Energy majors from Norway's Statoil to BG Group are among the first to get the chance to explore frontier prospects off the coast of Myanmar. Global Witness says that, while the country has made important reforms to draw in investors, the sell off will be a test of the government's resolve.
Myanmar awarded dozens of offshore blocks from an auction that began nearly a year ago. A series of political reforms that began with general elections in 2010 have brought in major international investors and the oil and gas sector now makes up about $13 billion, or around 40 percent, of its total foreign investment.
Juman Kubba, Myanmar campaigner for Global Witness, told Oilprice the country has been moving more or less in the right direction since the 2010 contest ended a long period of military rule.
"From our perspective, the oil and gas block sell off is an important test of the current government’s commitment to transparency," she said. "The Ministry of Energy has published some standard contract terms, and the country is preparing to apply for candidacy of the global transparency standard, the Extractive Industries Transparency Initiative."
EITI Chairwoman Clare Short said during a December meeting with President Thein Sein, a former military commander, the country was taking the steps needed to open Myanmar's economy and give international investors a level of confidence.
Foreign companies from Coca-Cola to French supermajor Total are moving into Myanmar's economy after Western sanctions pressure eased in response to democratic reforms. While the country exported its first barrels of oil more than 100 years ago, most energy investments were idled during military rule.
For Statoil, which landed its first-ever contract in the country, it's a chance to tap into untapped reserves. Erling Vagnes, a vice president in charge of regional developments, said Statoil investors have made important contacts in the country since at least 2011 and the company was now looking forward to reviewing the prospects offshore.
"With this award, we have accessed at scale in another frontier acreage with significant upside, in line with our exploration strategy," he said.
BG Group said it aims to conduct seismic surveys in the frontier territory with the aim to moving forward quickly with a drilling program.
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Myanmar is a net oil importer, though production has increased marginally during the past decade. It's positioned strategically to serve as a key transit nation and could play a role in regional efforts to break up oil and gas bottlenecks. New projects for natural gas, meanwhile, could add to a near exponential increase in production.
With some of the largest oil companies taking a hard look at the country, Kubba, the Global Witness campaigner, said Myanmar's government has the opportunity to prove it's ready for the international stage.
"This is critical if Myanmar is to make a real break from its past, and develop a strong foundation for its all important oil and gas sector," she said.
By Daniel J. Graeber of Oilprice.com