Monday, June 26, 2017
The Myanmar Times
The Myanmar Times

The race to build a supply base

With oil and gas majors planning to ramp up their Myanmar operations the need for a local offshore supply base is becoming critical. Myanmar Oil and Gas Enterprise (MOGE) is preparing to issue a tender to build and operate multiple bases, while a Singaporean joint venture is hoping to receive approval for its own supply base in the next few months.

A photo supplied by the Petroleum Authority of Thailand Exploration and Production (PTTEP) shows the Yadanar natural gas field pipelines in the Andaman Sea. Photo: EPAA photo supplied by the Petroleum Authority of Thailand Exploration and Production (PTTEP) shows the Yadanar natural gas field pipelines in the Andaman Sea. Photo: EPA

World prices for oil and liquefied natural gas may have fallen in recent years but Myanmar authorities have high hopes for the country’s production of both commodities. The government announced in April that international companies had started surveys at almost half of the 20 offshore-blocks awarded in a 2013 bidding round.

Several international firms are now preparing to step up activity in Myanmar. Australian company Woodside made two gas discoveries earlier this year and is preparing a “significant drilling campaign in 2017”, the firm said in its half-year results published last week.

The anticipated increase in activity, however, highlights the lack of offshore supply facilities, and local and foreign firms are well aware there is a lucrative opportunity to provide such infrastructure.

MOGE owns the country’s only existing supply base – at Thaketa near Yangon. But this is largely unsuitable because of a lack of water depth and is in serious need of upgrading, according to Andre Wheeler, chief executive of Asia Pacific Connex, who is helping Singaporean firm 2 Fish with its plans to construct an offshore supply base in Mawlamyine.

Oil and gas firms in Myanmar mainly use supply bases in Thailand and Singapore, depriving Myanmar of valuable economic activity, said U Than Lin, deputy managing director at MOGE. A Woodside spokesperson said the firm uses a combination of Singapore, Ranong in Thailand and Myanmar’s Thaketa.

“The money is flowing to [those other countries],” said U Than Lin. “Also if we have a supply base in Myanmar it will easier to bring the materials to the operations, because there will be less distance to travel.”

Local and international firms are well aware that the right to build and operate a base would be lucrative.

“We have had many interested persons coming in and making presentations,” said U Than Lin. He said MOGE is planning on issuing a tender for the construction and operation of several offshore supply bases this year, but needs to find an international consultant to help with the process.

The state-owned entity has long recognised the need for a new supply base, which would make the country’s oil and gas industry more efficient and create local employment opportunities.

An offshore supply base (OSB) provides a raft of facilities, including berths for supply and construction vessels, cranes and lifting equipment, helicopter rescue facilities, warehouses, and waste management and oil spill equipment.

MOGE invited bids from interested companies for a joint venture in the first half of last year, and received 52 expressions of interest (EOI) from local and international firms.

But the process then stalled and none of the firms that sent EOIs were selected. U Than Lin said those EOIs would not be ignored, and that MOGE will contact those firms when it holds its planned tender.

Myanmar needs two or perhaps three offshore supply bases, but for the number depends on input from the international consultant, he said. Any one firm would only be allowed to operate one base. “We don’t want a monopoly,” he said.

He did not provide further details of the tender’s structure, but said that MOGE will not provide the land for the base. The state-owned entity said last year that it would not provide any capital for a joint venture OSB.

Oil and gas industry figures suggested that the lack of offshore facilities was a factor in US firm Chevron’s decision to put its Myanmar assets up for sale, as reported by Reuters in April. Chevron has a 28.3 percent non-operator interest in the Yadana gasfields blocks M-5 and M-6, and is involved in the pipeline that sends the gas to Thailand.

A Chevron spokesperson, however, said the lack of offshore supply bases had not affected the firm’s position on its Myanmar investment. There has been no decision yet on whether to sell the Myanmar assets, and the firm would only proceed with a sale if it could “realise attractive value”, the spokesperson added.

But additional supply and logistics infrastructure could make Myanmar’s oil and gas industry more economically efficient, the Woodside spokesperson said. He declined to comment on whether the company would be prepared to invest in an offshore base, but said it supported MOGE’s efforts to create one.

While MOGE works on its tender, 2 Fish subsidiary Myanmar Offshore Supply Base (MOSB) is hoping to receive approval from the Myanmar Investment Commission (MIC) by the end of the year to build and operate a supply base, chief executive Leonard Oh told The Myanmar Times.

He added that it remains unclear exactly what category of license operating an offshore supply base will require, but said that the MIC had accepted the initial application because under MIC notification 49 an offshore supply base was not one of the activities that required a joint venture with the Ministry of Energy.

The planned Mawlamyine facility would drastically reduce the travelling time for oil and gas firms with Myanmar operations, which would otherwise have to travel to Singapore or Thailand, he said.

Mr Oh said his firm has an agreement with the Mon State government to lease 46 acres of land for 50 years, with a standard option of two 10-year extensions. This lease will come into effect if the MIC gives its approval.

With the land certification in place MOSB received a “no objection” verdict from a required list of over 10 different ministries and government bodies – including the former Ministry of Energy, of which MOGE is a part, he added.

Once the MIC approval is in place MOSB will issue its own tender for an international firm to build and operate the planned base. Outsourcing the construction and operation to a qualified international firm should remove the possibility that the new Ministry of Electricity and Energy could object to MOSB being allowed to proceed on the grounds it lacked the experience or expertise, Mr Oh said.