Jimmie Aung
Khin Afka Co. Pte. Ltd.
Singapore
Daniel Johnston
Daniel Johnston & Co. Inc.
Dallas
Following licensing efforts in 1989-90, Myanmar has been gearing up with activity both onshore and offshore.
The industry gave a strong response to the first round of exploration licensing. Fig. 1 shows the location of the various license areas (Table 4 summarizes license statuses).
Signature bonuses paid for the first nine onshore blocks came to $46 million, and the combined minimum work commitment for the 3 year exploration period was $363 million.
The license awards in the first round carried fairly aggressive work commitments in terms of both dollars and timing. Work commitments on each of the first nine blocks ranged from $12 million to $70 million for each block (OGJ, May 7, 1990, p. 35).
Most companies committed to spudding their first wells within the first 12-14 months. The drilling results are starting to come in.
Although no significant oil discovery has been made yet, the country expects to speed up its exploration activities in the next few years. Following the first round of licensing onshore, Myanmar Oil & Gas Enterprise (MOGE), the national oil company, is negotiating terms for offshore blocks as well as additional onshore blocks for improved oil recovery (IOR) and rehabilitation/redevelopment rights for existing fields. These blocks are shown in Fig. 2.
With the exception of the interest shown in the Moattama gas field offshore, the aggressiveness of the 198990 onshore exploration licensing round is not as evident in these subsequent negotiations.
RECENT ACTIVITY
During the first half of 1992, some 2,225 km of land seismic survey was shot in about 13.5 crew-months vs. 10,300 km in 67 crew-months during the same period last year.
In addition, over 52,000 ft of exploratory hole was drilled in 23.4 rig-months against 51,000 ft in 8 wells and 20 rig-months in the corresponding period last year.
Development drilling was active in the oil fields located along the Irrawaddy Valley. Most of this activity comprises drilling in-fill and injection wells, together with maintenance and workover operations.
Production has dropped from around 30,000 b/d of oil in 1982 to around 16,000 b/d at present (Table 1). The aging oil and gas fields lack equipment and spare parts; therefore, it has been difficult trying to maintain production levels. With production down, the country imports nearly I million bbl/year.
Myanmar has a population of around 40 million, about 85% of whom are Buddhist. The labor force is around 15 million, and per capita gross domestic product is around $200.
Exploration in Myanmar is characterized primarily by a combination of strong structural elements (many fields were discovered based upon surface features), the potential of multiple pay sands (five to 40 or more pay sands), and progressively deeper drilling.
Many of the exploration plays have target depths of 12,000 ft or more.
POTENTIAL
The potential for large discoveries is probably greatest in the Central (Salin) basin and the Southern Chindwin basin.
Virtually all production in Myanmar is from Oligocene and Lower Miocene sandstones. The stratigraphic section is shown in Fig. 3. These crude oils are often high in paraffin content, with pour points of 80 to 100 F.
Oil and gas reserves discovered to date in Myanmar are estimated by MOGE at 1.125 billion bbl of oil equivalent (BOE), comprised of 624 million bbl of oil and gas liquids and 2.469 tcf of gas. This figure could increase to 1.479 billion BOE with expected additions from existing discoveries.
The 1.479 billion BOE is comprised of 679 million bbl of oil and gas liquids and 4.817 tcf of gas. Cumulative production as of the end of 1992 is estimated at 520 million bbl and 590 bcf of gas, leaving 159 million bbl and 4.227 tcf of gas. The reserves status is outlined in Table 2.
At current production rates the proved reserves would take nearly 16 years to produce, and the expected additions would add 15 years of production. This underscores the potential for improved recovery and rehabilitation of existing fields.
The potential for reserves additions from future exploration in the country could range from 425 million BOE to 2.85 billion BOE, according to MOGE (Table 2). The potential is based on analysis of seven proved and two indicated generic hydrocarbon plays in five basins: Hukawng, Chindwin, the Eastern Platform, Central Burma, and the Irrawaddy Delta/Offshore basins, which comprise the Central Burma Tertiary Trough.
Myanmar's sedimentary basins cover three quarters of the country and are divisible into a number of individual basins: Irrawaddy Delta, Central or Salin basin, Chindwin-Hukawng, Shwebo-Monywa Plain, Pegu Uoma-Sittang, Arakan Yoma-Naga Hills, and Arakan Coastal Region in the Tertiary geosyncline of the West. All the currently producing oil fields are situated in the Irrawaddy and Salin basins and produce from Oligocene and Miocene sandstones.
The Myanmar Tertiary geosyncline covers an area of approximately 140,000 sq miles, out of which 111,000 sq miles has hydrocarbon potential. Furthermore, in the eastern region of the country, especially in the central part of the Shan States, the Mesozoic sedimentary basins also have hydrocarbon potential, particularly in the Jurassic, Permian, and in the Carboniferous limestones.
These basins are virtually unexplored. Further to the east, oil shales outcrop along the Myanmar-Thai border.
DRILLING CONDITIONS
Drilling problems in Myanmar involve hole instability, excessive deviation and the penetration of abnormally pressured and high temperature zones.
High pressure and temperature conditions are not uncommon, with temperatures of over 300 F. and required mud weights of up to 148 lb/cu ft-19.75 ppg.
The terrain, climate, and operating conditions change dramatically from one end of the country to the other. The northern blocks are in mountainous terrain, and transportation by barge is possible only in the rainy season from May to November. Here, both seismic and drilling activities require helicopter support, which adds significantly to costs.
The blocks in central Myanmar, along the Irrawaddy River, have better terrain. Annual rainfall here is around 30 in., and year round operations are possible.
In the southern regions, with annual rainfall of 120 in., typical Southeast Asian rice paddy conditions exist.
The weather conditions, even at the height of the monsoon season (June-September), should not halt actual drilling operations but may affect the movement of rigs and materials. Therefore, careful planning of the drilling program and stockpiling of consumable materials at sites are necessary.
Even in the southern sector, road building and site preparation are costly. Roads and drilling locations must have dikes sufficient to handle flood conditions. Fair weather drilling conditions begin in late September after the monsoon.
DRILLING UPDATE
Here is a review of recent exploratory drilling:
- Block C-Yukong Oil Co. The company completed a total of 2,808 line km of seismic survey from February 1990 to October 1991. It has drilled one well, Indaw YK-1, which was dry.
The well had encountered problems with lost circulation and was not able to reach its 14,000 ft target depth, The company has decided to suspend drilling activity for at least 1 year.
- Block G-Shell. Of the first two exploration wells, Ahpyauk Al and Intaya 1, the Ahpyauk Al well resulted in a gas discovery, which came on stream recently at 20 MMcfd (OGJ, June 29, p. 38).
The discovery well reportedly tested at a rate of 19 MMcfd from three intervals. The well, drilled to a depth of 9,686 ft, was completed in April 1991. Gas reserves associated with the Ahpyauk discovery are estimated to be in excess of 100 bcf. The discovery is located about 24 km from the country's main gas pipeline, which transports gas to Yangon.
The third well, Tadokan, drilled to about 9,000 ft, had some gas shows but was abandoned without testing. Shell has a four to six well work program.
- Block D-Idemitsu. The Dabaing IM-1 well in Block D was drilled to a depth of 13,150 ft and tested dry. A second exploration well, Mahudaung North IM-1, was drilled to 10,500 ft and was abandoned. The projected total depth had been 13,000 ft.
- Block E-Petro-Canada. Petro-Canada drilled two wells, the Nawadat-1 to 9,000 ft and the Kabat North-1 to 6,000 ft. Both wells were abandoned.
- Block B-Amoco. The first well, Uyu-1, was drilled to 11,898 ft and was abandoned.
- Block F- Unocal. The company has completed 2,000 line km of seismic survey. The first exploration well, Kandaw 1, drilled to 16,013 ft, tested some oil and gas (OGJ, May 27, 1991, p. 36). The second well, Kankaung 1, drilled to 7,790 ft, was abandoned as a dry hole. The company plans to drill two more exploration wells next year.
- Block I-Croft/Texaco, The combine spudded its first exploration well, Lemyatnya-1, in March 1992. The target depth was 12,000 ft, but the well was drilled to around 9,000 ft and abandoned as a dry hole.
- Block H-BHP. The company completed 1,200 line km of seismic survey and after drilling a 6,500 ft dry hole, Kawliya-1, has relinquished the block.
- Block J-Kirkland. Kirkland has a seismic commitment but has not started survey operations.
- Offshore Blocks M-5/M-6-Total. Total has signed an agreement to develop Moattama gas field offshore. It reportedly paid a $15 million signature bonus for these blocks.
- Offshore Blocks M-12/M-13/M-14-Texaco/Premier/Nippon Oil. Acquisition of 3,953 line km of 2D marine seismic survey has been completed. Texaco, operator, has spudded the first exploration well on the first of three locations identified-the Yetagun structure in the southwest corner of Block M-13. Target depth is 8,450 ft.
The primary objective is mid-Miocene sandstones at about 7,000 ft (OGJ, Oct. 26, p. 31). The well is located in 345 ft of water. This is one of the first offshore wells in the country in over 15 years.
- Block RSF-9-Apache/Santa Fe. The companies will conduct a 6 month feasibility study followed by an optional 30 month exploration period.
- Block EP-3-Apache/Santa Fe. During a 2 year exploration period.
Apache will conduct geological evaluation and shoot up to 200 line km of seismic survey (OGJ, June 29, p. 38).
LATER LICENSING
In the second phase of licensing, the national oil company, MOGE, and the Energy Planning Department have invited bids for 26 blocks offshore, two blocks for IOR, eight for reactivation of suspended fields (RSF) or areas, and three blocks for exploration and production (EP).
Three production sharing contracts have been signed for offshore rights on a total of five blocks,
In the first activity following the exploration licensing round, MOGE finalized negotiations on a production sharing contract for Blocks M-13 and M-14 offshore Teninsarim in southern
Myanmar with a consortium of Texaco, Premier Oil, and Nippon Oil (OGJ, May 21, 1990, p. 26). These contiguous blocks comprise 7.9 million acres, and water depths range from 165 ft to 330 ft.
The agreement includes a 6,000 km seismic commitment and a 3 year exploration program. No firm well commitment has been mentioned.
A number of companies evaluated the development feasibility of the Moattama gas fields-Blocks M-5 and M-6 in the Gulf of Martaban. The fields hold 4.1 tcf of gas, according to some estimates.
Unocal, Shell, Nescor Petroleum, and Total were the reported bidders on the Moattama field development project. The development rights were granted to Total in July. The company plans to drill at least two appraisal wells next year on the 3DA structure. The 3DA feature has been the primary focus of development feasibility studies.
OFFSHORE RESULTS
A number of wells have been drilled on the 3DA structure in Blocks M-5 and M-6 and the 3CA structure in Block M-3. These are elongated asymmetrical anticlines.
The 3CA structure is more fragmented and has numerous culminations and fault blocks. The 3DA structure is less complex and has about twice the reserves the 3CA structure has.
The fields are 56 miles offshore and about 120 miles south of Yangon. The water depth at the 3DA structure is 145 ft, and the top of the reservoir is found at around 4,000 ft.
Table 3 summarizes some of the basic technical factors regarding these fields and another feature, the Bright Spot structure, so named for the seismic amplitude anomaly that has identified it.
The other fields also had some seismic bright spots, strong indicators of gas.
The shallower reservoirs are Upper Miocene fine sandstone layers that overlay a productive limestone section.
The gas from the 3DA field is quite dry with 98.37% methane, 1.28% ethane, and 8-50 ppm of H2S- Well 13A (3DA-XA) reportedly tested 39 MMcfd from about 7,500 ft.
There is a thin, 10-20 ft oil column of 42 gravity crude at the base of the 3CA structure.
Here the gas stream is 93.18% methane, 3.64% ethane, 1.64% propane, and 1.54% butanes-plus with no reported H2S.
REHABILITATION, REDEVELOPMENT
Over 20 companies have approached the government to discuss the potential of secondary recovery operations and deeper prospects in existing fields. The IOR, RSF, and EP block locations are shown in Fig. 2.
A number of bids for these blocks have been received, and negotiations are under way.
The first such blocks to be awarded in this phase of licensing are the Apache-Santa Fe Energy Blocks RSF-9 and EP-3 (OGJ, June 29, p. 38). In June, Petromer Trend signed a contract for RSF Blocks I and 2, which contain the Leptando and Tuyintaung fields respectively.
Shell signed for RSF Blocks 3, 4, and 5 adjacent to the northwest border of its EP Block G.
The Leptando area in central Myanmar is 20 miles north of the Chauk-Ayadaw oil and gas fields. MOGE drilled 16 wells in this field by 1989 and discovered heavy crude with high paraffin content. The pour point of this crude is over 90 F.
The exploration well produced around 1,000 b/d of oil initially from a depth of about 6,000 ft, but production dropped to 200 b/d within 3 months.
Tuyintaung oil field has been rated at slightly over 200 million bbl of oil in place in reservoirs ranging from 2,500 to 9,000 ft deep. This crude is fairly light at 30 gravity and is waxy with a pour point of 95 F.
MOGE claims that the RSF blocks still have the potential to yield wells capable of producing 1,000 b/d. It cites recent wells in new pools such as Pyi-105, which tested 1,600 b/d, and Shwepyitha-45, which tested 900 b/d.
The Leptando and Tuyintaung field blocks are the first RSF blocks granted.
IOR, RSF TERMS
The IOR contract terms differ in only a few respects from the production sharing contract terms signed in the first licensing round.
The IOR contracts outlined by MOGE are "incremental oil" contracts. The first stage of the contract is to formulate a decline rate for the life of the contract. All production above that level is shared between the contractor and the government according to the standard PSC, with a few changes.
The second phase of the IOR contract is to establish a joint operating body (JOB) with representatives from MOGE and the contractor.
The next contract phase is to initiate a study program for feasibility analysis prior to implementing a pilot program. The study program must start within 3 months after contract signing and be completed within 6 months at the contractor's sole risk and expense.
MOGE has the option to participate up to 30%. The terms outlined by MOGE for incremental oil allow for a 10% royalty, a cost recovery limit of 40%, and a sliding scale profit oil split based on level of production. The split, in MOGE's favor, is 70/30 for incremental production up to 10,000 b/d, 75/25 for 10,001-20,000 b/d, 80/20 for 20,001-30,000 b/d, and 85/15 for production above that.
The proposed RSF contract terms differ in a few respects from the IOR production sharing contract terms.
The main difference is that in addition to the 10% royalty, a 10% finder's bonus is taken by MOGE. The proposed contract also outlines cost recovery provisions for MOGE sunk costs.
Remaining production is shared on standard IOR terms. However, a domestic oil requirement is proposed, consisting of 20% contractor profit oil at 10% of the prevailing price. The general contract terms or the proposed terms for the various types of licenses are summarized in Table 5.
OUTLOOK
The government of Myanmar has demonstrated a keen understanding of the global market and has structured fiscal terms that have generated substantial interest. The other half of the equation, of course, is geological potential, and Myanmar has a lot to offer.
The country's oil patch has a rich history that Predates establishment in Myanmar (then Burma) of the old Burmah Oil Co. in 1886. To some this is where the "international" oil industry began, and it isn't over yet.
BIBLIOGRAPHY
- U Pe Kyi, U Kyew Nyein, Onshore Myanmar: Prospects, Trends, Opportunities and Types of PSCs in Myanmar, OGT '92, Bangkok, Thailand, February 1992.
- Commander Thein Tun, Ministry of Energy, A Second Look at the Oil and Gas Opportunities in Myanmar, August 1992.
- Petzet, Alan, Exploration programs stirring in Myanmar, OGJ, May 7, 1990, P. 35.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
