“We set high standards of performance and ethical behavior that we apply
internationally … according to our core values of honesty, integrity and
respect for people and to comply with relevant legislation and regulations.”
Words like these might well be
sending a shudder down the corridors of the Myanmar Oil and Gas Enterprise
(MOGE) as it grapples with pressures from some Western international oil
companies for Burma to become more transparently open for business.
The statement is part of Shell’s
business standards manifesto and appear to illustrate why Burmese Energy
Minister Than Hay recently held back from offering dozens of potentially
lucrative licenses to explore for gas and oil.
It was thought that more than 40
blocks in offshore territorial waters and onshore areas were going to be
announced at the Myanmar Oil Gas and Power in Rangoon earlier this month.
That was before a ministry
official declared that a bidding auction would be postponed following Western
company calls for domestic industry reforms to match recent political changes
in the country.
Companies such as Shell had
called for a clear and open explanation of the bidding process, who will be
involved and how the sector will be regulated.
Until the military regime moved
off stage and political reforms began, virtually all licenses and deals went
through MOGE, a well-known tool of the military. The state agency has been
denounced by the US government and opposition leader Aung San Suu Kyi but
continues to have a close hand in the industry.
The ministry has suggested that a
new round of licenses for offshore and onshore exploration blocks could be
offered by the end of the year once Burma’s regulatory process has been
overhauled to meet Western standards.
However, industry analysts and
Burma observers think it is over-optimistic to expect to be ship-shape by 2013.
“There’s going to have to be some
pretty rapid change at MOGE otherwise I cannot see the ministry of energy being
able to lay out its offshore blocks portfolio any time soon,” energy analyst
Jeff Mead in Hong Kong told The Irrawaddy on Monday.
Others think the delay in
offering blocks is a wise move for Burma’s economy in the longer term.
“Quite a few people have been
suggesting Burma should have a moratorium on new block licenses to give the
government time to make sure these projects are in the national interest, and
that the country gets the best deal it can,” said the co-editor of Burma
Economic Watch bulletin Sean Turnell, an economist with Australia’s Macquarie
University.
“There’s no need to rush,
especially since the revenue streams from these projects will be the basis of
Burma’s fiscal future—funds to upgrade infrastructure, funds for improvements
in health, education [and] also to provide Burma itself with the energy it
needs.
“The old regime wanted to sell
gas as quickly as it could to raise cash. The new one has a more important, but
more complex agenda,” added Turnell.
The much-amended foreign
investment law which was agreed by the Burmese Parliament on Sept. 7 will
clarify some of the questions the oil businesses had during the Rangoon
industry forum last week, but many others remain unanswered.
Western companies that attended
the forum were frustrated by the lack of data relating to offshore blocks
expected to be offered. MOGE was either unwilling or unable to provide
technical answers to questions.
“It’s rather a Catch-22 situation
because the government wants or rather needs the Western oil majors for the
kind of investment in E&P [exploration and production] that’s needed and
the majors want to move into Burma, but not at any price,” Mead said. “They are
not willing to run afoul of a still-existing web of US constrictions relating
to the military government era and they do not want to invest in blanks.”
MOGE has claimed that Burmese
waters hold between 11 trillion and 22 trillion cubic feet, but these are
largely unverified figures.
However, not all big
international oil firms are squeamish about dealing with MOGE. In recent
months, the state oil companies of Malaysia and Thailand—Petronas and PTTEP
respectively—have signed exploration contracts, and France’s Total and Japan’s
Nippon Oil agreed to buy shares in PTTEP’s large offshore gas prospect in the
Gulf of Martaban.
Chinese state firms such as China
National Offshore Oil Corporation and China National Petroleum Corporation are
also working closely with MOGE.
Questions are still being asked
by human rights NGOs about CNPC’s ethical standards towards workers and small
landowners as it constructs 900-kilometre gas and oil pipelines through Burma.
“I think Western oil firms do care
about MOGE—not necessarily because they are warm and cuddly institutions—but
simply because they do have to exist within laws and activism back home,” said
Turnell. “They do operate in ways that probably do not bear scrutiny elsewhere,
but Burma has a profile on these issues that may not apply to other places.”
Business risk assessor companies
have previously cautioned against linking up with MOGE.
Germany-based Transparency
International still ranks Burma as one of the world’s most corrupt countries,
while the UK risk assessor Maplecroft warned about the lack of institutional
infrastructure back in May.
“Despite the growing but cautious
enthusiasm amongst investors for an imminent return to Myanmar, businesses need
to be aware that significant operational and strategic risks are likely to
persist in the short term,” Maplecroft warned in a study.
On Sept. 8 the East Asia Forum,
part of the East Asian Bureau of Economic Research, published an article by
Turnell warning that Burma’s reforms “are fragile and contingent upon a few key
individuals.
“They are also pitched into a
business environment that bears all the scars of five decades of misrule:
degraded infrastructure, rampant corruption and cronyism, severe capacity
constraints in government and policy making bodies, residual human rights
abuses and ethnic conflict, a dysfunctional financial sector, and a myriad of
other obstacles to a smooth transition.”
These are sobering words for a
global oil company with Shell’s nobly-worded ethics code.
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