By Joseph Allchin
Bids by foreign companies to develop gas and oil blocks in the country were received for 18 new on shore blocks and are being reviewed by the Ministry of Energy, whilst foreign companies will have to sign a memorandum of understanding that they will work in joint ventures with local companies.
“The shortlisted foreign bidders will have to sign a memorandum of understanding or agreement with registered local Myanmar (Burmese) companies about talking about shareholding ratios,” an unnamed senior official from the Ministry of Energy told Reuters.
The move has been seen as part of the government’s attempt to liberalise the economy and stimulate the private sector, with the deadline for new bids for the blocks passing on the 23 August.
The official continued that; “We invited local companies to register in order to jointly invest in the 18 onshore oil and gas blocks with foreign investors and the closing date for this is Sept. 9.”
Many foreign companies have had to form a joint venture with the relevant government ministry, in the case of oil and gas; the powerful Ministry for oil and gas exploration (MOGE), whilst the practice of insisting on foreign partners has been common with onshore blocks, often to the annoyance of foreign companies.
“We are now assessing the bidders, which include companies from our immediate neighbours, from ASEAN (Association of South East Asian Nations) and also outside ASEAN,” said the official.
While it has not been revealed which domestic companies would likely bid for the joint ventures, companies such as Asia World have considerable experience acting as contractors with foreign infrastructure projects such as the Shwe gas pipeline and the Myitsone dam.
Asia World was set up by former heroin king pin Lo Hsing Han, who has prospered from his close relationship with senior military figures such as Than Shwe. They are joined by Htoo Trading, owned by tycoon Tay Za in profiting as contractors for foreign projects.
The number of local entities capable of taking such roles however will be limited and once again, as with the government’s privatisation drive earlier in the year the military’s Union of Myanmar Economic Holdings Limited, (UMEH) which is run by the military’s quarter master general, could feature, along with the ubiquitous crony conglomerates. However such policies often result in skills exchange to local companies.
Foreign direct investment (FDI) in Burma’s oil and gas sector has seen a vast year-on-year rise, helping FDI to grow to around $2o billion in the last financial year from $300 million in the previous year.
A number of ASEAN energy companies are active in Burma’s energy sector, with Gold Petrol from Indonesia and Singapore registered Interra resources active on shore, whilst Thailand’s PTTEP and Petronas are active in the natural gas sector in the Bay of Bengal.