China-owned company wins contract to expand Shwe gas project off Myanmar’s west coast

China’s state-owned COOEC Offshore Oil Engineering Co., Ltd. has been authorised to carry out phase 4 of the Shwe natural gas project off the coast of Rakhine State, according to a July 19 release to the Shanghai Stock Exchange. POSCO, the South Korean company operating the project, signed a contract with COOEC worth US$523 million for the construction of a new gas well, the release stated. Construction of the platform, pipeline, and other necessary infrastructure for drilling gas at a water depth of 1,000 metres is set to take three years, the COOEC, a subsidiary of the China National Offshore Oil Corporation, said in a statement. The project, which exports gas to China, is 51 percent owned by POSCO. Another South Korean company, KOGAS, has a 17 percent share, while the Myanmar Oil and Gas Enterprise (MOGE), a military-owned corporation, owns 15 percent. Two India-owned companies, ONGC and GAIL, each have an 8.5 percent share. The gas drilling operations are being carried out in phases. After the first extraction of gas from the project began in 2013, construction for phase 2 commenced in 2018. Construction for phase 3 began in 2021, the year of the military coup, and preparations for phase 4 are currently underway. In the oil and gas industry, it is common practice to drill new gas wells to offset the decline in production from older wells, a source close to MOGE told Myanmar Now. “New wells must be drilled to compensate for the decline in production. Since this is an offshore production, we need to build a new platform to extract gas after drilling the well,” he said. Permission to expand drilling must be obtained from MOGE, he added. New oil wells to be established Since the current project overseen by POSCO is a phased expansion of the existing project, it must adhere to the responsible investment policies of Myanmar’s publicly mandated National Unity Government (NUG), according to the NUG’s minister for electricity and energy, Soe Thura Tun. “I want to emphasise that this needs to be a responsible investment. If the responsible company follows the rules, this is a project we will not stop. However, I am not saying that this project should necessarily proceed,” he said. News has emerged that since the European Union (EU) sanctioned MOGE in February 2022, POSCO has stopped transferring the profits from the Shwe gas project to MOGE and instead holds the profits in an escrow account. Soe Thura Tun said they will monitor any situation that could benefit the military council and will object if the project generates income for the military council. “The operation was stopped without paying the military council in full, and China accepted this decision. While it’s one thing for the business owner to take their own share of the profit, they hadn’t previously paid the ‘quota’ for this side. So, we don’t need to say much more as long as they proceed responsibly,” he said. Gas production from the Shwe natural gas project began in 2013, with a daily export of 500 million cubic feet of natural gas to China via a 793km pipeline that passes through Rakhine State, Mandalay Region, and Shan State, according to POSCO’s website. New oil wells to be established in the Shwe natural gas project, as stated in POSCO’s 2022 annual report China National Petroleum Corporation (CNPC), POSCO, MOGE, KOGAS, GAIL, and India’s Oil Companies Overseas and India Gas Corporation made joint investments in the gas pipeline project. The Shwe project sold over US$1 billion worth of gas in the first three months of 2023, according to a company report published in April of the same year. The oil and gas industry generates billions of dollars in foreign revenue for the military council. Local and international activists are calling for a block on these revenues, arguing that the junta has been using the funds to purchase weapons and ammunition for killing and oppressing people. Well-known oil companies, including France’s Total and US-based Chevron, left Myanmar after the military coup due to worsening conditions. During a meeting on July 17, the regime’s minister for energy, Ko Ko Lwin, stated that Myanmar’s oil extraction has been ongoing for many years, but progress has been slow. He emphasised that production needs to be increased using modern technology. Fighting between the Arakan Army (AA) and the military council has been intense in Rakhine State, where the Shwe natural gas project and other economic initiatives are based. More than half of the state’s 17 townships are now under the AA’s control.

China-owned company wins contract to expand Shwe gas project off Myanmar’s west coast

Expansion of the project proceeds despite fierce fighting for control of Rakhine State, where it is based

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