Country Context: Myanmar Update on Resources Revenue Management,

& Social and Environmental Impacts.

Governance of Extractive Industries in South East Asia 31 March 2010

OverviewOverview

Overview of resources & wealthOverview of resources & wealthCurrent & future developmentsCurrent & future developmentsSome info from Prof Stiglitz visitSome info from Prof Stiglitz visitEngagement possibilitiesEngagement possibilities……Recent developmentsRecent developmentsSummarySummary

Extractive Industries Extractive Industries in Myanmar?in Myanmar?Gas mainly and some OilGas mainly and some Oil–– Large scale operating and future projectsLarge scale operating and future projects

Minerals Minerals –– particularly gold, copper, particularly gold, copper, gemstones (rubies, jade, sapphires etc)gemstones (rubies, jade, sapphires etc)–– Many of these are small scale operators, Many of these are small scale operators,

((artisanalartisanal mining), with many actors.mining), with many actors.–– Too dispersed for short term work? Too dispersed for short term work?

Timber and Forest ProductsTimber and Forest Products–– Large extraction already done, many issues Large extraction already done, many issues

reported by groups like GW. Too late?reported by groups like GW. Too late?3

Key challenges for Key challenges for Extractive Industries?Extractive Industries?

State considers sovereignty matters very seriously. State considers sovereignty matters very seriously. Agenda is tied up with many issues, including governance, Agenda is tied up with many issues, including governance, the roadmap to democracy and human rights issues.the roadmap to democracy and human rights issues.Sanctions environment has encouraged nonSanctions environment has encouraged non--engagement.engagement.International Reputation for Operators a key possible driver.International Reputation for Operators a key possible driver.–– Particularly human rights issues.Particularly human rights issues.

Economic reform needed. Economic reform needed. –– Particularly exchange rate unification.Particularly exchange rate unification.–– Financial and banking system reform.Financial and banking system reform.–– National accounts reconciliation.National accounts reconciliation.

Energy security issues for China critical.Energy security issues for China critical.Civil society has had little exposure as yet to progress Civil society has had little exposure as yet to progress elsewhere in extractives industry revenue work.elsewhere in extractives industry revenue work.2010 election dominating thinking at present.2010 election dominating thinking at present.

4

4/1/20104/1/2010 55

SHWE

OIL & GAS FIELDS OF MYANMAR OIL & GAS FIELDS OF MYANMAR (ONSHORE)(ONSHORE)

SR NO.SR NO. OIL & GAS FIELDSOIL & GAS FIELDS YEAR OF DISCOVERYYEAR OF DISCOVERY REMARKSREMARKS11 YENANGYAUNGYENANGYAUNG 18871887 PRODUCINGPRODUCING22 AYADAWAYADAW 18931893 PRODUCINGPRODUCING33 CHAUKCHAUK 19021902 PRODUCINGPRODUCING44 PAYAGONPAYAGON 19591959 SUSPENDEDSUSPENDED55 MYANAUNGMYANAUNG 19641964 PRODUCINGPRODUCING66 PYAYPYAY 19651965 PRODUCINGPRODUCING77 SHWEPYITHASHWEPYITHA 19671967 PRODUCINGPRODUCING88 PYALOPYALO 19691969 SUSPENDED SUSPENDED 99 MANNMANN 19701970 PRODUCINGPRODUCING

1010 LETPANDOLETPANDO 1974 PRODUCED FOR 1974 PRODUCED FOR 2 YEARS & SUSPENDED2 YEARS & SUSPENDED

1111 PEPPIPEPPI 19761976 PRODUCINGPRODUCING1212 HTAUKSHABINHTAUKSHABIN 19781978 PRODUCINGPRODUCING1313 HTANTABINHTANTABIN 19801980 SUSPENDEDSUSPENDED1414 KANNIKANNI 19851985 PRODUCINGPRODUCING1515 APYAUKAPYAUK 19911991 PRODUCINGPRODUCING1616 SHWEGUSHWEGU 19941994 SUSPENDEDSUSPENDED1717 KYAUKKWET /KYAUKKWET / 19951995 PRODUCINGPRODUCING

LETPANDOLETPANDO1818 INDAINGINDAING 19961996 SUSPENDEDSUSPENDED1919 NYAUNGDONNYAUNGDON 19991999 PRODUCINGPRODUCING

2020 THARGYITAUNG/SABETHARGYITAUNG/SABE 2001 2001 PRODUCINGPRODUCING2121 MAUBINMAUBIN 20062006 PRODUCINGPRODUCING2222 KANHTOOKANHTOO 20072007 PRODUCINGPRODUCING

M-9

1/1/20091/1/200977

Myanmar Current Oil and Gas Myanmar Current Oil and Gas ProductionProduction

Onshore (MOGE)Onshore (MOGE)Oil : 10,000 barrel / dayGas: 105 million cu ft / dayOffshore (PSC)Offshore (PSC)Oil: 12,000 barrel/day (condensate)Gas: 1,050 million cu ft / day

Myanmar Pipeline NetworkMyanmar Pipeline NetworkOnshore (MOGE)Onshore (MOGE)Length: 1966 milesSize: 6 to 20 inch diameterOffshore (PSC Export line)Offshore (PSC Export line)Length: 216+39 miles (Yadana)

126+42 miles (Yetagun)Size: 36” diameter (Yadana)

24” diameter (Yetagun)

4/1/20104/1/2010

Recoverable Reserves Recoverable Reserves –– Crude Oil & Natural GasCrude Oil & Natural Gas (as at 1(as at 1--44--2008)2008) LocationLocation CrudeCrude NaturalNatural

OilOil GasGas (MMBBL) (TCF) (MMBBL) (TCF)

Onshore 112 Onshore 112 0.460.46

Offshore 101 17.00Offshore 101 17.00

(as at 1(as at 1--11--2009)2009) LocationLocation CrudeCrude NaturalNatural

OilOil GasGas (MMBBL) (TCF) (MMBBL) (TCF)

Onshore 502 Onshore 502 0.970.97

Offshore 81 10.630Offshore 81 10.630

4/1/20104/1/2010 99

COMPANY BLOCK FIELD / AREA

MPRL E&P Ltd MOGE-2 Mann Field

GoldPetrol IOR-2 Chauk Field MOGE-1 Yenangyaung Field

Focus Energy Ltd MOGE-2 Htaukshabin / Kanni Field

Chinnery Assets Ltd IOR-4 Pyay Field

CNOOC PSC-M KyaukphyuPSC-C1 IndawPSC-C2 Shwebo-Monywa

SINOPEC PSC-D Mahudaung

ESSAR PSC-L Sittwe

Silver Wave Energy PSC-B 2 Zepyutaung

Nobel Oil PSC-A HukaungPSC B-1 Uyu

Note: 9 oil companies are working in 13 onshore blocks:

CURRENT ONSHORE OPERATING COMPANIESCURRENT ONSHORE OPERATING COMPANIES

1/1/20091/1/2009

COMPANY BLOCK FIELD / AREA

Daewoo A-1 / A-3 Shwe ProjectAD-7 Deep Water

TOTAL E&P Myanmar M-5, M-6 Yadana Project(Chevron)Petronas Carigali M-12, M-13, M-14 Yetagun ProjectPTTEP M-9 Zawtika Project

M-3, M-4, M-9, M-11CNOOC A-4

M-10ESSAR A-2Ngwe Oil & Gas Ltd M-8MPRL E&P Ltd. A-6Silver Wave Energy A-7CNPC AD-1, AD-6, AD-8 Deep WaterRimbunan/ UNOG M-1ONGC Videsh Ltd AD-2, AD-3, AD-9 Deep WaterTwinza Oil YEBPetroVietnem/ EDIN M-2

Note : 14 oil companies are working in 28 offshore blocks.

CURRENT OFFSHORE OPERATING COMPANIESCURRENT OFFSHORE OPERATING COMPANIES

4/1/20104/1/2010

ZAWTIKAZAWTIKA

SHWESHWE

OTHER POTENTIAL PROJECTS

1/1/20091/1/2009

105 185 225 265110200 200 200

600

600 600 600

400

400 400 300

100 150

400 400600

0

060

90

0

250

400

100

0

0

500

1000

1500

2000

2500

3000

2009 2013 2015 2019

MOGE Production

YETAGUN

YADANA

ZAWTIKA

SHWE

Export

Domestic

DA

ILY

GA

S VO

LUM

E (m

illio

n cu

ft )

YEAR

1215 mmscfd

(215 dom.)

1885 mmscfd

(485 dom.)

2235 mmscfd

(585 dom.)

2605 mmscfd

(705 dom.)

Additional Gas In

Additional Gas In

FUTURE MYANMAR GAS PRODUCTIONFUTURE MYANMAR GAS PRODUCTION

1,680971

911241

214193185

161151

11298

847571666562595756

602

0 200 400 600 800 1,000 1,200 1,400 1,600 1,800

Russia

Iran

Qatar

Saudi Arabia

United Arab Emirates

United States

Nigeria

Algeria

Venezuela

Iraq

Indonesia

Norway

Malaysia

Turkmenistan

Uzbekistan

Kazakhstan

Netherlands

Egy pt

Canada

Kuwait

Rest of world

Greatest Natural Gas Reserves by Country, 2006, trln.cu ft

www.eia.doe.gov/emeu/cabs/

Transparency in Natural Transparency in Natural Resource RevenuesResource Revenues

Gas currently around 45% of export revenue.Gas currently around 45% of export revenue.Around 5Around 5--10% of GDP depending on figures used...10% of GDP depending on figures used...

Gas revenue of $50/capita versus ODA of $4/capitaGas revenue of $50/capita versus ODA of $4/capita& education $0.6/capita & health $0.5/capita.& education $0.6/capita & health $0.5/capita.(2008 GDP estimates are $290 (2008 GDP estimates are $290 –– 340/capita340/capita……))With Shwe project, maybe 65% of export revenue. With Shwe project, maybe 65% of export revenue.

Many risk factors present for Natural Resource Curse. Many risk factors present for Natural Resource Curse. Engagement with EITI (Extractives Industry Engagement with EITI (Extractives Industry Transparency Initiative) could be a major step forward Transparency Initiative) could be a major step forward in improving visibility of accountability and transparency.in improving visibility of accountability and transparency.

A Natural Resource Fund could be a key way of A Natural Resource Fund could be a key way of locking in more funds for education, health & livelihoods locking in more funds for education, health & livelihoods if good governance is objective of such a fund.if good governance is objective of such a fund.

Gas revenues large, but are limited time duration, nonGas revenues large, but are limited time duration, non--renewable, & therefore particularly precious renewable, & therefore particularly precious –– USE WELL!USE WELL!

NSDS NSDS -- Sustainable Sustainable Energy Development Energy Development –– Recommendations: Recommendations: --

“Myanmar should recognize the need for care to avoid the natural resource curse which has already affected many countries that are rich in natural resources, that hindered their sustainable development.”“Myanmar should consider mechanisms and explore implementation used in other countries for avoiding natural resource curse issues through transparency mechanisms and examine the Extractive Industry Transparency Initiatives.”

Towards a More Productive Agrarian Economy for Myanmar

Professor Joseph E. StiglitzDecember 2009

(The following slides are a cut outs from his presentation made to Ministry of Planning

and Ministry of Agriculture – an audience of around 100…)

Myanmar at the Crossroads• …Its endowment of natural resources

provides the resource base to allow government to address effectively the challenges in agriculture….

• Challenge is to confront the limitations of the past but using the new opportunities afforded– Building on Myanmar’s existing strengths…– To transform Myanmar’s economy – In ways that promote sustainable development– Which benefit all of its citizens– Consistent with basic values

Myanmar’s Good Fortune

• Endowment of natural wealth (oil & gas, fertile land, forest, access to sea)

• High social capital• Location in Asia—likely to be the most

prosperous region in the world in the next decade

Managing Natural Resource Wealth

• Many countries, however, have not done a good job of managing their natural resource wealth– So much so that it has come to be called the “Natural

Resource curse”– Problems posed by price volatility, exchange rate

appreciation, misspending of money• The result is that on average, countries with large resource

endowments often grow more slowly• And are marked by high levels of inequality

– But all of these can be managed—a few successful countries have succeeded in high growth and low inequality and poverty

Impact Assessments: Impact Assessments: --

Many references in National Sustainability Development Strategy (NSDS) to involvement of multi-sectoral ministries and multi-stakeholder groups. Big & real!Environmental Impact Assessment for significant projects. Two major SEIA assessments underway. Public availability?

Environmental Environmental Impact Assessment Impact Assessment Issues / Concerns?Issues / Concerns?

Availability of sufficient Availability of sufficient background for baselines.background for baselines.Technical capacity of Technical capacity of groups to do work.groups to do work.Constraints of time etc Constraints of time etc leading to rushed studies. leading to rushed studies. Consultation not really Consultation not really taking place. taking place. Documents are not made Documents are not made public or released.public or released.

Social & Environmental Social & Environmental Impacts of 880km Pipeline ? Impacts of 880km Pipeline ?

What are important Social What are important Social Impact Assessment Issues?Impact Assessment Issues?

Knowledge about projects and Knowledge about projects and what the possible impacts are.what the possible impacts are.Preconceptions about likelihood of Preconceptions about likelihood of compensation based on past.compensation based on past.Difference between ownership of Difference between ownership of land and having legal land papers. land and having legal land papers. Serious poverty situation and lack Serious poverty situation and lack of education in most rural areas.of education in most rural areas.Concerns about more Concerns about more militarisationmilitarisation..

SummarySummary

Myanmar is a very resource rich country.Myanmar is a very resource rich country.Much work still needed to promote Much work still needed to promote revenue transparency revenue transparency –– in all groups.in all groups.““Civil SocietyCivil Society”” needs development.needs development.The NSDS process has made some The NSDS process has made some important steps forward in promoting important steps forward in promoting multimulti--stakeholder process. stakeholder process. Two major projects now in SEIA.Two major projects now in SEIA.More transparency in general will help. More transparency in general will help. 2010 Election a key upcoming event. 2010 Election a key upcoming event. PLEASE include Myanmar in processes of PLEASE include Myanmar in processes of AseanAsean advocacy, as much work needed! advocacy, as much work needed!