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CHAPTER 1
INTRODUCTION

1.1 Introduction
As a key infrastructure component, electricity is vital to social and economic
development. Its support of wide-ranging activities and services improves quality of
life, increases labor productivity, and encourages entrepreneurial activity. Its stable
supply of power allows households to improve living conditions, helping to meet
heating, lighting, and cooking needs across income levels. And it is a key input in
economic production, making goods and services across all economic sectors possible.
It is also vital to basic social services such as education, health care, clean water
supply, and sanitation. As such, access to affordable electricity can help developing
countries meet the United Nations Millennium Development Goals.
But the economic literature has yet to establish whether greater electricity
consumption leads to economic growth, or where economic growth leads to more
electricity consumption. Likewise, it is difficult to estimate the magnitude of the
impact of greater access to electricity on poverty, since having electricity is not an end
in itself. Electricity needs to work with other sectors to ensure that the poor benefit as
much as possible from that improved access.
Myanmar’s consumption of electricity is expected to grow, the government
should prioritize its stable, efficient, and affordable supply. While the country has
abundant energy resources, including renewable alternatives, hydropower remains the
main source of fuel for electricity requirements, followed by natural gas and coal.
1.2 Aim and Objectives
The aim of this term paper is to study the importance of power sector in
Myanmar. The role of myanmar’s power sector is very essential and try to promote
this sector to grow Myanmar's economic. This paper is to know about the importance
of electricity for a country in every sector, to know about the importance of foreign
direct investment (FDI), to know clearly electric power generation sector, to
understand Myanmar's economic situation. The objective of this term paper is to study
the economy of Myanmar’s power sector.

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1.3 Scope of the Term Paper
This term paper is to study the importance of power sector in Myanmar. Major
parts of this term paper are studying generation and utility, business industries,
contract and economy of power sector in Myanmar.

1.4 Outline of the Term Paper

This term is composed of five chapters. The chapter one is the introduction of
the term paper. Chapter two is describing general concepts on oil and gas sector in
Myanmar. Chapter three contains the study of economic effect in Myanmar.
Suggestion and performance are included in chapter four. Chapter five describes
discussion and conclusion of the paper and also gives recommendation of the paper.

CHAPTER 2
MYANMAR’S POWER SECTOR

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Per capita electricity consumption in Myanmar remains among the lowest in
Southeast Asia (Figure 1), reflecting poverty-level per capita incomes and an
electrification rate of only 31% as of December 2013 (ADB 2013a), and much less in
most rural areas. Myanmar typifies a country saddled with “energy poverty” (IEA
2012). Lacking electricity, most rural households burn firewood and animal dung for
lighting and cooking, causing widespread acute respiratory problems. Low
electrification also hampers development of industry and even small businesses. The
country therefore aims to develop and exploit its energy resources to increase the
supply and reliability of electricity, particularly in rural areas, and accelerate overall
economic development.
2.1 History of Electric Power in Myanmar
 (In the period approached to independence of Myanmar, the national leaders
set strategies and plans for the development of the country: to promote and expand the
agricultural sector with advanced technologies; to exploit the natural resources
effectively by cooperating with local industries. The leaders also realized that
electricity played a vital role to implement above strategies. Therefore, in June 1947,
they decided to implement the hydropower projects which were enormous resources
in Myanmar, and could be implemented by suitable budgets as a first priority. They
put those plans in two years plan for Economic Development of the Union of
Myanmar (1947).
                        In early post-independence time, Electricity Supply Board (ESB) was
organized under the Ministry of Industry on 1st October 1951 complied with the
Electricity Act of 1948. On 16th March 1972, it was changed as Electric Power
Corporation (EPC). On 1st April 1975, the Ministry of Industry was divided into the
Ministry of Industry (1) and the Ministry of Industry (2) and hence the Electric Power
Corporation (EPC) was composed under the Ministry of Industry (2). On 12th April
1985, the Ministry of Industry (2) was expanded with the Ministry of Energy  and the
EPC was composed under the Ministry of Energy. On 1st April 1989, the EPC was
changed into the Myanma Electric Power Enterprise (MEPE). On 15th November
1997, the Ministry of Electrical Power was organized, and there were three
departments under it: the Department of Electrical Power, the Myanmar Electric
Power Enterprise and the Department of Hydropower. On 15th May 2006, the
ministry was divided into No 1 and No 2, and on 5th September 2012, they were
composed again into one Ministry as the Ministry of Electrical Power (MOEP) under
which there were three departments, two enterprises and two corporations. On
1st April 2016, the MOEP was composed with the Ministry of Energy to form
the Ministry of Electricity and Energy (MOEE) under which there were four
departments, five enterprises and two corporations.
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In 2022 May, State Administration Council reconstituted the ministry
as Ministry of Electric Power and Ministry of Energy.)(moee website)
2.2 Institutional Organization
Eight ministries are responsible for energy matters in Myanmar. The Ministry
of Energy, the overarching focal point, oversees overall energy policy in the oil and
gas sector. The MOEP, the other key ministry, which oversees policy formulation in
the sector, has the following responsibilities:
(i) development, implementation, operation and maintenance of all large
hydropower plants;
(ii) development, implementation, operation and maintenance of coal-fired
thermal power plants;
(iii) construction, operation, and maintenance of the transmission and
distribution systems throughout the country;
(iv) operation and maintenance of gas-fired thermal power generation; and
(v) planning, implementation, and operation of mini hydropower plants.
The MOEP has seven departments, three mainly operating entities—Myanmar
Electric Power Enterprise, Yangon City Electricity Supply Board, and Electric Supply
Enterprise (Figure 5). The departments have the following functions:
(i) Myanmar Electric Power Enterprise develops and implements the
transmission network, including operation and maintenance, low voltage
distribution system, and the operation and maintenance of gas-fired
power plants (gas turbines and combined-cycle gas turbines). The
transmission network voltage levels under its responsibility: existing 66
kilovolt (kV), 132 kV, and 230 kV; and the planned 500 kV (under
construction in four phases). The distribution systems consist of lower
voltage levels, namely: 33 kV, 11 kV, 6.6 kV, and 0.4 kV.
(ii) Yangon City Electricity Supply Board (YESB) is responsible for the
supply of electricity to consumers in Yangon City. On 1 April 2015,
however, the YESB has been corporatized into state-owned Yangon
City Electricity Supply Corporation, financially independent from
MOEP. Full privatization is planned within the next 3 to 4 years.

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(iii) Electric Supply Enterprise covers the supply of power to the rest of the
country, which comprises 17 states and regions, including off-grid
generation and distribution. It is also responsible for planning,
implementation, and operation of off-grid minihydropower and diesel
stations. Yangon City Electricity Supply Board and Electric Supply
Enterprise also implement system improvement and expansion of
distribution systems.
(iv) The Department of Hydropower Planning is in charge of planning
hydropower projects to be implemented by both the government and
through the private sector.
(v) The Department of Hydropower Implementation has four institutes
responsible for design, investigation works, and mechanical works; and
seven engineering construction companies capable of construction and
installation of large hydropower projects.
(vi) Hydropower Generation Enterprise operates and maintains all the
MOEP’s hydropower stations and is involved in the operation and
maintenance of power plants under joint venture arrangements with the
private sector. It also operates the country’s only coalfired power plant,
with a capacity of 120 MWs.
(vii) The Department of Electric Power is responsible for planning,
coordination, international relations, and serves as staff of the MOEP.
2.2 Policies and Relevant Laws
The following laws govern the power sector:
(i) Electricity Act of 1948, as amended in 1967.
(ii) Myanmar Electricity Law (1984), which sets the requirements for the
electricity authority, the duties and responsibilities of electricity
inspectors, and the punishments and fines for various offences, and
empowers the government to grant rights to specified organizations,
including foreigners to participate within the sector (Webb 2013).
(iii) Electricity Rules (1985), which supplements the 1984 law. (iv)
Myanmar Electricity Law of 2014, which repeals that of 1984 and

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establishes the Electricity Regulatory Commission (ERC) and grants
some regulatory responsibilities to the ERC; and authorizes the Ministry
of Electric Power (MOEP), region and state governments, and leading
bodies of self-administrated zones and self-administrated divisions the
power to grant permits to entities to engage in electricity-related works
such as generation, transmission, and distribution, thereby encouraging
foreign and domestic investments in power projects.
Existing power sector policies cover the following:
(i) expand the national power grid for effective utilization of generated
power from the available energy resources such as hydro, wind, solar,
thermal, and other alternative ones to achieve sufficient electricity
supply throughout the country;
(ii) conduct electricity generation and distribution in accordance with
advanced technologies, and enhance private participation in regional
distribution activities;
(iii) conduct Environmental and Social Impact Assessments for power
generation and transmission projects in order to minimize negative
impacts;
(iv) restructure the power sector with the cooperation of boards, private
companies, and regional organizations toward more participation of
local and foreign investments and formation of competitive power
utilities;
(v) encourage the expansion of power transmission and distribution
throughout the country and the employment of Public–Private
Partnership in each sector; and
(vi) reach millennium development goals in areas covering construction of
thermal power plants and more hydropower plants.
The government also recognizes that foreign direct investment through the
private sector will be one of the main vehicles to develop the power sector. In the
absence of a comprehensive and transparent framework for increased private sector
participation in the sector, the government has taken initial steps to strengthen

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legislation to facilitate the financing of power investments through various private
sector participation schemes with the provisions in the new Electricity Law. The
provisions include, among other things, identification of required institutions and their
own distinct and respective functions, preparation of a national electricity master plan,
formulation of grid codes, and development of a framework or of model power
purchase agreements for small and large power generation projects. To date, over 200
MW of private sector power plants have been operational. And memoranda of
understanding with about 50 companies covering hydro and thermal power plants are
under consideration.

CHAPTER 2
GENERAL CONCEPTS ON POWER GENERATION IN MYANMAR

2.2 Electric Power Generation in Myanmar

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In the existing power generation system consists of two departments, namely
Renewable Energy and Hydropower department (REHP) and Thermal Power
department. REHP department operate two components, namely, hydropower and
solar power and Thermal Power department operate three components, natural gas,
coal-fired power and diesel power generation. Currently, hydropower contribution
accounts for the largest share in the power system. As a share of total installed
capacity (5409 MW) on the grid, hydropower in power system currently accounts for
60% (3221 MW), natural gas accounts for 36% (1967 MW), diesel engine generation
accounts for 2% (101 MW) and coal-fired power plant accounts for the remaining 2%
(120 MW)and that generation mix is shown in Figure (2).

2.2 Hydropower Generation of Myanmar

In Myanmar, there are many potential resources to produce electric power.

Myanmar has mainly four rivers and three mountain ranges. The four rivers are the
Ayeyawaddy, the Chindwin, the Sittong and the Thanlwin. The three mountain ranges
are Rakhine Yoma, Bago Yoma and Shan Plateau. Four rivers are meandering
between these mountain ranges and finally discharge into the Gulf of Mottama,
dividing the whole country into four topographic regions. Therefore, according to the
plentiful water resources and geographically condition, hydropower, which uses the
energy of flowing water to produce electricity, becomes vital role in Myanmar.

Medium-scale hydropower development in stages beginning in 1960, with the

installed capacity of 84 MW Baluchaung No.(2) hydropower plant that could supply
595 Gwh of electricity to Yangon and Mandalay. The second stage, starting in 1974,
added another 84 MW power plant with 596 Gwh annual average supplies. So, the
total installed capacity of Baluchaung No. (2) hydropower plant became168 MW.
Eight more hydropower plants, each with installed capacity ranging from 12 MW to
75 MW, were commissioned between 1974 and 2005. Development of larger capacity
hydropower plants only started in 2005. During 2005-2011, another eight hydropower
plants were built, with total installed capacity of 2094 MW, including two large scale
hydropower plants with a combined capacity of 1390 MW (Shweli-1 commissioned in
2008 and Yeywa commissioned in 2010)

At present, total 27 numbers hydropower stations with the total installed

capacity of 3221 MW have been connected to national grid. Among them, 22 numbers
hydropower stations with the total installed capacity of 2110 MW have been
implemented solely invested by Ministry, 2 numbers hydropower stations with the

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total installed capacity of 172 MW have been implemented by local entrepreneurs on
BOT basis and the rest 3 hydropower stations with the total installed capacity of 939
MW have been implemented by foreign companies on JV/BOT basis.
2.3 Thermal Power Generation of Myanmar
Most of Myanmar's electricity (74.7%) coming from hydropower and a dry
season that lasts from October to May, this was a problem. Therefore, the country
started to build and run thermal power stations during the dry months and beyond.

At the present day, there are 27 numbers thermal power stations with the total
installed capacity of 2042.9 MW have been connected to national grid. Among them,
10 numbers Gas Turbine power stations with the total installed capacity of 992.9 MW
have been implemented solely invested by Ministry, 5 numbers Gas Turbine power
stations with the total installed capacity of 510 MW have been implemented by
foreign entrepreneurs on IPP, BOT basis, 4 numbers Gas Turbine power stations with
the total installed capacity of 420 MW have been implemented by foreign companies
on IPP, Rental and the rest of 1 number coal power station with the installed capacity
of 120 MW on IPP, Lease.

2.2 Solar Energy in Myanmar

Developing solar energy in Myanmar is viewed as an important climate change
mitigation measure for the country that is highly vulnerable to the detrimental impacts
of climate change.

Myanmar has one solar power plant operating in Minbu, Magway

Division. The plant has the capacity to produce 170 MW of electricity. The country
plans to build two more solar power plants Mandalay Division, each to have a
generation capacity of 150 MW.

On 18 May 2020, Ministry of Electricity and Energy issued an invitation to

submit prequalifying bids for the construction of several solar plants throughout the
country, with a combined capacity of 1060 MW. The ministry received more than 150
bids for the tenders and on 9 September 2020 bidders were announced. All but one of
the winning bids for the 30 sites involved Chinese companies, with unit price ranging
from 3.48 US cents to 5.1 cents per kilowatt hour.

2.4 The Role of Oil and Gas in Myanmar

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The purpose of Myanmar's foreign policy is to respond, to manage and to
influence its external environment, and to promote its domestic goals. Officials have
identified a clear hierarchy of core foreign-policy objectives: first, to enhance its
security; second, to bolster its economic development and prosperity; and, third, to
promote a peaceful and equitable world order (Haacke, Jurgen, “The Political Security
Imperative and Foreign Policy Goals”. For the second objective, economic
development is impossible without energy. Nowadays, countries of the world both
developed and developing ones need to secure energy supplies in order to maintain
their economic growth rates. As economic growth increases around the world, nations
are demanding steadily increasing amounts of oil and gas. Therefore competition
among countries of the world occurred to get these vital resources of oil and gas while
oil and gas exporting countries have used a large amount of the petro-dollars in
nation-building endeavours.
Union of Myanmar, a leading natural gas producing country and an important
gateway for oil and gas pipelines, will be in no doubt a crucial part on foreign
relations. According to 2009 estimate, Crude oil potentials in Myanmar amounts to
8,611.625 million barrels (mmbl) in onshore and 392.932 mmbl in offshore and total
gas resources are 6.286 trillion cubic feet (tcf) in onshore and 131.967 tcf in offshore.
Altogether it has 9,004.557 mmbl of crudeoil and 138.253 tcf of natural gas. Up to
2009, daily production is about 9000 barrels of crude oil, 12,000 barrels of condensate
and 1.2 bcf of natural gas. Therefore Myanmar has the abundance of gas not only for
domestic consumption but also for export. Myanmar, however, cannot exploit and
explore these natural resources by its own efforts alone. Certainly she needs (1)
capital, (2) equipment, (3) skilled technicians and (4) experienced executives.
In order to fulfillthose needs, the SLORC has officially thrown away the
centrally planned economy in favour of a more market-oriented economy
since1988.With this aim, the Union of Myanmar Foreign Investment
Law(FIL)waspromulgated on 30 November 1988 and the procedures relating to the
law were endorsed on 7 December 1988.After the promulgation of the Foreign
Investment Law, MOGE has entered into production-sharing contracts (PSCs) with
several multinational oiland gas companies on exploration and

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CHAPTER 3
STUDY OF ECONOMIC EFFECT IN MYANMAR
3.1 Introduction
Myanmar currently suffers from acute "energy poverty" despite proven natural
gas reserves of 7.8 trillion cubic feet. 80% of the country's natural gas is exported. Its
immediate neighbor, India, China and Thailand, are all net importers of crude oil and
natural gas and have been eager to tap into Myanmar's gas reserves. The geopolitical
context of Myanmar's energy sector places the country in a unique position to attract
foreign investment into its energy sector while trying to provide for its own energy
needs. Yet with only 20% of natural gas feeding domestic demand, there is an
insufficient supply to meet local use and only about 26% of the population has access
to electricity. The existing power infrastructure can meet only about half of current
demand, resulting in frequent blackouts and rationing of electricity suppl. Only 13%
of the population have access to the national electricity grid, and almost 95% depend
on solid fuels such as wood and rice husks for cooking and heating. The word bank
projected that Myanmar would need $444 million every year-almost 10 percent of its
GDP, the highest of any country in Asia-to achieve universal access to electricity by
2030; to put this number in perspective, the next highest investment requirement, in
Timor Leste, would need to invest only 2.7 percent of its GDP.
Myanmar has one of the lowest levels of tax revenue collection, and natural
resource revenues are an important source of income. Only 1 percent of the FDI
coming into Myanmar from FY 2010-2011 was outside the extractive sectors,
although the more recent pattern of inward investment is changing. Gas revenues are
the largest source of foreign income for the Government of Myanmar, with a peak of
6.5% of GDP projected in 2014/15. As such, the O&G sector will remain a major
contributor to the Myanmar economy through significant revenue transfers for a long
time to come.
Energy will be important to Myanmar's further integration into the global
economic system: it reserves and strategic location between Asia's two biggest

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economics already mean it can be an important regional supplier and crossroads.
However, the development of the sector will require a transformation of the basic
institutions and infrastructure that are needed to drive the country's future economic
growth and ensure that O&G and power generation can contribute to poverty
alleviation and address the disparity between urban and rural areas. In their proposed
framework for Myanmar to build a 'New Energy Architecture', the World Economic
Forum and the Asian Development Bank highlight three essential requirements that
Myanmar's energy policy must achieve in order to balance a myriad of competing
interests: economic growth and development, sustainability, and energy access and
security in the country.
However, there are good reasons for Myanmar to diversify away from an over-
reliance on the sector. In addition to potential resource curse issues, as the ADB also
notes, Myanmar's current growth pattern, with a major concentration in energy and the
extractive industries, is placing huge pressure on its environment and if continued,
will certainly be unsustainable. It has also been identified as a country with strong
potential to develop renewable energy resources and to be a regional supplier of clean
and affordable energy.

3.2 Oil and Gas Consumption in Myanmar

This section lists the major elements of the transition process to a market
economy, on which Myanmar’s performance is evaluated in subsequent sections.
There are three main components of the transition process; macroeconomic
stabilization; price and market liberalization; and restructuring and privatization of
state enterprises and allowance of new private firms and activities. Due to diverse
initial conditions and reform strategies of the governments, transition economics took
diverse paths in transitioning to market economies, with varying degrees of success in
terms of economic performance.
Macroeconomic stabilization includes getting inflation under control. Many
transition economics experienced high inflation during the early years of transition.
High inflation was caused by, first, the fall in output in the initial transition, and
second, the elimination of controlled prices. Liberalization of price controls often

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resulted in sharp price increases. Monetization of fiscal deficits that come about as a
result of the fall in output and the restructuring of state enterprises also played a role
in sparking inflation. Tight monetary and fiscal policies were the usual prescription
for containing inflation, and the shortage of fiscal revenues was a major obstacle for
fiscal consolidation.
Price and market liberalization, and restructuring state enterprises permitting
private firms are both structural reforms designed to replace a centrally planned
economy with a system of market oriented resource allocation. Centrally planned
economies employ controlled prices that distort relative prices and cause inefficient
resource allocation and black markets. Price liberalization refers to the elimination of
controlled prices and includes the alignment of the official foreign exchange rate to
the parallel market rate. Market liberalization refers to the elimination of entry barriers
for industries that were formerly monopolized by state enterprises as well as the
liberalization of foreign exchange and foreign trade. Price and market liberalization is
used to create greater economic efficiency and to enhance economic growth.
The restructuring and privatization of state enterprises and the allowance of
new private firms are designed to allow the private sector to supplant the state sector
as the major actor in the economy. Privatization of state enterprises was more
prominent in the transition economies of Central and Eastern Europe and the former
Soviet Union, whereas the establishment of new private firms was emphasized in the
case of East Asian transition economies.
These three pillars of the transition process are not sufficient conditions for a
successful transition; the literature stresses the important of institutional infrastructure
building as well. Institutional infrastructure underpins the operation of market
economics. Necessary reforms include the elimination of direct and indirect subsidies
from the state budget and the implementation and enforcement of bankruptcy laws and
creditor rights. All of these impose hard budget constraints on economic agents.in
regard to institutional infrastructure building in the transition process; there has been
debate between advocates of the big bang approach and the gradual approach. Given
the complementarity among the above mentioned three pillars of transition processes,
the advocates of the big bang approach propose implementing all the reforms

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simultaneously and rapidly. In contrast, the advocates of the gradual approach contend
that institutional infrastructure building is evolutionary and that existing institutions
will adapt to new environments. They argue that the big bang approach fails to
recognize the long and difficult process of institutional infrastructure building.

3.3 Opportunities for Foreign Investors

Until 1988 the government led by the Burma Socialist Programme Party
(BSPP), Myanmar pursued the Burmese Way to Socialism, a variant of central
planning. The agricultural sector, which accounted for the bulk of economic activity,
was never collectivized, but the marketing of principle agricultural commodities was
monopolized by the state enterprise under the state procurement and distribution
system. The industrial and services sectors were wholly under the control of the
central planning office, although they accounted for a minor share of GDP, around
21.7% as in other transition economies in Southeast Asia. Foreign trade was also
monopolized by the state. Nonetheless, export smuggling was considered pervasive
Myanmar started its transition to a market economy during the economic
turmoil of the late 1980s. Before the transition, the real GDP growth rate was negative
for three years in a row, and it recorded minus 11.4% in 1988 (World Bank, 1995). To
counteract the economic downturn, in September 1987 the BSPP government
announced the abolition of the state procurement and distribution of rice, which led to
an immediate jump in the price of rice. To combat inflation, the government
demonetized large denomination banknotes in September 1987. The demonetization
invalidated 57% of the currency in circulation. The rise in the price of rice and the
demonetization led to a nationwide antigovernment movement in August 1988. Under
these circumstances, the military staged coup in September 1988, seizing power from
the BSPP. The military established the State Law and Order Restoration Council
(SLORC) and announced the abandonment of the Burmese Way to Socialism, aiming
to revitalize the economy. The military junta remained in the office until March 2011
and implemented its peculiar transition strategy.
The transition strategy of the military junta emphasized the creation of new
private firms and activities as opposed to state enterprise reform and market
liberalization. The government liberalized the domestic marketing of agricultural
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commodities but resumed the procurement and distribution system for rice, though on
a smaller scale than before. The government also allowed private firms to enter the
industrial, commercial, and foreign trade sectors, while the State Economic Enterprise
Law instituted in March 1989 designated 12 sectors for monopolization as state
economic enterprises (SEEs). These included teakwood, minerals, petroleum and
natural gas, and precious stones and pearls.
The junta recognized the inefficient operations of existing state enterprises.
Under the BSPP regime, SEEs took loans from the Myanma Economic Bank (MEB),
one of the state banks, and maintained revolving funds outside of the centrally
controlled budget, these loans resulted in large accumulation of debt. The outstanding
loans from the MEB to the SEEs swelled from 9% GDP in 1978 to 61% in 1988.
Furthermore, the source of funds for loans to the SEEs was mostly the central bank
lending to the MEB. In fact, by printing money, the central bank had been lending to
the SEEs indirectly through the MEB.
As a consequence of this transition strategy, two resource allocation systems
stood side by side in Myanmar: central planning of the state sector and the market
oriented economy of the private sector.
3.4 Strength and Weakness of the local companies
As of 1990, the overall public sector share of GDP was 22%, and the total
employment in SEEs was 312000 (World Bank, 1995: 52-53). The operations of the
Myanmar’s SEEs have been diverse. They included large scale monopolistic
operations such as electric power generation and supply, railways, and the post and
telecommunications. They also included operations such as textiles and foodstuffs
where there was competition with the private sector and with imported goods.
The most important feature of Myanmar’s transition was the worsening of the
soft budget constraint problem embedded in the state budget system. The budget
system was divided into the local currency budget and foreign exchange budget. The
remainder of this section presents the details of the budget system.

3.5 Natural Gas Domestic and Export

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This section evaluates three aspects of Myanmar’s transition to a market
economy in relation to the private sector: macroeconomic stability, market
liberalization, and institutional infrastructure.
3.5.1 Domestic
Domestic gas consumption has been historically limited, and driven by the
available gas volumes indigenously produced that were not exported. The power
sector accounts for the overwhelming majority of natural gas consumption (currently
around 70%), while the rest is consumed mainly by industries, CNG filling stations
and refineries.The country’s plans for electrification, and the subsequent need for
additional power generating capacity, is expected, according to the Ministry of
Electricity, to lead to the construction of new gas-fired power plants. The
commissioning of these new plants, which is planned until 2021, will lead to a strong
growth in domestic gas consumption, and result in 2.5-fold increase in demand from
current levels (around 300 mmcf/d on average in 2014-15) to around 750 mmcf/d on
average in 2020-21 onwards. The largest part of this increased demand will be
attributed to a limited number of offtakes of the gas system, which will serve the new
power plants.
Domestic market is currently supplied from indigenous sources, primarily
offshore fields which supply 81% of the domestic market supplies (2014-15).
Offshore fields provide the bulk of their production to the export market. The
availability of indigenous gas supply for the domestic market is nevertheless
decreasing, as production from both onshore and offshore fields is predicted to drop
from 2020-2021 onwards.
The industrial and commercial demand examined mainly includes gas used in
Myanmar industries for energy and feedstock, oil refineries and CNG filling stations.
The projections for industrial/commercial demand for the period from 2015-16 up to
2024-25 were provided by MOGE. According to these projections, demand is
expected to increase more than 2-fold from around 70 mmcf/d on average in 2014 –
15to around 150 mmcf/d on average in 2015 –16 onwards, driven primarily by
demand from existing paper and cement plants and oil refineries, as well as by new
plants, mainly in metallurgy and cement industries.As the estimation of the economic

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cost of gas supply is carried out for the period of 2015 –2030, while demand forecasts
from MOGE were provided up to 2025, gas demand is assumed to remain constant for
the period 2026 –2030.
Most of the gas produced in Myanmar originates from the country’s offshore
fields of Yadana, Zawtika, Shwe and Yetagun. However, in accordance with the PSA
for development of these fields, the largest part of production is exported, and only a
small part is supplied to the domestic market. Specifically, the domestic market
receives 31% of gas produced in Yadana, 29% of gas from Zawtika and 20% of Shwe,
while Yetagun is fully export oriented. Production, exports and domestic supply
historical and projection information for the three offshore fields (Yadana, Shwe,
Zawtika) supplying the domestic market, on the basis of data received from MOGE.It
is noted that MOGE provided production forecasts for the offshore fields until 2025,
and thereafter it was assumed that supply directed to the domestic market would
remain constant for the period 2026 –2030. Provides production information for
Yetagun, for completeness purposes.
Yadana started production in 1999, with annual production volumes ranging
between 200,000 and 300,000 bcf until today. Production is expected to decline
henceforth, reaching levels below 100,000 bcf by 2025/26. The majority of Yadana
gas has been and will continue to be exported to Thailand. Historically, domestic
consumption accounted for 1% to 26% of production, averaging at around
11%.Forecasts of available supplies for domestic use are from 31% of production
declining to 22% of production, in the period to 2025/26, averaging at around 26% of
production.
Zawtika started production in 2014, with annual production volumes in the
years until today ranging between 84,000 and 118,000 bcf. Production is expected to
increase to 126,000 bcf in 2016/17, with levels maintained until 2023/24, declining to
around 77,000 in 2025/26.The majority of Zawtika gas is exported to Thailand.
Forecasts of available supplies for domestic use range between 23% to 47% of
production, in the period to 2025/26, averaging at around 30% of production.

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Yetagun started production in 2000. Production is assigned only to exports.
Yetagun production is nevertheless expected to decline significantly, reaching around
13% of today’s production levels by 2025/26.
Shwe also started production in 2014, with annual production volumes in the
years untiltoday ranging between 42,000 and 174,000 bcf.Production is expected to
increase to around 182,000 bcfin 2016/17, with these levels maintained until
2025/26.The majority of Shwe gas is exported to China.Historically, available
supplies for domestic use ranged between 1% to 9% of production. It is forecasted that
domestic use will account for around 20% of production in the period to 2025/26.
There are 7 onshore fields listed below (in parentheses the start of production
date) whose production is exclusively oriented to supplying the domestic gas market:
Mann(1970)
Htauk Sha Bin (1978)
Apyauk (1991)
Kyaukkwet (1995)
Nyaung Don (1999)
Thar Guyi Taung (2001)
Ma U Bin (2006)
Total production of these fields was about 46 bcm in 2004/5 and rapidly
declined over the years reaching about 19 bcm in 2015/16.It is forecasted that
production from these fields will be around 17 bcm p.a. in the period 2016/17 to
2024/25.Of the 7 onshore fields, Nyaung Don has the largest gas production,
accounting for 36% of total onshore gas production, followed by Kyaukkwet (21%),
MaU Bin (17%) and Apyauk (15%).

3.5.2 Export
Myanmar is a net natural gas exporter, supplying gas to China and Thailand.
Myanmar has 53 onshore blocks in operation;17 blocks are operated by 12 companies,
mostly international companies. Offshore areas are divided into 51 blocks and 18 are
in operation.  The existing offshore gas projects are Yadana Project, Yetagon Project,
Shwe Project (exporting gas to China) and Zawtika Project.  The daily production rate

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of the Yadana natural gas project is 910 million cubic feet (Mcf); Shwe produces
around 500 Mcf; Zawtika produces 360 Mcf; and Yetagon produces over 250 Mcf.
There are six deep rigs, nine medium rigs and eleven shallow rigs.  The total length of
natural gas pipeline in the country is 2,200 miles.  Myanmar has 45 compressed
natural gas (CNG) filling stations and has over 27,000 CNG vehicles.  The average
domestic natural gas supply is 300 Mcf per day.
State-owned Myanma Oil and Gas Enterprise (MOGE) under the Ministry of
Electricity and Energy (MOEE) exports natural gas to Thailand and China annually
based on the individual contracts. Natural gas is Myanmar’s top export which brings
in the most revenue. The government’s annual budget expenditures still have to
mainly rely on the revenue of natural resources and raw materials, including natural
gas.
This year’s export has increased, but the export earnings over nine months in
2016-17 was only $1822 million, which was half of the $3086 million export in 2015-
16 fiscal year, according to the officials from the commerce ministry. It is due to a
drop in oil price in the international market.
According to official website of Myanmar Trade Promotion Organisation,
Myanmar exported 498,442 tonnes of gas and earned $2926 million in 2009-10, while
it exported 410,370 tonnes and earned $2522 million in 2010-11, and 114,287 tonnes
for $3,666 million in 2012-13; $3,299 million in 2013-14; 59,516 tonnes for
$3,525.55 million in 2014-15. Natural gas revenue constitutes half of total of the
national export revenue.
Those numbers suggest that if natural gas export earning exceeds $3,000
million, it takes up 50pc of export revenues.
Natural gas export volume reached more than US$ 2.4 billion in the eight
months of this fiscal year, decreasing by more than US$ 97 million, compared with
the same period of last year, said an official of the Ministry of Commerce. More than
US$ 2.456 billion were fetched from the export of 177 million cubic feet of natural
gas from October 1 to May 31 of 2018-2019 FY. Natural gas export reached more
than US$ 3.258 billion and more than 296 million cubic feet of natural gas was
exported in the same period of last year. Natural gas export volume decreased by 119

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million cubic feet of natural gas on more than US$ 97 million. Myanma Oil and Gas
Enterprise generated 3.32 million crude barrels and more than 623,000 million cubic
feet of natural gas from 86 oil and gas wells of offshore and onshore during the third
year of the current presidential term, according to the Ministry of Electric Power and
Energy.
The press conference on performance made during third year of the current
presidential term for the State and the people was held at the office of the Ministry of
Information in Nay Pyi Taw on May 9, cited the statement on State-owned
newspapers.
During the third year of the current presidential tenure, the MOGE managed to
dig 40 wells, producing 2.31million barrels of crude oil and 19,019 million cubic feet
of natural gas.
The international companies dug 46 offshore wells and generated 1.02 million cubic
feet of petrol and 604,818 million cubic feet of natural gas. During the third year of
the current president tenure, a total of 3.2 million barrels of crude oil and 623,838
million cubic feet of natural gas from onshore and offshore. 

3.6 The Duration of Production Sharing Contract (PSC)

The onshore model PSC has three phases, the Preparation Period, the
Exploration Period and (if any) the Development and Production Period. The offshore
model PSC has an additional phase: the Study Period.

3.6.1 Preparation period

The Preparation Period is for a six month duration, which can be extended at
the discretion of the MOGE. During this period the Contractor is required to
commission (i) an Environmental Impact Assessment, (ii) a Social Impact Assessment
and (iii) an Environmental Management Plan (the Reports). The preparation of these
Reports will count towards to the exploration minimum expenditure requirement.
Once the Reports have been prepared they must be approved by the MIC before
petroleum operations can commence.

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3.6.2 Study Period (for offshore PSCs only)
In Myanmar, while much is known about the onshore geology, there is very
little seismic data available for offshore blocks. The Study Period provides the
Contractor two years to conduct technical evaluations and assessments prior to the
Exploration Period. The model PSC anticipates that there will be a minimum work
commitment during this period, but does not specify the amount. The Contractor must
disclose all the results of its study to the MOGE. At the end of the Study Period the
Contractor may, at its discretion, terminate the PSC and relinquish its rights.

3.6.3 Exploration period

The duration of the Exploration Period is up to six years: Three years (Initial
Exploration Period) + two years (First Extension Period at Contractor’s option) + one
year (Second Extension Period at Contractor’s option).Unlike PSCs in many other
jurisdictions there is no phased relinquishment during the Exploration Period. Instead
relinquishment occurs at the end of the Exploration Period and amounts to 100 per
cent of the contract area, less any discovery area, development and/or production area.
In addition, there is an automatic extension of the Exploration Period to allow for
completion of seismic or drilling operations or to appraise a discovery.

3.6.4 Development and Production Period

The Development and Production Period commences on the date the
Contractor gives notice of a commercial discovery to the MOGE and shall continue to
the later of: (i) twenty years from the date of completion of development in
accordance with Development Plan, and (ii) the expiration of the petroleum sales
contract.

3.7 Foreign investment

The new Law of Foreign Investment (the FIL), which repeals the previous
1988 Law of Foreign Investment, was enacted in November 2012. The MNPED is the
government ministry responsible for foreign investment and the MIC is the regulator
responsible for approving foreign investment in Myanmar.
The FIL requires foreign investors to:
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 establish a branch or subsidiary (although a branch is more common)
 obtain an MIC permit and trading permit
 obtain a certificate of registration as a branch.
An oil and gas investor must be recommended by the MOE before it can receive a
permit from the MIC. The MOE is required to makes its recommendation within
seven days of the receipt of a recommendation request and the MIC must grant or
refuse the permit within ninety days of the date of receipt of the MOGE. In addition
the MOE will manage the MIC permit application process, whereas this would be the
foreign investor’s responsibility in cases not involving oil and gas.

CHAPTER 4
PERFORMANCE OF OIL AND GAS SECTOR IN MYANMAR
4.1 Myanmar’s Strengths, Weakness, Opportunities and Threats
Emergence from a long period of relative isolation, coupled with a desire for
reform and change, heralds a bright future for Myanmar. SWOT Analysis and
benchmarking tools are used to analyze and compare the real prospects and challenges
of investing or expanding in the industry. Further, all the investment opportunities
sector wise, highlighting the industry growth potential and project feasibility. Detailed
information on new fields, blocks, pipelines, refineries, storage assets and LNG
terminals along with the investments required, current status of the projects and
commencement feasibility are provided. Business operations, SWOT Analysis and
financial performance of the companies are provided. Current status of planned
projects along with the possible commencement of the projects, feasibility of
developing those projects in current market conditions, expected start up, impact of
competing assets in other countries and overall industry developments, investments
required and other related information on planned projects is provided in detail.

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4.1.1 Strengths
1. Strong economic growth
2. Alternate options
3. Demand for petroleum products
4. Scope of Conservation
5. High exploration
6. Increase in demand for oil and gas
4.1.2 Weaknesses
1. High import dependence
2. Late start in acquisition
3. Geo-political disturbance
4. Self-defeating policy
4.1.3 Opportunities
1. Supply channels
2. Interdependence nations
3. Technology
4. New sources
5. Growing market
6. Collaborations
7. Frontier markets
4.1.4 Threats
1. Production Stagnation
2. Ever increasing demand
3. Increasing competition
4. Lack of regional institutions
5. Terrorism
6. Environment concerns

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4.2 Economic Impact on oil and gas sector
Myanmar's political and economic transformation and drastic expansion of
foreign direct investment in natural resource sector necessitate systematic safeguards
to mitigate impacts from its development activities. Myanmar promulgated the first
national EIA law and procedure only recently, in 2016, and the country's institutional
and financial capacity is extremely limited to implement effective EIA. This article
evaluates Myanmar's EIA system against a set of evaluative criteria developed by
Wood (1995) and modified by Annandle (2001). The evaluation was based on the
review of the literature, investigation of EIA legislative and administrative framework,
and several other sources of data and information. Opinions of professionals from
international and government agencies, and researchers are also solicited. The paper
then evaluates the rate of EIA disclosure in O&G sector and whether EIA in Myanmar
is significance in mitigating the impact of O&G operations on the environment. The
review of EIA system indicates that Myanmar generally has sound legal and
administrative framework for EIA, however, its practical implementation reveals
several major challenges and weaknesses. The presence of more than one standard
EIA procedure and lack of inter-departmental coordination and consultation are also
major concerns. Overall, the quality of EIA reports and the level of disclosure in O&G
sector is higher than that of other sectors in Myanmar. Through the analysis, the paper
summarizes the fundamental challenges faced by companies and government,
opportunities and good practices in implementing EIA systems and propose
recommendations to strengthen EIA performance. The findings of this study expect to
contribute to strengthening EIA system and performance in Myanmar and other
developing countries, especially in Southeast Asia.
4.2.1 Stakeholder Engagement & Grievance Mechanism
Stakeholder consultation and engagement in Myanmar are complex for a
number of reasons. Until recently citizens’ rights to speak freely had been forcefully
suppressed for 50 years and as a result many individuals are still reluctant, even
fearful, about speaking out against the Government or military in particular. That is
beginning to change. The Government has historically placed itself as the main
interface between companies and communities and this approach will take time to

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change. Ethnic diversity, and experience of armed conflict and inter-communal
violence provide different perspectives which may be difficult for outsiders to access
and understand.
There are particular challenges in conducting effective consultations in
conflict-affected areas. It is important to understand the dynamics of the conflict and
the key stakeholders that need to be consulted, through a conflict mapping and
stakeholder analysis. This is important in identifying who is representative of
constituencies in the area (but whose voices may not always be heard, such as
women’s groups or marginalised communities), as well as key power holders (who
may not always be representative). In some cases – for example, armed group leaders
– contacts may have to be established through a trusted third party, who can provide a
channel of communication and/or convene meetings. In conflict contexts in particular,
consultations with key stakeholders should be seen as a relationship-building exercise
more than an information-collection exercise. In such areas, direct consultations with
communities may be more difficult – access may be constrained, contact with
communities may be mediated by a conflict party, people may be reluctant to speak
openly, and if handled poorly the consultation process could put communities at risk.
In areas where there are inter-communal tensions and violence, such as parts of
Rakhine State, similar challenges exist. In some cases, one community may even
object in principle to consultations with another community, due to concerns that this
may give legitimacy to that community and its viewpoints. Such situations need to be
handled with great delicacy, and require a detailed understanding of local dynamics;
local authorities are often not neutral.
In areas where non-state armed groups operate, it is critical to engage with
them and the ethnic civil society groups operating in their areas. Most of these groups
have bilateral ceasefire agreements with the Government that authorise them to travel
freely within the country (without arms) and meet with whomever they want. It is
important to recognise that some of these groups have areas of political influence and
authority that are far wider than the limited territory over which they have military
control. It is also important to recognise that most ethnic border areas have never
historically come under the administrative control of the central state. The larger

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armed groups run parallel administrations, from health and education through to land
registration, forestry and revenue collection. As the de facto authority in their areas,
their agreement is necessary for any activities to take place. With regard to community
consultations in these areas, it should not be assumed that the armed group is
representative of the views of all communities, and in some cases relations may be
coercive; experienced third party facilitators will need to be engaged to ensure that
effective community consultations can take place in an atmosphere where people will
be safe and confident to speak freely – something that the presence of either
Government or armed group representatives might hamper.
4.2.2 Communities
Myanmar is primarily a rural agrarian society, with many engaged in
subsistence farming. Most poor families are working in agriculture or as casual day
labourers. Reliable, detailed data on socio-economic indicators is still lacking. The
2014 UN Human Development Index ranked Myanmar at 150 out of 187 countries
surveyed, putting it in the “low human development category,” with a 65.2-year life
expectancy and just 4.0 mean years of schooling. Nearby ASEAN member states
Thailand ranked at 89, Viet Nam at 121, Cambodia 136, and Laos 139.The UNDP has
reported that the national poverty rate is 26%, and poverty rates are twice as high in
rural than in urban areas. However, more recent information based on the same UNDP
data reported in May 2014 by the World Bank in Myanmar indicates a national
poverty rate of 37.5%, using a higher number of minimum calories per day as a cut-
off point for poverty, and a higher rate of urban poverty. Its re-interpretation of UNDP
data indicates an alarming 77.9% poverty rate in Rakhine State. The landlocked Shan
State, which the South East Asia Gas/Oil Pipeline passes through, had a 2010 poverty
rate of 33%.226 Magwe Region in central Myanmar, a key area for onshore O&G
operations, had a 2010 poverty rate of 27%. The high poverty levels feed into and also
result from conflict in the ethnic states. In 2010 the poverty rates in coastal areas
where offshore natural gas will come on shore were 44% in Rakhine State, 33% in
Tanintharyi Region, 16.3% in Mon State, and 32% in the Ayeyarwady Region,
compared to a 26% national rate.Social service delivery is poor, partly due to the
country’s decades-long isolation and ban on development aid imposed during the

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1990s by the US, Canada, Australia, New Zealand Governments and the EU in
response to human rights abuses. But it is also because the previous military
Government did not treat health, education, and welfare as priorities. Even in the
current period, Government spending on social services as a percentage of GDP was
0.76% for health, 1.46% for education and less than 0.01% for social welfare in 2012-
2013.The low public resource allocations to social spending has negative impacts for
the provision of health, education, and welfare services, particularly in remote rural
areas where O&G projects operate. The Government has recognised the need for a
social protection system and will set up a National Committee for the Coordination of
Social Protection, “with due attention given to alleviating poverty and addressing
inequities, social exclusion, and emergencies''.
4.2.3 Land
Land is often the most significant asset of most rural families. 70% of
Myanmar’s population lives in rural areas and 70% of the population is engaged in
agriculture and related activities. Many farmers use land communally under a
customary land tenure system, especially in upland areas inhabited by ethnic
minorities. Customary use and ownership of land is a widespread and longstanding
practice. The field assessments confirmed what is evident from secondary research:
that for the vast majority of the Myanmar population dependent on access to land for
livelihoods, where land is taken, even with monetary compensation, the impacts on an
adequate standard of living can be significant. Compensation is often not keeping up
with rapidly escalating land prices, meaning displaced farmers are unable to acquire
new land in nearby areas.
4.2.4 Corporate Social Responsibility (CSR)
While there is a growing awareness in Myanmar of the concept of corporate
social responsibility (CSR), this is often limited to a concept of corporate philanthropy
– i.e . Making donations to charities or local communities. An approach to CSR based
on the concept of business taking responsibility for its impacts on society and the
environment is less well understood by Myanmar businesses and Government as is the
concept of a “social license to operate” – i.e. a tolerance if not acceptance by local
communities of business operations that goes beyond its legal and regulatory license

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to operate. Local businesses and the Government are also not well informed about
leading extractive companies’ approaches elsewhere to social investment in
communities surrounding extractive projects and how these can address impacts and
build relations with local communities in way that is effective for communities, the
local government and the companies. The model Production Sharing Contract (PSC)
does not require a social investment programme per se but there is discussion within
the MIC of strongly encouraging all investors to put aside a budget for CSR
programmes of 1-3% of pre-tax profits, and to take decisions on spending this in
cooperation with local communities and authorities. Although this amount is currently
not compulsory, an actual contractual commitment of 2% was inserted in the
renegotiated Letpadaung Copper Mine Project. Currently the PSC simply requires the
company signing the agreement with MOGE to “expedite the Corporate Social
Responsibility in the Contract Area according to the code of conduct for each
Contractor Party”251 which leaves the approach up to the individual company. This
provides for flexibility in designing a programme but assumes that companies have
the appropriate experience in designing useful CSR/social investment programmes.
Neither charitable donations nor transferring the CSR budget to a local or regional
government with little capacity is likely to be effective in supporting a company’s
social licence to operate. It could become a driver for local conflict or corruption.
Furthermore many companies’ business integrity rules would not allow such
payments. If this approach becomes a more established or compulsory MIC
requirement, transparent principles are needed about how the money should be spent,
such as requiring agreement with the local community for sums spent locally, and
these should be discussed first with business and civil society. There should also be
guidelines on what the money may not be spent on (e.g. environmental and social
protection required to comply with the ESMP) and whether it is cost-recoverable
under the PSC. Above all, it is important that the strategic business link between
social investment and the O&G project is maintained. Otherwise companies,
particularly in a country with Myanmar’s level of poverty, become drawn into playing
the role of development agency or philanthropic social service providers, neither of
which is their purpose. Rather the Government should fulfil its ‘duty to protect’ and

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provide health and education services on the basis of full collection of revenue from
the entire tax base, including the O&G sector.
4.2.5 Labour
Labour issues in Myanmar pose several challenges to responsible business
conduct. For 50 years, independent trade unions and employer organizations were
prohibited; laws covering labour protection were antiquated and/or restrictive; forced
labour of civilians by the military and civil authorities was common; and child labour
is still an ongoing problem. Article 348 of the 2008 Constitution guarantees that
discrimination by the Union against any citizen is prohibited on grounds of race, birth,
religion, official position, status, culture, sex and wealth but the internationally
recognized grounds of discrimination based on colour, language, political or other
opinion and national origin are not prohibited by the Constitution, leaving significant
gaps in protection against discrimination. An estimated 70% of the population is
engaged in agriculture or related activities; 23% in services, and 7% in industry.
Underemployment in Myanmar was 37% in 2010, affecting rural and urban areas,
poor and non-poor, male and female alike, as well as young people in
particular.However, there is a lack of reliable statistics and other accurate data in
Myanmar with regard to labour. The Ministry of Labour, Employment and Social
Security, with International Labour Organisation (ILO) support, will undertake a
comprehensive national labour force survey in the third quarter of 2014.
A major concern in Myanmar has been the widespread and systematic use of
forced labour of civilians by the tatmadaw (the Myanmar army) and the civilian
administration for several decades, despite the fact that the Government had ratified
ILO Convention 29 against forced labour in 1955. There have been allegations of
forced labour in relation to a variety of infrastructure projects, including in connection
with security provided in the area of an international or domestic O&G pipelines.
Since the reform process began in 2011, many observers, including the ILO, have
welcomed the decrease in forced labour, but noted that the practice is still continuing
in some areas. President U Thein Sein has made a public commitment to end forced
labour by 2015.While there is now less risk to companies of forced labour being used
in relation to projects, such as road construction, there is a need to remain vigilant, as

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it was a common practice for several decades, and local government and other
authority figures still sometimes use it.The ILO noted that while there are relatively
few complaints of forced labour in the private sector, this may be because in Myanmar
forced labour isgenerally associated with the Government. However, in the past there
were numerous allegations of forced labour in relation to O&G projects, most recently
about the Shwe Gas Pipeline. In September 2011 a Myanmar NGO reported that
forced labour was used to construct roads in Rakhine State and build pipeline-related
infrastructure in Magwe Region. The UN Special Rapporteur on Myanmar noted in
his March 2010 report that he had received reports of rampant forced labour in areas
near the Shwe gas pipeline and the Kanbauk to Myaing Kalay gas pipeline project in
Southeastern Myanmar.

4.2.6 Security
Operating onshore oil blocks are located primarily in Magwe Region, central
Myanmar. While there is no history of armed conflicts in this area, it is an important
region in Myanmar history with close ties to the O&G sector. During the colonial
period, demonstrations sparked by labourers at the Burma Oil Company (BOC), swept
the nation into a campaign against colonialist oppression. Parts of Mon State and
Tanintharyi Region have been affected by decades-long armed conflict between the
central Government and various ethnic armed groups. The Karen National Union
(KNU) and New Mon State Party (NMSP) armed groups are present in parts of
Tanintharyi Region – although they are no longer active in the vicinity of the
Yadana/Yetagun gas pipeline. Although ceasefires are now holding in Mon State and
Tanintharyi Region, they still experience high levels of militarisation, which includes
the presence of the tatmadaw, its allied militias, Mon and Karen armed groups, small
splinter groups, and armed criminal gangs. This militarisation and insecurity has led to
past and some continued human rights abuses, including land confiscation, extortion
and arbitrary taxation, and sexual violence.The more recently developed pipeline by
the Southeast Asia Gas Pipeline Company (SEAGP)/ the Southeast Asia Crude Oil
Pipeline Company (SEAOP) (also referred to as the Shwe Gas Pipeline), which comes

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on shore at Kyaukphyu in Rakhine State and then travels through central Myanmar to
northern Shan State and into China, has seen international and Myanmar groups report
human rights violations by the Government during the construction phase. Rakhine
State is characterised by a disproportionately high poverty rate and on-going inter-
communal violence between Muslim and Buddhist groups, as previously noted,
although there is little or no armed conflict there. Northern Shan State is host to a
number of ethnic minority armed groups, including the United Wa State Army (the
largest armed group in the country, which has long had an uneasy ceasefire with the
Government); the Kachin Independence Organisation (KIO, a major armed opposition
group); the Ta-ang (Palaung) National Liberation Army (TNLA); the Shan State
Progress Party (Shan State Army-North); and a recently reactivated Kokang armed
group.Fighting continues in northern Shan State, mainly between the tatmadawon the
one hand, and the KIO and TNLA on the other. Myanmar civil society groups have
accused the tatmadaw of recent human rights violations against the civilian
population, including forced portering and torture, amidst an increase in tatmadaw
battalions in Palaung areas.International human rights organisations have reported on
widespread human rights abuses in areas where the KIO and tatmadaw are fighting,
including Kachin State and northern Shan State, after a 17 year ceasefire between the
KIO and the Government broke down in June 2011. Some analysts and civil society
groups have claimed that fighting in this area is related, at least in part, to the
tatmadaw’s efforts to secure the Shwe Gas Pipeline route.The nationwide ceasefire
process, even if successful, will not necessarily bring an end to insecurity in
Myanmar’s border areas. In addition to the major armed groups at the peace table,
there are numerous small splinter groups, village militias (some with hundreds of
troops), and armed criminal gangs. Lack of economic opportunities, an easy
availability of weapons, and weak security and rule of law mean that these areas will
be characterised by insecurity for some time to come. If the peace process eventually
leads to Disarmament, Demobilisation, Rehabilitation and Reintegration (DDRR) –
which is still likely some years off – there will be the additional dynamic of former
combatants with limited opportunities for lawful employment, and who may resort to

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extortion, racketeering and other criminal activities to support themselves – as some
are already doing.
4.2.7 Environment
Myanmar has diverse coastal and marine habitats, including coral reefs,
seagrass beds, mangroves, sandy beaches and mudflats. It also hosts abundant natural
resources, including on-shore and off-shore oil and gas, timber, silver, lead, tin and
gems as well as and fertile ecological zones which have traditionally provided
extensive agricultural production. These resources have supported a large population
over many centuries, and they continue to provide the bulk of Myanmar’s economic
output to this day. However, deforestation, large-scale mining, habitat and land
degradation and diminishing water resources are all placing pressure on the
environment.The expansion of agriculture and industry, pollution, population growth,
along with uncontrolled use and extraction of resources, are causing severe
environmental and ecosystem degradation.Rubber plantations have almost doubled
from 1990 to 2010 and together with large scale palm oil plantations are among the
biggest threats to biodiversity.These environmental pressures in turn, increase the
vulnerability of several socio-economic sectors including agriculture, transport and
energy sectors. Although accurate updated estimates are difficult to obtain, illegal
wildlife trade in Myanmar is considered to be widespread. Together with illegal
hunting, it is causing a general decrease of wildlife population. Many Myanmar
citizens, and local and international civil society organisations, fear Myanmar’s rich
biodiversity and natural habitats will be depleted and damaged by greater investment
in the extraction of such resources. Myanmar’s programme to adapt to climate change
addresses the main environmental stresses affecting the country: climate related
hazards/extreme weather events; deforestation; and diminishing water resources. The
coastal areas, where offshore O&G production already comes on shore in Rakhine and
Ayeyarwady, are exposed to long-term climatic impacts such as sea-level rise as well
as an increase in cyclones and storm surge/flooding. The country more generally is
exposed to both geological and meteorological hazards (e.g. earthquakes, floods,
cyclones and tsunamis) as a result of the country’s southwest location within the Bay
of Bengal and low-lying coastal zone. On a longer-term basis, Myanmar, like many

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developing countries faces the dilemma of developing the O&G resources that also
contribute to the climate change impacts to which the country is particularly
susceptible.

CHAPTER 5
DISCUSSIONS AND CONCLUSIONS

5.1 Discussions
The “government take” the proportion of revenues from oil and gas projects
that goes to the government can be as high as 94 percent under present production
sharing contracts, according to energy research. The high state take is one of several
factors, including low oil prices and a lack of infrastructure that has prompted many
energy companies to scale back their activities in Myanmar or withdraw completely.
Almost half of the offshore blocks awarded in a 2014 bidding round, for example,
have already been relinquished. While the plan is to only apply the new terms to
future agreements and not existing contracts such as those signed by companies that
won blocks in a 2014 bidding round, the government was always open to negotiation.
If operators find a new discovery and it is not economically viable we will consider
because we are always trying to get mutual benefit.

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Myanmar’s existing production sharing contracts were introduced by the
military regime shortly after it took power in 1988 and slowly began to open up the
economy. The contract template has barely changed in the years since, except for an
increase in royalties from 10 to 12.5 percent in the 2014 bidding round. While the
existing PSC structure has enabled the development of four major offshore fields,
critics say it risks making the country uncompetitive at a time when low energy prices
have prompted many firms to scale back exploration and development plans.
The revision of PSC terms should be based on sound modeling and be fair for
both the government and investors. The private sector argues that the changes to fiscal
terms are needed to encourage the investment required to meet Myanmar’s growing
energy needs. Gas is far more valuable as a fuel for the country’s industrial
development than for tax revenue. That’s why these fiscal terms are counterproductive
for Myanmar.
The others are related to coordination within and between ministries, policies
regarding pricing, including currencies and guarantees of payments, and energy
infrastructure. If the high taxation is limiting exploration, this means there’s a risk of
hydrocarbon not being found at all. If it’s kept underwater, gas has no value. To be
honest, the government just tries to keep increasing taxes. They never consider easing
them and this is why companies left the country. According to the contracts, the
companies have to put up 100 percent of the investment and the government puts in
nothing. Even then, the government still tries to increase taxes. If we keep going this
way, we’ll end up with nothing.
A November 2016 analysis for the World Bank of Myanmar’s standard PSCs
put the government take the proportion of a project’s revenue that ends up in
government coffers at 88 percent. The take for deep-water projects was 86 percent and
rose to 91 percent for shallow water. This put Myanmar at the higher end of the
spectrum globally. A regional comparison found investor returns under Myanmar’s
fiscal regime were low to middling relative to its peer group. The authors noted that
they were relying on the standard PSC terms and these might not reflect the actual
signed PSCs, and that cost and geological environments also impact on investment
decision and vary across each country. For an offshore project producing above 900

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million cubic feet of gas a day, the state take was 93.9 percent in shallow water and
87.8 percent in deep water. For projects in the lowest band of production – under
300mmcfd – the state take was 78.6 percent in shallow water and 72.4 in deep water.

5.2 Conclusions
Thailand’s heavy investment in the Myanmar gas sector as well as the
escalating Sino-Indian rivalry over Myanmar’s oil and gas have no doubt made it
easier for Myanmargovernment to withstand pressure from the US and EU countries.
The US and many EU countries are heavily dependent on oil and gas for their energy
needs. Therefore they have been trying to neglect their sanction on Myanmar because
Myanmar has an abundance of oil and natural gas. Despite the European Union’s
sanctions on Myanmar, TOTAL, a French company and UNOCAL of the United
States have invested in Yadana natural gas project, a block off the Mottama coast, and
are carrying out exploration work. The Myanmar government, on her side, has been
trying in the process of reconstructing the country’s infrastructure which needs hard
currency. Therefore oil and gas are indispensable resources in Myanmar foreign
relations, and it is via energy security that Myanmar and energy hungry countries can
be bound together politically and economically more closely than other conditions that
have influenced Myanmar’s choice of policy orientation.
In the absence of major new finds coming on stream over the short to medium
term, and given the contractual difficulties of diverting gas from the export to the
domestic market, the projected supply gaps at the offtake points would have to be
accommodated with supplies from external sources. Over the short to medium-term
period (2016-17 – 2019-20) it is not possible to develop in country permanent gas
import infrastructure so as to enable the import of LNG for domestic use.

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REFERENCES LIST

[1] www.elevenmyanmar.com/natural gas export volume reaches more than us 24-

billion
[2] www.mmtimes.com/natural gas export brings 3b-fiscal year
[3] www.export.gov/Burma energy oil and gas
[4] www.myanmar-responsiblebusiness.org/Myanmar Oil and Gas Sector Wide
Assessment
[5] www.mmtimes.com/yadana-pipeline construction work
[6] www.energypedia.info/Economic Costs of Natural Gas for Myanmar Domestic
Market
[7] www.nortonrosefulbright.com/oil and gas exploration and production in Myanmar
[8] www.frontiermyanmar.net/a new deal for oil and gas
[9] Than Tun (Oil)- Oil Fields of Myanmar Book
[10] www.en.m.wikipedia.org

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