Firms Seek Access to Myanmar Oil Fields

by Thomas Hogue, September26, 2007


Just last Sunday - when marches led by Buddhist monks drew thousands in Myanmar's biggest cities - Indian Oil Minister Murli Deora was in the country's capital for the signing of oil and gas exploration contracts between state-controlled ONGC Videsh Ltd. and Myanmar's military rulers.

The signing ceremony was an example of how important Myanmar's oil and gas resources have become in an energy-hungry world. Even as Myanmar's military junta intensifies its crackdown on pro-democracy protests, oil companies are jostling for access to the country's largely untapped natural gas and oil fields that activists say are funding a repressive regime.

China - Myanmar's staunchest diplomatic protector and largest trading partner - is particularly keen on investing in the country because of its strategic location for pipelines to feed the Chinese economy's growing thirst for oil and gas.

Companies from South Korea, Thailand and elsewhere also are looking to exploit the energy resources of the desperately poor Southeast Asian country.

France's Total SA and Malaysia's Petroliam Nasional Bhd., or Petronas, currently pump gas from fields off Myanmar's coast through a pipeline to Thailand, which takes 90 percent of Myanmar's gas output, according to Thailand's PTT Exploration & Production PLC.

But investing in Myanmar has brought accusations that petroleum corporations offer economic support to the country's repressive junta, and in some cases are complicit in human rights abuses. This week's bloody clampdowns on protests have escalated the activists' calls for energy companies to pull out of the country.

"They are funding the dictatorship," said Marco Simons, U.S. legal director at EarthRights International, an environmental and human rights group with offices in Thailand and Washington. "The oil and gas companies have been one of the major industries keeping the regime in power."

Demonstrations that started a month ago over a spike in fuel prices have become a broader protest against the military rulers. Ten people were killed in two days of violence this week. Soldiers fired automatic weapons into a crowd of demonstrators in Yangon on Thursday and occupied Buddhist monasteries and cut public Internet access Friday. The moves raised concerns the crackdown on civilians was set to intensify.

Myanmar's proven gas reserves were 19 trillion cubic feet at the end of 2006, according to BP PLC's World Review of Statistics. While that's only about 0.3 percent of the world's total reserves, at current production rates and Thailand's contract price for gas, the deposits are worth almost $2 billion a year in sales over the next 40 years.

"It points to the potential that Myanmar has," said Kang Wu, a fellow at the University of Hawaii's East-West Center in Honolulu.

Altogether, nine foreign oil companies are involved in 16 onshore blocks exploring for oil, enhancing recovery from older fields, or trying to reactivate fields where production has been suspended, according to Total's Web site. A block is an area onshore or offshore in which an oil company is granted exploratory and discovery rights.

Offshore, nine companies, including Total, Petronas, PTTEP, South Korea's Daewoo International Corp., Chinese state-run companies China National Offshore Oil Corp., or CNOOC, and China Petroleum & Chemical Corp., or Sinopec, are exploring or developing 29 blocks, Total said.

Despite economic sanctions against Myanmar by the United States and the European Union, Total continues to operate the Yadana gas field, and Chevron Corp. has a 28 percent stake through its takeover of Unocal. Existing investments were exempt from the investment ban.

Both Total and Chevron broadly defended their business in the nation.

"Far from solving Myanmar's problems, a forced withdrawal would only lead to our replacement by other operators probably less committed to the ethical principles guiding all our initiatives," Jean-Francois Lassalle, vice president of public affairs for Total Exploration & Production, said this week in a statement.

French President Nicholas Sarkozy urged Total this week to refrain from new investment in Myanmar; the French concern said it had not made any capital expenditure there since 1998.

Chevron's interest in the Yadana project is "a long-term commitment that helps meet the critical energy needs of millions in people in the region," said Nicole Hodgson, corporate media adviser for Asia.

Total and former partner Unocal Corp. were accused of cooperating with the military in human rights violations while a pipeline was being built across Myanmar to Thailand in the 1990s. Both companies have denied the accusations but Unocal settled a related lawsuit in the U.S. in 2005, prior to being acquired by Chevron.

Always worried that instability on its border could affect the juggernaut Chinese economy, Beijing has been gently urging Myanmar's leaders to ease the recent strife. On Thursday, it issued a plea for calm, asking the government to "properly deal" with the conflict.

"The Chinese prefer to separate business and politics," said Kuen-Wook Paik, an energy analyst at Chatham House, a think tank in London. "They want to take a neutral stance. They don't want to risk the relationship with the Myanmar authorities."

But China's chief interest, analysts say, may lie in its strategic location as a site for pipelines to move oil and gas shipped from the Middle East to southern China, avoiding the Malacca Straits, which Beijing worries could be closed off by the U.S. Navy in a conflict.

By building a pipeline, "you start stitching together a crisis management capability," said William Overholt, director of the Center for Asia Pacific Policy at RAND Corp., an American think tank.

Beyond interests in exploration blocks in the Bay of Bengal off Myanmar, India also plans to build a pipeline to eastern India, but disagreements with Bangladesh have delayed the plans.

India is not facing any diplomatic pressure to reduce investment in the country, said R.S. Sharma, chairman of the state-run Oil and Natural Gas Corp.

"There is a trade-off between the two: That is a moralistic position and these strategic interests," said Muchkund Dubey, president of the Council for Social Development, a New Delhi think tank, and the former top bureaucrat at India's Foreign Ministry.

Thailand's PTTEP, a partner in Total's Yadana and Petronas' Yetagun gas projects, said in a statement that production of natural gas is at the normal rate, and should not be affected by the unrest.

"It is business as usual," said Sidhichai Jayamt, the company's manager for external relations. "When we have a contract with the government, it doesn't really matter who the government is."


AP Business Writers Rajesh Mahapatra in New Delhi, Elaine Kurtenbach in Shanghai and Malcolm Foster in Bangkok contributed to this report.

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