What? Myanmar has oil?
In discussions with foreign investors about the Myanmar economy, I am fre- quently taken a back by a lack of aware- ness of the substantial level of petro car- bon resources the country possesses and of the historical significance and ongoing importance of oil and gas production as a driver of the economy. With this in mind, I thought I would relate some of the basics in this month’s column.
How much oil and gas does Myanmar have? Opinions clearly vary, largely be- cause the country has not had the techni- cal capacity to assess its possible reserves, something that is reflected in the contrac- tual arrangements attached to the offshore exploration licences allocated earlier this year. There are no promises made as to the size of reserves- there may be little found at all, but bidders clearly are expecting that there is much wealth to be discovered. Ac- cording to BP’s Statistical Review of World Energy, Myanmar currently has 8 Trillion Cubic Feet (TcF) of proven gas reserves. This places it close to Thailand – hardly known as a large producer on a global scale. The lack of exploration activity in Myanmar, however, naturally means that less has been found. Some believe the actual number is much higher – as high as 90 TcF of natural gas- which would put the country’s endow- ment closer to that of Indonesia. Myanmar may also have 3 billion barrels of oil reserves, although proven reserves are currently very low.
Myanmar is, in fact, one of the oldest oil producers in the world – some dating pe- troleum discovery there to as early as 900 AD. It is evident that Burma was produc- ing oil long before it was discovered in the Middle East, where it was first discovered in Persia (modern day Iran) in 1908 and then Saudi Arabia in 1938. Marilyn Longmuir, in her book Oil in Burma – The Extraction of “Earth-Oil” to 1914, describes the early oil industry in Myanmar as “the largest in the world”. Oil was extracted by hand by mining families known as Twinza, who held hered- itary rights to the soil and to the oil below.
In 1854, as an early example of the introduction of state control over a clearly significant resource, King Mindon declared a royal monopoly on the wholesale trading of oil – Twinza were required to sell all production to the king, who became the sole wholesaler. Such regulation was later to be reflected in British policies and it finds its modern form in the 2008 Republic of the Union of Myan- mar Constitution and other legislation, which gives the central government control over the country’s entire hydrocarbon re- sources.
After the colonisation of Burma in 1885, following the Third Anglo-Burmese War, the British founded the Burmah Oil Compa- ny – which survives today as Castrol – and commenced exporting oil. The oil fields of Myanmar were of strategic importance as the only major oil-producing region in the British Empire, supplying the British Navy. As has been the case with a number of more recent conflicts around the globe, one sug- gested motivation for the British action in 1885 was to lock in access to Burma’s oil. Another suggested motivation was the fact that Britain’s rivals, the French, were in discussions with the Burmese crown, the British assault being aimed at keeping the French out. It is indeed ironic that the only European company with major oper- ations in Myanmar today is a French oil company, Total.
The mining and energy sector is ranked fourth in terms of contribution to Myan- mar’s GDP and the sector’s current trajec- tory alone suggests that its importance in driving economic growth must increase, going forward. The participation of virtu- ally all of the world’s major oil exploration and production enterprises in the bidding process for the MOGE 2013-2014 block releases suggests, however, that some be- lief in the credibility attaches to unofficial reserve estimates that, if realized, could ultimately place Myanmar among the top global oil and gas producers. In such circumstances, it may well be that oil and gas production becomes the key source of Myanmar’s future prosperity.
