Rangoon (Mizzima) - Oil and gas exploration and production companies in Burma are hoping for a forthcoming easing in restrictions on the current ban related to the selling and transferring of stakes in the country’s natural resources.
“Transferring and selling stakes is an important option, which is internationally practiced, in such a risky business as oil and gas exploration, in order both to offset risks and to sustain operations,” said a source with a foreign oil company active in the Burma.
The military government’s Ministry of Energy last September released a directive banning the sale of stakes in both offshore and onshore blocks.
Sources said the measure has resulted in the reduction of expenditure in exploration, a costly undertaking in which companies typically share expenses or exchange shares in exploring and drilling, sources added.
“As the industry is capital and technological intensive in nature, the country has no other option but to rely on foreign firms, which is why the government is expected to reconsider the ban,” commented one expert.
The drilling of a single exploratory well costs approximately U.S. 25 to 30 million dollars, with success never assured despite preliminary geological surveys.
The energy expert added that the continued prevention of share transfers would likely result in a further decrease in exploration and a corresponding loss in the discovery of new resources and company revenue.
He said the Production Sharing Contract (PSC), widely used internationally, allows for the selling or exchanging of stakes between foreign oil companies.
However, because of the ban on swaps in Burma, Thailand’s PTT Exploration and Production (PTTEP) said in a statement released in February of this year that it was forced to cancel an interest swap deal with China National Offshore Oil Corporation (CNOOC).
Other foreign energy companies active in Burma include South Korea’s Daewoo International, France’s Total, Chevron of the United States, Japan’s Nippon Oil and Malaysia’s Petronas.
Burma earned US$2.16 billion from the export of natural gas to Thailand alone during the 2006-07 financial year – a figure expected to double once deposits off the cost of Rakhine and Mottama become available for export in 2009 and 2011, respectively.