U.S. economic sanctions cloud Myanmar E&D action

• Where Myanmar E&D projects are advancing [42760 bytes]

As official U.S. scrutiny intensifies over alleged repressive acts by the government of Myanmar, formerly Burma, operators continue to press exploration and development projects covered under existing production-sharing contracts.

Project milestones have been reached at Yadana and Yetagun fields in the Gulf of Martaban, but new investments not covered by PSCs, however, appear out of the question-at least until U.S. economic sanctions are lifted.

In 1996, President Clinton signed into law federal enabling legislation allowing imposition of U.S. economic sanctions on Myanmar because of the actions of its government (see related story, p. 37).

In the U.S., mounting public and private sector pressure has resulted in the Clinton administration deciding to impose economic sanctions in an effort to bring about political change by prohibiting new project investments (OGJ, Apr. 28, 1997, Newsletter, and p. 37).

But, as Myanmar oil and gas developments advance, questions linger as to the effects on companies' plans for future investments.

Yetagun gas deal

After years of negotiations, a natural gas purchase agreement covering Yetagun field has been approved, paving the way for additional volumes to be transported to gas-hungry Thailand to support its rapidly growing petrochemical and power-generation infrastructure (OGJ, Jan. 27, 1997, p. 25).

Petroleum Authority of Thailand (PTT) signed a 30-year gas purchase agreement with state-owned Myanma Oil & Gas Enterprise (MOGE) and a Yetagun group led by operator Texaco Exploration Myanmar Inc.

The deal concludes almost 3 years of negotiations (OGJ, Feb. 13, 1995, p. 28). Industry sources conjecture that the deal may increase Texaco's thus-far low visibility and place it under a microscope by factions seeking political change in Myanmar.

The gas purchase agreement will generate an estimated 5 billion baht ($200 million)/year of revenue to be shared by the Yangon (formerly Rangoon) government and the Yetagun development group.

Operator Texaco has a 50% interest in the production-sharing agreement covering Blocks M-12, M-13, and M-14. The blocks cover a total area of 36,200 sq km. Yetagun field lies in the extreme southwest corner of Block M-13, about 420 km south of Yangon (see map).

Partners include Premier Petroleum Myanmar Ltd., Nippon Oil Exploration Myanmar Ltd., and PTT Exploration & Production plc (Pttep), a PTT unit.

Yetagun output

Deliveries from Yetagun are to begin in 1999 at an initial rate of 200 MMcfd.

Gas, which ultimately will be moved to Thailand via the Yadana pipeline, will be used for power generation by the Electrical Generating Authority of Thailand (EGAT) in its 4,600-MW combined-cycle complex at Ratchaburi, southwest of Bangkok.

From Yetagun field, gas initially will be shipped via a 170-km, 30-in. offshore pipeline segment and about a 70-km onshore segment, linking with the Yadana pipeline at an onshore point near the Myanmar-Thai border.

Separately, EGAT recently selected Japan's Mitsui to build a gas-fired thermal power plant capable of generating 2,100 MW-14% of Thailand's current supply-at Ratchaburi. The plant, which will also use Myanmar-produced natural gas, is slated to go on stream in 2000.

Yadana's next phase

Offshore pipeline construction tied to Myanmar's other major offshore field, Yadana, about 320 km south of Yangon, is slated to begin in mid-1997. The field, due on stream in mid-1998, has reserves pegged at 5.7 tcf.

Construction of the Myanmar onshore segment of a controversial offshore-onshore pipeline, which will link the field to Thai markets, is under way. Allegations of repressive acts have been made involving the army acting on behalf of the ruling government junta, the State Law and Order Restoration Council (Slorc). Slorc is responsible for protecting the pipeline right-of-way and is battling insurgent groups near there.

Among the charges-denied by the companies involved-critics claim forced labor has been used on the Mynamar onshore segment of the pipeline, and that entire villages have been relocated to accommodate routing.

A contract was recently let covering the onshore Thai portion of the line.

Yadana deliveries to PTT, at an average 525 MMcfd rate, are due to start in mid-1998. Output can be boosted to as much as 604 MMcfd, if a swing increase is required by PTT.

Unocal Corp. has a 28.26% interest in the Yadana project. Partner interests are operator Total 31.24%, Pttep 25.5%, and MOGE 15%.

The 346-km, 36-in. offshore segment of the Yadana pipeline is to be completed early in 1998. It will connect with the onshore segment on the Daminseik coast in Mon state.

The 65-km onshore portion of the Myanmar segment is set for completion this month.

After crossing Myanmar, the onshore 260-km Thai portion of the pipeline will extend from Thong Tha Phum district, in western Thailand, via the western border town of Kanchanaburi.

A $143.6 million contract involving work on the Thai portion of the pipeline was signed in March between PTT, Tipco Asphalt plc of Thailand, and Germany's Mannesmann Demag AG.

The Thai portion of the line, which will cross densely forested areas in Thong Tha Phum district, was delayed while environmental assessments were prepared. Late in March, Thailand's National Environmental Board approved proposed mitigation measures.

Other offshore work

More offshore Myanmar gas reserves stand to be found, if exploratory work currently under way by ARCO Myanmar Inc. proves successful on two Gulf of Martaban area blocks.

What effect the U.S. sanctions order will have on future possible development remains to be seen, ARCO said.

"We can't say that all activity related to that...is automatically grandfathered," an ARCO official said.

Thai officials see offshore Blocks M-7 and M-9 held by ARCO as new potential gas sources for Thailand.

The ARCO unit signed a production-sharing contract (PSC) on Block M-7 in May 1996 and a PSC for Block M-9 the following July.

ARCO in February spudded a well on Block M-9, known as Shwepyihtay.

On Block M-7, ARCO has acquired 5,800 km of 2D seismic data. In the mid-1970s, Martaban Cities Service Inc. drilled two wells on the block. One well, M7-2, tested 18.5 MMcfd of gas from Miocene sands.

Based on past drilling and the addition of new seismic data, officials expect Block M-7 to have the greater potential of the two blocks.

Badamyar, Sein reserves

The Total-led Yadana group has proved up 700 bcf of additional area reserves from Badamyar and Sein, sister fields to Yadana.

Unocal said those projects, involving Blocks M-5 and M-6, are covered by existing PSCs and will not be affected by the sanctions order because they are not new investments.

Block M-5 and M-6 reserves, booked at yearend 1996, were based on the results of drilling last year.

Two wells have been drilled on the Badamyar structure, about 7 km northwest of Yadana, and one well on Sein, about 10 km south of Yadana.

The Badamyar wells flowed on test at a combined rate of about 30 MMcfd, and the Sein well yielded about 26 MMcfd.

According to news wire service reports from Singapore after disclosure of the U.S. sanctions, John G. Vandermeer, Unocal's Southeast Asia new ventures vice-president, indicated the company would not pursue work on at least two potential new offshore field projects.

A Unocal official said Vandermeer was referring to two new blocks off Myanmar that Unocal had considered obtaining in the future, which are not covered by existing PSCs.

Copyright 1997 Oil & Gas Journal. All Rights Reserved.