By Judy Clark
Associate Editor
HOUSTON, Sept. 4 -- Unocal Corp. Wednesday repudiated what it called "a misleading and erroneous headline" in an El Segundo, Calif., newspaper that indicated the company was considering a withdrawal from its investment in the Yadana natural gas project in Myanmar.
Unocal said company officials did meet Tuesday with California Treasurer Phil Angelides and New York comptroller Alan G. Hevesi, who asked Unocal to consider withdrawing from its Myanmar investment in the wake of serious political turmoil and legal charges associated with the project.
At that meeting, however, Unocal Executive Vice-Pres. and Chief Financial Officer Terry G. Dallas told Angelides and Hevesi that withdrawal from the Yadana project is not under consideration, but the company did agree to take under advisement a request by Angelides and Hevesi to provide "an analysis of staying in the Yadana project."
Yadana field, which has certified reserves of 5.7 tcf of gas, is in the Gulf of Martaban on Blocks M-5 and M-6 about 320 km south of Rangoon, Myanmar, along with the newly discovered Sein, and Badamyar fields. Unocal's subsidiary Unocal Myanmar Offshore Co. Ltd. holds a 28.26% interest in the blocks.
Other stakeholders are operator Total SA 31.24%, Thailand's upstream state company PTT Exploration & Production PLC (PTT)'s subsidiary PTTEP International Ltd. 25.5%, and Myanmar's state oil company Myanma Oil & Gas Enterprise 15%.
Most Yadana production is delivered via a 411mile pipeline from the field to an onshore power station in Ratchaburi province, Thailand. The $1.2 billion pipeline, which started operation in early 2000, has been bombed three times this year by political extremists opposed to Myanmar's military government—the State Peace and Development Council—which the rebels claim used forced labor and committed other abuses and rights violations during the construction of the pipeline (OGJ Online, Apr. 28, 2003). Rebels admitting to damaging the line also charge the government with using proceeds from gas sales to purchase weapons for oppressing the country's people and accused the oil companies with complicity and supporting the military government in that pursuit.
Unocal said it assured Angelides and Hevesi that it has done due diligence in evaluating the risks associated with the Yadana project.
Dallas insists that the project continues to be economically sound for Unocal stockholders and "provides benefits to thousands of ordinary Burmese families in the region, including jobs, health care, education, and economic opportunities." He also emphasized that the Yadana project "provides essential supplies of natural gas for power generation to neighboring Thailand, a key US ally."
The consortium earlier this year said it expects to raise the average Yadana gas sales to PTT this year to 638 MMcfd from 615 MMcfd recorded last year. The consortium has moved up installation of a medium compression platform at Yadana to this year from 2005, ramping up its future maximum gas delivery to Myanmar and Thailand to 850 MMcfd from 650 MMcfd this year, to serve new electric power generation facilities (OGJ Online, Apr. 28, 2003).
Lawsuit postponed
Meanwhile, Unocal's legal woes associated with the project continue. A lawsuit filed in 1996 against the parent Unocal Corp., was dismissed in September 2000 by US District Judge Ronald S.W. Lew. However, the plaintiffs appealed that federal ruling and filed another suit in California's Superior Court in October of that year. Last September the 9th US Circuit Court of Appeals reinstated the federal lawsuit.
Last year, Los Angeles Superior Court Judge Victoria Chaney denied Unocal's motion for dismissal of the human rights violations case (OGJ Online, June 13, 2002). That trial, slated for last September but postponed to Dec. 3 of this year, will be separated into two phases, Unocal spokesman Barry Lane said.
The major focus of Phase I will involve a key alter-ego issue, determining if the lawsuit had been filed against the correct party—an issue that could affect many international companies with subsidiaries worldwide. Unocal contends that lawsuits should not target a parent company for allegations made against a foreign-based subsidiary. If it is determined that the lawsuit legally should have been directed against the Myanmar-based subsidiary rather than the US-based parent company, the case would not be tried in the US. Unocal also argues that the case does not belong in a state court because it involved crimes allegedly perpetrated by foreign troops outside of California.
The second phase would consider whether a legitimate link can be established between a private company working in a country and the actions of the country's government over which it has no control. Unocal, which says it has done nothing wrong, claims it is not responsible for the actions of the Myanmar government or its military.
Contact Judy Clark at [email protected]