Exiting Myanmar

David Knott
London
[email protected]

Political pressures at home are forcing a second U.S. petroleum company to reduce its interests in Myanmar.

Although the U.S. government imposed sanctions against the Yangon (Rangoon) government in April, it appears protest groups targeting companies with interests in Myanmar are behind this second withdrawal.

In mid-November, ARCO announced its intention to reduce its operations in Myanmar by selling an interest in gas-prone blocks in Gulf of Martaban.

Two months earlier, Texaco Inc. sold its 42.9% interest in the Yetagun gas field, also in the Gulf of Martaban. Texaco said merely that the sale followed an asset review.

However, press coverage at the time suggested that Texaco's move was triggered by political pressure within the U.S. and a wish to repair the company's corporate image following a damaging lawsuit over racial discrimination.

Texaco sold its Yetagun asset for $260 million to Malaysian state oil firm Petronas, which took 32.3%, and London-based independent Premier Oil plc.

Yetagun plan

Premier took over Texaco's operatorship. Before its exit, Texaco secured a gas sales agreement with the governments of Myanmar and Thailand, for delivery of 240 MMcfd of gas from Yetagun.

Premier says Yetagun development work has begun and that first gas is scheduled for early 2000. The contract includes a provision to boost deliveries to 400 MMcfd from nearby prospects.

Now ARCO is negotiating with several companies to reduce its 39% interest in Blocks M-7 and M-9, where a number of wells have been drilled. One flowed on test at a rate of 18.5 MMcfd of gas from Miocene sandstone.

ARCO has been the target of demonstrations and leafleting. A group of exiles from Myanmar, along with U.S. student and protest groups have held weekly demonstrations outside ARCO's headquarters.

Like Texaco, ARCO has extensive U.S. operations. Industry analysts say the value of ARCO's Myanmar gas interests is insignificant when compared with its U.S. retail business.

Yet an ARCO official denied the company was being forced out of Myanmar by protests. He said ARCO is seeking a farm-in, not a sell-out, and intends to remain as operator.

Overseas bias

Unocal Corp. has also been attacked by anti-Yangon elements but has refused to withdraw from the Yadana gas project, also in the Gulf of Martaban, where Total SA is operator.

Unocal is thought to have sold so much of its downstream business in the U.S. that Myanmar activities outweigh any concerns over retaliation by U.S. consumers.

Arco Myanmar Inc. signed the production-sharing contract with Yangon for Block M-7 on May 23, 1996, and for Block M-9 on July 26, 1996.

The company has been in contact with Petroleum Authority of Thailand (PTT) for the sale of natural gas from these blocks to Thailand.

Premier, meanwhile, is not embarrassed about its Myanmar operation, boasting a second gas find on Block M-12, 40 km northwest of Yetagun, its fourth gas find off Myanmar this year.

Aung Zay Ya-1 wildcat flowed on test 9.47 MMcfd of gas plus condensate through a 40/64-in. choke. Premier says the M-12 wells have verified a new gas play on the block and that further exploration and appraisal are planned for 1998.