Canadian firm still poised to buy Myanmar gas project, as Ottawa leaves gaping hole in sanctions

Canada’s expanded list of sanctioned Myanmar firms and individuals, announced in October as a coordinated move with the United States, differs notably from that of its close ally in one key respect: the absence of the state-owned Myanma Oil and Gas Enterprise (MOGE). While the reason for this discrepancy is not clear, it has left the door open for a small Canadian firm, MTI Energy Inc, to finalise a deal to buy the largest stake in a natural gas pipeline to Thailand partly owned by the MOGE. Despite the Trudeau government’s talk of coordination, Canadian officials opted not to do what the US Treasury Department’s Office of Foreign Assets Control did when it banned American firms from engaging in financial transactions with MOGE on October 31, the same day Canada updated its Myanmar sanctions list. According to the US Treasury Department, MOGE—which was also targeted by the European Union for sanctions in February 2022—is the “largest single source of foreign revenue for Burma’s military regime.” Canada’s decision not to sanction MOGE makes it possible for MTI Energy to move forward with its plans to buy into Myanmar’s Yadana natural gas project, which includes a pipeline that runs from a gas field in the Andaman Sea through Tanintharyi Region to Thailand. MTI Energy, a privately held company registered in the oil-rich province of Alberta, has become the focus of intense scrutiny from Myanmar activists and anti-corruption campaigners since it was revealed in February this year that the firm’s wholly owned Bermuda registered subsidiary, Et Martem Holdings Limited, was in the process of acquiring a 41.1% stake in the Yadana project and the same sized stake in the Moattama Gas Pipeline Company, the entity that owns the Yadana pipeline. If completed, the purchase would give MTI Energy the biggest stake in the Yadana project, Myanmar’s largest gas development, in which MOGE has a 21.8% stake. In addition to its direct stake in Yadana, MOGE as a state-owned entity under the Ministry of Electricity and Energy (MOEE) collects revenue on behalf of the Myanmar state from Yadana and other offshore gas projects via production-sharing contracts. MOGE’s revenue derived from the sale of gas from the Yadana project was more than US$60 million per month in late 2021, according to figures obtained by EarthRights International (ERI), an NGO that has been monitoring Yadana since the project began in the 1990s. Few details of the Canadian firm’s deal to buy the stake in Yadana have been disclosed so far and MTI Energy, a company formed in 2019 with no known history of operating in Myanmar, took down its website shortly after news of its move to buy into Yadana was first reported by Britain’s Guardian newspaper in February 2023. MTI Energy’s entry into Myanmar has been made possible by the departure of US energy giant Chevron, which originally became involved in Myanmar after it acquired UNOCAL in 2005. Though Chevron, considered one of the largest oil and gas firms in the world, has confirmed to the media that it was in the process of selling its stake in Yadana to MTI Energy, the energy giant has refused to disclose any further information about the transaction. “We have signed an agreement to sell the company’s interest in all Myanmar assets and exit the country. The terms of the agreement are confidential,” a Chevron spokesperson recently told Reuters. In a letter sent to the Business and Human Rights Resource Centre (BHRRC), an international monitor group, in January of this year, Chevron—which first announced it was leaving Myanmar in January 2022—claimed to be pursuing “an orderly exit” from the country. Although Chevron’s Myanmar operations have been subject to a barrage of criticism from rights groups and vocal Myanmar exiles, the energy giant chose to put a positive spin on its impending Myanmar exit. “Chevron is proud to have played a role in growing and developing the Yadana Project over the past 20 years,” the firm said in its response to questions from the BHRRC. The statement also made no mention of the fact that the Yadana project is considered the largest single source of revenue for the Myanmar junta. Prior to Chevron’s acquisition of UNOCAL, the latter firm was sued by a group of ethnic Karen villagers in US courts in the famous Doe v. UNOCAL case, with the villagers alleging that Myanmar army troops forced villagers to provide unpaid labour for the project. The troops connected to the project were also alleged to have committed acts of rape and murder against villagers living along the pipeline route, which had been forcibly cleared by the army in advance of the pipeline’s construction. After a near decade-long court battle the villagers, who were supported in their case by ERI, eventually agreed to a multimillion dollar settlement with UNOCAL in 2005, just before Chevron acquired the firm. ERI’s founders played a central role in the precedent-setting law case, which continues to be taught in US law schools. Chevron’s stake in Yadana increased from 28% to 41.1% in 2022, when the French giant Total pulled out of the project. Prior to its departure, the French firm was the lead operator of Yadana, a role that Chevron took over when Total left. Employees of Total E&P Myanmar walk along the offshore platform of the Yadana gas field in May 2017 (Supplied) The directive from the US Treasury Department prohibiting American firms and citizens from engaging in financial transactions with MOGE stopped short of adding MOGE to its list of Specially Designated Nationals (SDN), an American sanctions blacklist that includes a range of other Myanmar firms and individuals. Had MOGE been added to the SDN list, it would have caused difficulties for non-American firms that do business with MOGE. Not adding MOGE to the list makes it possible for PTT Exploration and Production (PTTEP), a division of Thailand’s state-owned oil firm PTT, to continue to buy gas from Yadana and Zawtika, another offshore gas field and pipeline project operated by PTTEP with MOGE as a partner. Thailand at present derives around 20% of its electricity from the burning of gas imported from Myanmar and PTTEP has indicated that it plans to extend its involvement in Myanmar. MTI accused of ‘corrupt acts’ In a complaint filed in September by ERI and a partner NGO simultaneously in Canada and the UK—because MTI’s subsidiary Et Martem Holdings Ltd. is based in the British Overseas Territory of Bermuda—it was alleged that MTI’s participation in Yadana would violate guidelines set by the Organisation for Economic Co-operation and Development (OECD) that Canadian and British firms are ostensibly required to follow. (Like Canada, the UK government also failed to include MOGE on its updated sanctions list, even as it claimed to be working in concert with the US to maximise the impact of its efforts to deprive the regime of the means to cling to power. The omission also comes despite calls from Burma Campaign UK, a London-based advocacy group, for the UK government to sanction MOGE.) “If MTI completes its acquisition, it will be making or enabling monthly payments that are an act of corruption, assisting the junta in its abuse of public office for the theft of public funds,” said ERI and its partner in the complaint, which was filed with the office of Canada’s National Contact Point (NCP) for Responsible Business Conduct, an entity managed and staffed by the Foreign Ministry. ERI was joined in the complaint by an unnamed Burmese civil society organisation that chose anonymity due to security concerns. The complaint alleges that MTI Energy, a small firm known in the oil and gas industry as a “junior,” would, if the deal is completed, be playing a central role in overseeing the day-to-day operations of the Yadana project. “As the largest shareholder, MTI Energy will have a substantial role in overseeing Yadana, authorizing decisions of the various operations committees and shareholders meetings over which, unless the contracts have been varied, it holds a veto power. MTI Energy will have cash liabilities to the Government of Myanmar. MTI Energy will meet these liabilities by allowing funds to be received by the junta, facilitating its theft of public funds,” said ERI and its co-partner in the complaint. “Early in the 2021 coup, the junta seized control of MOEE and of MOGE’s offices. In entering into contracts with MOGE after the coup, and crediting the junta’s control of the agency, MTI Energy is making a political decision to treat the junta as the Government of Myanmar and to reject the competing claims of the NUG, in breach of the OECD Guidelines,” the complaint alleged, referring to Myanmar’s civilian National Unity Government. According to MTI Energy’s since shuttered website, the firm’s CEO is Mehtab (Tab) Khehra. founder and CEO of Mitey Titan Industries, a manufacturer of oil and gas equipment that is also based in Edmonton, Alberta. The now defunct MTI Energy website described the firm as a “spinoff” from Mitey Titan Industries. The MTI Energy website also listed Ralph Lean, a long-time Conservative Party of Canada fundraiser and private prison company lobbyist, as its chairman of the board. In May of this year, Lean told Canadian news outlet the Toronto Star that he had retired from the MTI Energy board in March 2022. Nearly a year after his alleged departure, however, his name remained on the MTI Energy website and in the firm’s registration with the provincial government of Alberta. In his comments to the Toronto Star, Lean declined to speculate on the firm’s involvement in Myanmar, saying, “I feel legally and corporate governance wise, that it’s not appropriate to comment on that.” Another board member, Adewale Olorunsola, is president and CEO of an equity fund called Rein Capital. The firm’s subsidiary Rein Energy is, according to research conducted by campaign group Justice for Myanmar, a shareholder in two MTI Energy subsidiaries—Caxes Energy and Shibah Energy. MTI Energy acquired Chevron’s 37.5% stake in Brazil’s Papa-Terra field via these subsidiaries. MTI Energy also has operations in Africa, including a partnership with a state-owned oil firm in Angola plagued with scandal: Sonangol P&P. MTI Energy does not appear to have made any public comment about the Myanmar Chevron deal since it was first reported by the Guardian in February. The company did not respond to questions sent by BHRRC in March about the Myanmar deal, and Reuters, the Toronto Star, and Upstream, an oil industry journal, have also reported that they were unable to reach the firm, its CEO Tab Khehra, or any other current company directors. In addition to general difficulties dealing with an unstable military regime, MTI Energy’s stake in Yadana would be further complicated by the fact that the Yadana pipeline runs through territory in Tanintharyi Region controlled by Brigade 4 of the Karen National Union (KNU), Myanmar’s oldest ethnic armed organisation. In contrast to when the pipeline was built in the 1990s, the KNU is no longer in retreat but has been expanding its influence across eastern Myanmar. Residents of Sagaing Region’s Letpadaung Township protest against the controversial Yadana pipeline in March 2023 (CJ) In addition to the KNU, a number of other groups, like breakaway KNU faction the Kawthoolei Army and multiple newly emerged People’s Defence Forces, are also operating in parts of Tanintharyi close to where the pipeline runs. Whether MTI Energy, which according to its registration papers is run out of the same compound as the Mitey Titan Industries warehouse site in east Edmonton, can stay on top of constantly changing developments in arguably the most complicated civil war in the world remains to be seen. In his testimony before a Canadian parliamentary committee in June, the Toronto-based NUG representative Kyaw Zaw (incorrectly identified as “Zaw Kyaw” in parliamentary records) said he was “very much concerned” about MTI Energy’s involvement in Yadana. Whether Canadian authorities were actually paying attention, however, remains to be seen. Future of complaint with Canadian authorities uncertain The Canadian NCP office’s website indicates that an initial assessment is underway with regards to a complaint received in early October against an unnamed firm that matches the specific issues raised in the MTI Energy complaint. According to the NCP office’s guidelines, an initial assessment of a complaint is usually made within three months of when it is filed, but this can take much longer. The case tracker list on the NCP Office’s webpage shows that two other complaints filed in October 2022 remain in the initial assessment stage, 14 months after they were first submitted. Under Canada’s current regulatory framework, Canadian firms are not legally obliged to cooperate with a complaint submitted to the NCP. Unlike other countries like Norway, whose NCP office operates at an arm’s length from the government, the Canadian NCP office is operated as a committee that consists of eight federal departments, with the Canadian Foreign Ministry serving as chair and providing staff for the NCP secretariat. The Canadian NCP office has repeatedly come under fire from Canadian civil society for being weak and overly deferential to firms allegedly involved with corruption and human rights violations abroad. The Netherlands-based OECD Watch recently blasted the Canadian NCP’s handling of a complaint filed against an Ottawa-based firm owned by the daughter of Abdul Taib Mahmud, the long-time and highly controversial former chief minister of Malaysia’s Sarawak. OECD Watch characterised the Canadian NCP as having taken “active steps to threaten and harm members of civil society” during the complaint process, which saw the NCP office deputise the Canadian Ministry of Justice to send threatening legal letters to OECD Watch and the Bruno Manser Fonds, a Swiss-based NGO that filed the original complaint, after the NGOs put out a press release criticising the Canadian NCP office’s conduct. A follow-up complaint filed by OECD Watch prompted an investigation from the OECD itself, which determined that Canada’s NCP office conduct had breached a number of OECD guidelines. “The Canadian NCP has also quite egregiously breached the Procedural Guidance’s core criteria of transparency by attempting to silence civil society organisations that were trying to be transparent regarding unexplained and concerning changes in the NCP’s stance on the complaint and to hold the NCP to the principle of accountability,” the OECD concluded in a damning report on the affair released in September 2022. Although Canada has claimed to have made some changes to the way the NCP office operates since receiving an unprecedented reprimand from the OECD, it remains far from clear whether the MTI Energy complaint will proceed and if the complaint will compel Ottawa to take further to steps to prevent Canadian firms from partnering with MOGE. While leaving the door open for MTI to link up with MOGE, other state-owned enterprises were added to Canada’s sanctions list in October, including Myanmar Mining Enterprise No 1 (ME1), a MOGE-like entity controlled by the Ministry of Mines that previously had a 50% stake in a joint venture with Vancouver-based Ivanhoe Mines to operate a copper mine near Monywa in Sagaing Region called Myanmar Ivanhoe Copper Company Limited. Ivanhoe’s founder and chairman Robert Friedland—dubbed “Toxic Bob” by his critics for his association with the Summitville gold mine disaster in Colorado—was a frequent visitor to Myanmar when it was ruled by a previous military regime widely condemned for its rampant rights abuses. Ivanhoe chairman Robert Friedland, centre, cuts the ribbon at the opening ceremony for the Myanmar Ivanhoe Copper Co. Ltd. mine project near Monywa on January 19, 1999 (ME-1) Now operated by subsidiaries of a Chinese state-owned firm, the Monywa copper project was during the time of Ivanhoe’s involvement regularly cited by critics of Canadian industry as one of the most flagrant examples of a Canadian firm partnering with a repressive government abroad to extract natural resources at the expense of human rights and the environment. Ivanhoe’s withdrawal from Myanmar, the focus of an in-depth investigation by Amnesty International, was equally mired in controversy, with Amnesty calling on Canadian, British and American authorities to investigate the opaque manner in which Ivanhoe’s Myanmar assets were sold off. Amnesty alleged the sale, which relied on a myriad of offshore holding firms managed by what Ivanhoe claimed was an “independent trust,” may have violated sanctions because the transaction appeared to benefit both notorious crony Tay Za and the military-owned Union of Myanmar Economic Holdings Limited. The apparent failure of Canadian authorities to follow up on Amnesty’s findings suggests that Canadian firms seeking to do business with the regime that seized power in 2021 needn’t be overly concerned about their actions being scrutinised, especially now that Canadian officials have shown their unwillingness to sanction the junta’s single largest source of revenue.

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