Why oil investment in Myanmar is a gamble
This September Myanmar is set to auction off more than twelve oil and gas wells in an effort to entice foreign firms to invest in oil exploration within the country. This presents the first opportunity for the U.S. to join the biddings in 15 years.
Myanmar was previously under a military regime which lasted almost five decades. Currently, it is trying to make up for lost time by rapidly instituting changes, which include opening up its energy sector to foreign oil investment.
The President of Myanmar, Thein Sein, foresees a more modernized and economically thriving country in five years time. Presently, nearly one-third of the country’s populace is living in poverty, 75 percent of which has no access at all to electricity.
Giant U.S. manufacturing firms like GE and PepsiCo have already invested in the country, but some others were not so keen in doing so. Myanmar is among the most corrupt countries in the world, along with North Korea and Somalia. A lot of firms operating in the country have been pressing for more regulatory transparency in a market virtually run by wealthy businessmen closely associated with military generals and their political allies.
So despite Myanmar’s planned reforms, some foreign firms are still wary of investing in oil exploration in the country. Just recently, the government passed rules leaning towards protectionism, and this has discouraged investors all the more.
Still, Myanmar’s energy potential has reportedly drawn western oil firms Royal Dutch Shell and BG Group to invest in the country’s oil exploration activities, joining the likes of Chevron and Total, according to Reuters. Other oil firms, like ConocoPhillips, BP, ExxonMobil and Statoil have also shown some interest to invest in oil exploration in the country.
Experts estimate that the country could have natural gas deposits of more than 20 trillion cubic feet. At present, over 19,000 barrels of crude as well as 1.5 billion cubic feet of natural gas are produced daily.
Meanwhile, Aung San Suu Kyi, a Nobel Peace Prize award winner, advised investors to think twice before forging a partnership with the country’s Myanma Oil & Gas Enterprise, a state-run energy firm, citing that the company has transparency issues.
Thura Swiss Chief Executive Aung Thura also disclosed that there isn’t much available data on Myanmar firms and the people managing or supporting them. They are very discreet. She added that some may have employed dirty tactics in the past, but it’s quite difficult to pinpoint who did. She suggested that companies willing to gamble take on the services of experts capable of researching and supplying investor-relevant information as a precautionary measure.