Published On: Thu, Jun 28th, 2012

INTERVIEW-UPDATE 1-Energy firm Interra eyes output boost in Myanmar

By Eveline Danubrata:(Reuters) – Singapore-listed oil and gas firm Interra Resources Ltd aims to aggressively develop its two onshore oil fields in Myanmar and is eyeing new oil and gas blocks slated to come up for tender this year.

Starting out in Myanmar in 1996, the company is among the few listed Myanmar-focussed plays and its shares have quadrupled so far this year, valuing it at S$112 million ($87 million).

In the year to December, nearly two thirds of Interra’s total revenue of $24.8 million came from Myanmar, seen as one of Asia’s last frontier markets. Indonesia accounted for the remaining revenue.

“We are looking to significantly increase the oil production…We hope to increase it by 15-20 percent per annum,” CEO Marcel Tjia told Reuters on Wednesday.

Interra operates the Chauk and Yenangyaung fields, which produce 2,300 barrels of oil per day (bopd), nearly one-third of Myanmar’s total onshore oil output of 7,500 bopd, the former private equity partner said in an interview at his office in central Singapore.

The company has a partnership with Chinese state-run firm ZhenHua Oil for its oil fields in Myanmar and aims to drill a total of 10 wells in the country this year.

“Especially in the last two and a half years, we have had very good business development in Myanmar,” Tjia said. “If you look at the share price, at previous levels we were very undervalued in terms of earnings, assets, cash flow.”

Interra has been among the most heavily traded stocks in the Singapore market over the past few months.

Regional oil and gas players with exposure to Myanmar include Thailand’s PTT Exploration and Production Pcl, as well as China’s CNOOC and Sinopec.

As Myanmar opens up after almost 50 years of army rule, foreign investors are descending on the resource-rich country and shares of Myanmar-focussed companies have jumped.

“In the first phase of the opening up of any market, infrastructure, oil and gas, property stocks are the lower-hanging fruits. They will be the first to benefit,” said Carmen Lee, head of OCBC Investment Research in Singapore.

“At this point in time, there’s really a lot of interest in stocks with exposure to Myanmar. But I think investors should exercise a little bit more discretion because some of the stock prices have gone up quite a fair bit and it’s still early days.”

Interra’s major shareholders include Indonesian businessmen Edwin Soeryadjaya and Sandiaga Salahuddin Uno. Soeryadjaya is also the chairman of PT Saratoga Investama Sedaya, a private equity and investment company in Indonesia.

MOVING FAST

Myanmar is expected to offer up to 18 onshore oil and gas blocks in a global tender to be launched later this year, opening up a potential flood of new investment into the country. The new tender follows the country’s largest oil and gas offering in August.

“I am quite surprised it’s moving this fast. Myanmar needs a lot of energy, and to develop the country they need the foreign investment,” Tjia said.

He said Interra will “definitely” look at potential blocks, but expects intense competition, especially from small-to-medium sized Asian oil and gas companies.

Corruption and infrastructure are major concerns for foreign investors, Tjia said, noting that Myanmar needed to develop its physical infrastructure including power supply and roads, as well as “soft infrastructure” such as its banking and legal system.

“There is no real functioning banking system. Bank transfers are not easy, foreign currencies are not easy, and it’s still sometimes difficult to use credit cards. It is now possible to exchange kyat for U.S. dollar, but not in very large amounts.” ($1 = 1.2803 Singapore dollars) (Editing by Anshuman Daga)

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