshore blocks.

AODC Company was awarded the A-2, A-3 and A-4 blocks; Total CFP Company was awarded A-1, where Daewoo International recently found its natural gas reserves, and A-5; while MCSI was given the A-6 and A-7 blocks to explore.

All three companies ran marine seismic surveys on their blocks and drilled at least one exploratory well – AODC actually drilled four – but only found trace amounts of gas and quickly stopped searching.

“Many foreign oil companies had explored for oil and gas in the Rakhine offshore area before Daewoo International but they didn’t find any commercial gas reserves. That all changed when Daewoo explored there; Daewoo showed that the potential for finding of oil and gas reserves in the region was large indeed,” said U Chan Mya.

U Zaw Min, general manager of Oil & Gas Service Company Ltd, said Daewoo’s discoveries of commercial natural gas reserves in A-1 and A-3 blocks have changed the perception that the Rakhine offshore blocks offered little potential for exploration.

“Because Daewoo found gas there, other oil and gas companies began to think that there might be more in the region, so they started coming to Myanmar to explore,” he said.

China’s CNOOC was the first oil company to sign a production sharing contract (PSC) with MOGE for M block in Rakhine – which is next to Daewoo’s A-3 block – in October 2004, at the same time that Daewoo found its commercial gas reserve.

CNOOC was followed by India’s Essar Oil Company that became the first Indian private oil company to invest in Myanmar’s energy sector. Essar signed its PSC with MOGE in May 2005 to explore for oil and gas in the A-2 and L blocks within Rakhine State.

Indian oil company GAIL, which has a 10 percent stake in the A-1 and A-3 blocks was awarded the A-7 block in December 2006.

MPRL, formerly Myanmar Petroleum Resources Ltd, won the rights to the A-6 block; China National Petroleum Corporation picked up the AD-1, AD-6 and AD-8 deepwater blocks in January 2007; Daewoo acquired AD-7; and Malaysian firm Rimbunan Petrogas Ltd got the rights to A-5 block in February 2007.

U Chan Mya said that another reason why Myanmar has received foreign direct investment in the Rakhine offshore blocks is the global demand for oil and gas, which has seen the price of gasoline rise steadily.

“Because the demand for oil and gas is high, oil companies obviously want to invest in hydrocarbon exploration,” he said.

U Zaw Win said that increased foreign direct investment in Myanmar’s energy sector is also helped by the nation’s geographic location; sharing borders with the booming and energy-hungry and nations of China and India means Myanmar is extremely well-placed to provide for these expanding markets.

“China and India invest in Myanmar’s oil and gas industry because they need the energy and it will be easy to transport the oil or gas home because they share a border with Myanmar, unlike the oil-rich countries of the Middle East, which are far away from the region,” he said.

MPRL, Operator since January 2007 of the 9830 square kilometre A-6 Block which is located off the coast of Rakhine State, said the discovery of the "Shwe" Gas Field was one of many contributing factors which encouraged the Company to invest in Block A-6.

Historically, over the past 10 to 15 years, the bulk of discoveries worldwide have come from deep water areas: Nigeria, Angola, Gulf of Mexico, Offshore Brazil and therefore the western coast of Myanmar is one of the last remaining deep water areas in the world whcih remains to be fully explored.

The statement also announced that MPRL has hired a team of experts to study Block A-6 and are currently reprocessing the existing seismic data from the Block.

The company also stated that to move from onshore into offshore, and possibly even deep water exploration, may seem a bold step for a small independent like MPRL but it was a logical development platform for the company as bids for additional offshore blocks are invited by the Ministry of Energy. It allows MPRL to grow, and the company was simply ready to take on the challenge. MPRL believes that there are still many opportunities to expend further in the country and MPRL has in fact applied for additional onshore acreage.