Military authorities authorise domestic companies to operate old oil wells

While it pushed to regain territory lost since coming to power in a 2021, Myanmar’s military regime has also been granting licences this year to domestic companies to extract oil and gas from old, onshore fields in Bago and Ayeyarwady regions. A junta-controlled newspaper announced last Thursday that authorities had granted rights to two fossil fuel companies—HNA Myanmar Oil & Gas Ltd (HNA) and Future Engineering & Gold Mining Company, Ltd (Future)—to operate at fields located in Bago Region’s Shwedaung Township and the neighbouring Myanaung Township, Ayeyarwady Region. Future received the licences for Pyay oil field, IOR-4 block, in Shwedaung Township and Myanaung oil field, IOR-6 Area 3 block, in Myanaung Township, while HNA received the licence for the Shwepyithar oil field, IOR-7 block in Myanaung Township, the announcement said. The junta also granted rights to the IOR-6 Area 2 block at the Myanaung oil field to another company, Myanmar Kinsanar Ltd, last month. The authorised companies had all signed production-sharing contracts with the junta-controlled giant Myanma Oil and Gas Enterprise (MOGE), which operates under the military council’s energy ministry, according to the junta-run newspaper, which also quoted Ko Ko Lwin, the junta energy minister, predicting that the yield from the oil fields would be lucrative. However, a businessman who asked not to be named said that the wells in the licensed production blocks are producing at a diminished rate, making the investments by the domestic oil companies risky. “The oil fields are over 60 years old. The reworking of old oil fields is done in foreign countries as well, but the potential profit and loss are highly uncertain,” he said, adding that the main aim behind authorising operations by the grantee companies was to “upgrade the level of domestic oil operators.” Despite the energy minister’s optimistic view of the Bago and Ayeyarwady oil field’s prospects, the businessman predicted that the production rates of these fields would compare unfavourably with those of the Mann, Yenangyaung, and Chauk oil fields in Magway Region. The licensed oil blocks are owned by MOGE, with companies operating them on the basis of temporary leases. Drilling operations are expected to begin at those fields next year, and “MOGE is the regulator since it owns the oil fields. For the others, it’s like living in a rented house. They are MOGE’s blocks,” noted the businessman who spoke with Myanmar Now. The details and terms of the profit-sharing arrangements between MOGE and the domestic firms have yet to be verified. Map showing locations of oil and natural gas extraction blocks and projects within and off the coast of Myanmar. The IOR-4, IOR-6, and IOR-7 blocks—recently licensed to domestic firms for reworking—are in Shwedaung Township, Bago Region and Myanaung Township in northern Ayeyarwady Region. According to the businessman, domestic companies have only recently enjoyed any opportunities to participate in the oil and gas sector, which is normally dominated by foreign firms. The massive upfront investment needed in the sector left these companies few options but to share the production with other firms. A source close to the energy industry told Myanmar Now that these oil fields are the earliest oil fields discovered and found by Myanmar nationals under the People Oil Industry after the Myanmar government completely purchased the BOC company in 1963. A source familiar with the energy industry spoke to Myanmar Now about the supply of oil in Myanmar over the decades. The fields in Bago and Ayeyarwady regions that the authorities have licensed to domestic firms are some of the earliest discovered after the nationalisation of the United Kingdom-based Burmah Oil Company (BOC) in 1963. “Due to the military council’s coup, international oil companies and international investors no longer want to be part of the business, so they invited domestic private companies and granted them permission to rework wells that have no production,” the source said. The source argued that the announcement of continuing investments in these wells, despite the complete lack of potential for commercial production, was simply propaganda. In addition to the licencing of onshore extraction blocks, MOGE launched a joint venture—called the “Min Ye Thu” project—to develop an offshore oil and gas block in the Andaman Sea with the Thai-owned Gulf Petroleum Myanmar company in May. The military junta, fighting resistance forces and ethnic armed groups on multiple fronts, has lost wide swathes of territory across the country during the four and a half years since taking power in a coup, and has lost control of valuable natural resource deposits and extraction sites found within those areas. International and domestic activists have pointed to the links between the military’s oil and natural gas revenues and its expenditures on weapons, ammunition, and aviation fuel used in indiscriminate airstrikes and other attacks on civilian areas. While the junta’s atrocities have deterred some international businesses from investing in their energy production ventures, some international companies continue to collaborate with the junta and the oil and gas companies under its control.

Military authorities authorise domestic companies to operate old oil wells

While the junta’s energy minister said there were good prospects for lucrative production from the long-unused wells, others with experience in the energy sector questioned whether they had any potential for viable commercial production

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