Time to broaden India-Myanmar hydrocarbon cooperation

Time to broaden India-Myanmar hydrocarbon cooperation

In his recent visit to Myanmar, Petroleum Minister, Dharmendra Pradhan has pitched for broader cooperation between India and Myanmar across the hydrocarbon value chain. ONGC Videsh Ltd (OVL) and Gas Authority of India Limited (GAIL) by investing in gas producing blocks have made its presence felt in Myanmar’s upstream sector.

With its relatively low amount of proved natural reserves recorded at 18.7 trillion cubic feet, Myanmar is still known as natural gas exporter. It also recorded a highest increase in natural gas production in 2015, across the Asia Pacific, with 16.4% increase, at 1.9 billion cubic feet per day. However, its underdeveloped upstream sector, which is marred with sanctions, needs greater global attention.

Myanmar’s hydrocarbon sector has been initially developed by China in 2001. Resulting from sanctions Western oil companies, including the U.S. companies, stayed away from any investments, allowing China to fill this void, albeit, only in a limited way.

Chinese companies, such as, the China National Petroleum Corporation (CNPC), the China Petroleum and Chemical Corporation (Sinopec) and the China National Offshore Oil Co. (CNOOC) intensified their presence in both offshore and onshore hydrocarbon projects, particularly after 2004.

Since then, series of agreement were signed by Chinese National Oil Companies (NOCs) to develop oil and gas fields in Myanmar. Sinopec, for instance, signed an exploration contract for an onshore block, viz., PSC-D, in September 2004. In January 2007, CNPC signed production sharing contracts for offshore blocks, viz., (AD-1, AD-6 and AD-8).

China, further capitalised on their presence and clinched oil and gas pipeline deals as well. In November 2008, China and Myanmar agreed to build a US$1.5 billion oil pipeline and US$1.04 billion natural gas pipeline. In case of the gas pipeline, two Indian companies, namely, Indian Oil and GAIL too had their stakes.

While these investments helped both China and Myanmar to reap strategic and economic benefits, it dealt a blow to India’s gas import plans from Myanmar through Myanmar-Bangladesh-India pipeline.

However, these initial setbacks didn’t deter India’s larger energy ambitions in Myanmar, which is also a gateway to India’s Act East Policy. Myanmar’s huge hydrocarbon potential and its 1,600 km long land border along with maritime boundary in the Bay of Bengal prompted India to continue with its energy hunt by enhancing its limited strategic presence.

The case in point is the initial investments in gas blocks by OVL and GAIL, viz., Block A1 and Block A3 through its participation in 2002 and 2006 respectively. In these blocks, OVL and GAIL holds 17% and 8.5% Participating Interest (PI) respectively. Gas production from Block A1, having fields, viz., Shwe and Shwe Phyu, started in January 2014, while production of Block A3 in Mya field started in July 2013. With two more blocks been awarded to OVL in Block B-2 and Block EP-3 in August 2014, of which it has 97% PI, it has strengthened its presence in Myanmar. Taking these strategic presence further both the counties agreed to expand their hydrocarbon ties.

Thus, given the need to tap Myanmar’s hydrocarbon sector and to reap the potential of India’s north-eastern states by unlocking its hydrocarbon potential, under its new Hydrocarbon Vision for northeast India, Pradhan recent visit to Myanmar holds great significance.

In this process, while India can play its role in ongoing economic transformation taking place in Myanmar, Myanmar too can contribute towards better energy infrastructure support in north-eastern part of India by opening up its market and provide gateway to East Asia and Southeast Asia.

According to a press release, Pradhan, while meeting his counterpart H.E. U Pe Zin Tun, Union Minister of Electricity and Energy, Myanmar, proposed India’s greater participation across hydrocarbon value chain.

This included, willingness of Indian upstream companies to participate in forthcoming bid round in Myanmar; assisting Myanmar in training and capacity building its hydrocarbon officials; refurbishment and upgradation of their refineries; developing their downstream market through supply of petroleum products, LPG, wax, petrochemicals, etc.; integrating the Indian Natural Gas grid with Myanmar for developing their cities through City Gas Distribution network and also in the area of sourcing LNG.

These proposals not only addresses the issues concerning Myanmar’s underdeveloped upstream sector but also take care of its rising energy demand as a result of robust economic development, post sanctions.

According to the U.S. Energy Information Administration’s country analysis report, the Myanmar government is keen to attract foreign investments and technical assistance in its upstream sector. It also highlights the limited production and refinery capacity in Myanmar, which are insufficient to meet rising demand for crude oil and petroleum products, including natural gas. Most of these issues are addressed well by the Petroleum Minister while proposing for greater hydrocarbon cooperation in Myanmar.

Earlier, as a part of Hydrocarbon Vision 2030, India, along with Bangladesh are contemplating financial modalities to build the 6,900 km gas pipeline that would be linking Chittagong in Bangladesh, Sitwe in Myanmar and north-eastern states.

Thus, recent round of talks between India and Myanmar on hydrocarbon cooperation offers win-win situation to both the countries by supporting their holistic economic development.

Disclaimer: The views expressed in the article are that of the author.

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