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COMMENT: deepwater Myanmar could create long-term growth

Tue 26 Sep 2017 by David Foxwell

COMMENT: deepwater Myanmar could create long-term growth

Deepwater E&P activity offshore Myanmar might pick up, argues Clarksons Research, which could create opportunities for vessel owners, despite a cabotage market in the country.

Clarksons said that recent deepwater gas discoveries offshore Myanmar have bolstered the confidence of oil companies sufficiently for them to start planning deepwater drilling campaigns, in spite of weaker energy prices. So, could these first steps be an indication of Myanmar’s deepwater E&P potential?

Historically, E&P activity offshore Myanmar was focused in shallow water, with discoveries in water depths of less than 200 m accounting for 78% of all offshore finds in the country as of September 2017. Myanmar’s first deepwater find, the Mya South gas field, in a water depth of 560 m, was not discovered until 2007.

The country held its initial offshore licensing round in 2013, awarding 20 offshore blocks, of which 13 were located in deep or ultra-deepwater areas, indicating strong operator interest in Myanmar’s deepwater potential at the time.

These 13 blocks were awarded before the downturn but with energy demand from Myanmar’s major gas export partners such as Thailand and China and its domestic market expanding, Clarksons argues that there are incentives for operators to get involved in E&P activities in these deepwater blocks, which are thought to hold large gas reserves. Loosely upheld cabotage rules – due to a lack of locally-flagged offshore support vessels – has increased competition in charter markets, driving down rates, potentially reducing deepwater E&P costs.

The discovery of very large gas fields like Shwe Yee Htun and Thalin, at depths of 2,000 m and 836 m respectively, has also strengthened operator interest in Myanmar’s deepwater acreage.

Clarksons noted that Woodside has a five-well deepwater drilling campaign scheduled to commence this year and Shell is reportedly planning to drill in its deepwater blocks soon. Meanwhile, Total has recently farmed into 50% of Block MD-7 (average water depth, 2,436 m). On national oil company (NOC) front, Petronas acquired a 36% stake in the AD-9 and AD-11 ultra-deepwater blocks in March.

Offshore E&P trends in Myanmar’s Asian neighbours, where NOCs like Pertamina and PTTEP are looking to take over more domestic acreage, could serve to heighten the relative attractiveness to international oil companies (IOCs) of deepwater E&P in Myanmar, where 53% of currently licensed acreage is located in water depths of at least 500 m.

However, it is not all plain sailing for Myanmar. The country lacks the logistic infrastructure to support a rapid ramp-up of deepwater E&P activity. There are also risk factors reflecting the country’s ongoing political transition that may represent excessive exposure for some operators (on top of the risks already inherent in weaker energy prices).

Clarksons concluded that there are evidently obstacles to be overcome if Myanmar’s still young offshore sector is to grow to maturity and that, in the short term, existing drilling plans may frame the country’s deepwater outlook.

In the longer term, however, rising gas demand, strong IOC interest and a friendlier investment climate could lead to rather more expansive growth in Myanmar’s deepwater E&P.

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