Myanmar Oil and Gas Summit 2014

Myanmar Petroleum Sector Future Pathways and Prospect

Aung Kyaw Htoo Deputy Director Energy Planning Department Ministry of Energy

26 February, 2014 Trader Hotel, Yangon, Myanmar

Content

(1) Milestones of Myanmar Oil and Gas Industry (2) Ministry of Energy and Movements (3) Plan and Prospect (4) Perception, Challenges and Recognition (5) Conclusion

(1) Milestones of Myanmar oil and gas industry

Milestones of Myanmar Petroleum Industry Onshore

18 Century: Several hundred shallow hand-dug wells, yield an average of 10 to 50 gallons a day in Yenangyaung Oil Field 1886: The establishment of a modern petroleum industry by London based Burmah Oil Company (BOC) 1905 to 1942: Major crude supplier of Indias oil requirement 1939: Pre-Second World War, annual oil production peaked at 6.5 million barrels 1960-1965: 4.6 million barrel per year (Nationalized) 1975: 7.09 million barrel per year and decline to 5.4 million barrel per year at year 1988 1989-2000: Launched onshore and offshore blocks and 23 foreign companies entered in 29 onshore blocks-> Apyauk Gas Field, discovered by Shell Co. 2000-2010: 15 foreign companies in 10 onshore blocks 2011: First international bidding round, 9 blocks being awarded to 7 foreign companies 2013: Second international bidding round, launched 18 blocks and awarded 16 blocks
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Milestones of Myanmar Petroleum Industry Offshore

1969: Surveyed by Japanese firm in Gulf of Martaban, Bay of Bengal 1970-1976: Seismic survey and exploration wells for Myanma Oil Corporation (MOC) by Prakla German Co.; (Cities Service Co., Petrolas, Esso Exp & Prod., Japanese consortium) 1978: MOC invited foreign companies: No one interested! 1982: MOC signed Cooperation Agreement with Myanmar Development Co. Ltd. (BPDC) of Japan 1989-2000: Launched onshore and offshore blocks and 10 offshore blocks being awarded to 9 foreign companies-> Yatana and Yetagun Gas Fields Direction negotiation to take part Petroleum E&P before 2012 2013 First International Bidding: launched 30 blocks (11 shallow and 19 deep water blocks)
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(2) Ministry of Energy and Movements

Ministry of Energy
Organizations and Respective Responsibilities

Ministry of Energy

Energy Planning Department (EPD) Coordination Management Regulation

Myanma Oil and Gas Enterprise (MOGE) Exploration Drilling Production Onland Oil and Gas Pipeline Network CNG

Myanma Petrochemical Enterprise (MPE)

Myanma Petroleum Products Enterprise (MPPE)

Refineries & Process Marketing Distribution Fertilizer Plants Methanol Plant CO2 and LPG Plants Waxing & Tar

* Ministry of Energy is Focal Point for Myanmar Energy Sector Cooperation with International and Regional organizations.

Exploration and Development of Petroleum

Summary

Onshore
Daily Production Discovered Producing Fields Tested/Suspended Fields Appraisal Unconventional Project IPR Onshore Blocks Total Demarcated
Domestic Crude Pipeline Network Domestic Gas Pipeline Network

- Crude Oil 7600 bbl & Natural Gas 55 mmcf - 28 oil and gas fields - 18 oil fields and 5 gas fields (Total 23) - 1 tested and 4 suspended oil fields - 1 in Southern Chindwin Basin - Shale Gas Projects under Study Period - 1 field by Horizontal Drilling - 53 (Operating 16, awarded 16 blocks in 2013 Bidding, Open 21)
- 535 km

Onshore (4 to 20) Offshore Yadana to Yangon (24)

Myanmar China Pipeline

- 2874.5 km - 436 km (Offshore 286.5 km+ Onshore 149.7 km)

Crude Pipeline (32) Gas Pipeline (40)

- 741 km - 736 km

Exploration and Development of Petroleum

Summary

Offshore Producing Fields Daily Production Yadana Yetagun Shwe Export Ongoing Plan Offshore Blocks - Yadana,Yetagun and Shwe - Crude Oil 10,000 bbl & Natural Gas1400 mmcf - 750 mmcfd (722 BTU) - 10,000 bbl/day + 450 mmcfd (1010 BTU) - 200 mmcfd (1012 BUT) - 1100 mmcfd (Thailand) and 200 mmcfd (China) - Zawtika Project M-9 (year 2014) - A Project for domestic supply, Block M-3 - Demarcated Total 51 (Shallow 26 & Deep 25)

Export Gas Pipeline to Thailand (PTTEPI) Yadana to Metering Station (36) - 410 km Yetagun to Metering Station (24) - 274 km Zawtika Project is undergoing in progress and Fist Gas be soon!
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Status of Onshore and Offshore Blocks

Type Description Block Total Onshore Blocks PSC Production Sharing Contract EP Exploration and Production RSF Reactivation of Suspended Fields IOR Improved Oil Recovery MOGE MOGE's oil and gas field areas TOTAL ONSHORE BLOCKS Offshore Blocks (Shallow) A Arakan (Rakhine) Coastal Area M Mottaban & Taninthayi Shallow Water Block Total 23 5 10 7 8 53 Current 2013 Open Blocks 9 0 6 2 4 21 Operation Bidding Submitted 8 2 3 1 2 16 7 3 1 5 2 18 6 3 1 4 2 16

7 19 26 16 9 25 51 104

3 10 13 4 2 6 19 35

3 8 11 12 7 19 30 48

3 7 10 6 5 11 21 37

1 2 3 6 2 8 11 32

(Deep)
AD MD Arakan Offhsore Area (Deep) Mottama/ Taninthayi (Deep) Deep Water Block Total TOTAL OFFSHORE BLOCKS Block Total

Status of Blocks

Demarcated 53 onshore and 51 offshore blocks, Total 104 blocks. 16 onshore blocks and 19 offshore blocks are operating by multi companies in present 2nd Onshore Bidding Round, 16 Onshore Blocks are awarded to 10 companies. 1st Offshore Bidding Round, out of 30 blocks, 21 blocks are interested only in, 10 evaluated proposals and announcement will be soon!

Existing Petrochemical Plants Operated under Myanmar Petrochemical Enterprise (MPE)

Crude Oil Refinery LPG Plant

- 3 (51,000 bbl/day) - 3 (50 mmscfd)

Fertilizer Plant (Urea) - 5 (Ammonia 1340 MTD & Urea 2012MTD) Methanol Plant - 1 (450 MT/day, under rehabilitation)

CO2 Recovery Plant - 1 (Liquid 24 Ton & Dry ice 6 Ton/day) Others - Waxing and Bitumen (548 MT/day)

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(3) Plan and Prospect

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Plan !
1. Main Concern-> Domestic Orientation 2. Secure for long-term sufficient 3. Priority: Upstream E&P in Onshore and Offshore Area
Exploration and Associated Services Drilling and Related Services Engineering, Infrastructure and Supporting Services

4. JV System:
Midstream and Downstream Area Fabrication Yards! Marine Supply Base! Laboratories Training Centers! New Infrastructures!

5. Privatization (Marketing in Petroleum Products) 6. Unconventional Sources of Hydrocarbon! 7. Next Bidding Rounds!
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Prospect!
1. Government Assessment of potential reserves country-wide Upstream E&P monitoring and State participation Revenue and generated skilled-environments JV with International companies: Capital, Technology, Associated Infrastructure, Supply base and Services etc. 2. JV System in Downstream Area Encouraging JV to existing refineries and following plan! 3. JV System in Service and Supply Base Marine Supply Base! 4. JV System in Laboratories and Training Centers! 5. JV System in New Infrastructures 6. New Refinery (2 mil. MT per Ann.) 7. Privatization Scheme: LPG, Petroleum Products, !!! 8. The lack of an adequate infrastructure-> Opportunities 9. No information-> Expect huge reserves!
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(4) Perception, Challenges and Recognition

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Perception and Challenges (Regulation)

Unprecedented rise-> land Acquisition and market share, Environmental & Social concerns EIA and SIA-> Critical Issuers JV System is exercising and on forwarding New Foreign Investment Law 2012 National Energy Management Committee (NEMC) and Energy development Committee (EDC)-> to compile Integrate Energy Policy for future program, short terms and long terms-> The final draft of Working Paper for National Energy Policy in progress EITI in extractive sectors-> Government and International Operators Transparency and Accountability-> Centre to design investments in all sectors
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Perception and Challenges (Government)

The investment-> shaped by effective laws and regulations Strength legal framework-> more confidence to investors An update regulation, laws and rules-> major concerns to promote investment National employee-> Skills shortages->Training facilities-> HR policies Technical skills is the key shortage area while Financial skills-> the bottom of consequence! National Competitiveness-> the fundamental issues for a country's economic development execution Controversial between privatization and JV deals! Conventional and Unconventional Sources International Practice !
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Perception and Challenges (Local Company)

Time-> To learn international practice and knowledge Time-> To compete at home-> Service from international Co. Strategic alliances-> To increase technological base & Practice with foreign service providers Deal with foreign partnerships-> A source of principal and knowledge, and to associate with global supply chains Accomplish international standards-> Quality and Price Improve the capacities of employees-> Most fundamental for future practiced means not only Services but also E&P area Upgrade the standards-> Much stronger, ability for facing complexity in service & process Long term relationship with Operators & International Firms
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Perception and Challenges (International Company)

Large measurement of cheap labor with poor infrastructure Move fast-> To establish lasting business Formulate-> A long-term commitment Prepare-> Advantage of the opportunities Partnership with local companies-> A platform to improve access to local ability Recruitment-> Policy -> Graduates without experience Fulfill commitment of Work Program and Expenditure Not fully surveyed using modern technology-> Most prospective exploration target in frontier basins especially deep offshore area Wide prospective with very little information-> Prospect hugely increase the availability of hydrocarbons! National Content Quotas-> Domestic demands & Needs!
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Perception and Challenges (International Company)

Onshore Blocks
Signing PSC EIA/SIA 6 months
Joint Study/Initial Exploration Period- 3 years

Seismic Survey

Drilling Campaign

Year 2014-2015
EIA/SIA 6 months Signing PSC

Year 2018-2019
Seismic Survey
Seismic Survey & Drilling

Year 2020
Drilling Campaign

Study Period/ TEA & Initial Exploration Period- 3 years

Offshore Blocks

Time Schedule ->Working Program in Onshore and Offshore blocks within Exploration Periods Seismic and Drilling Campaign-> Survey Teams & No. of drilling rigs! Favourable Seasons: Logistic, Survey Parties and Drilling Rigs ?
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Recognition
Terms, Conditions and Expression of Model PSC As a Standard for Bidding 2013 Same level for all bidders Revisit and amendment are engaged EIA, SIA and EMP Reserves-> Unitization Project-> Abandonment & Decommission Additional Contracts Negotiation between National Company and IOCs Gas Sale Agreement, Crude Sale Agreement Infrastructure: Pipeline and related communications Tariff etc
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Conclusion
High Geologic Risk in Deep Water Main theatre of deep water activities-> Last frontier basin! Priority is Upstream E&P, Onshore and Offshore Area Required New Infrastructures, Downstream and Value-Change

Process (Improvement on E&P)

Exercising to Joint Venture System for existing Refineries Model PSC-> Leveling for International Firms Reserves Unitization, Ring Financing! Decommissioning and Abandonment Cost-> Recovery fund !

A fiscal scheme that generates Government share averaging up to!,

Would seem appropriate? Insufficient Infrastructure and No information (Data) > Opportunities
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Focal Personal for Ministry of Energy

Person: Director General Energy Planning Department Ministry of Energy, Myanmar Building No.6, Nay Pyi Taw, Myanmar 95 - 067 - 411 113 95 - 067 - 411 057 95 - 067 - 411 099

Address: Fax. Phone no.

Email: Website:

myanmoe@mptmail.net.mm http://www.energy.gov.mm/
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