Published On: Tue, May 22nd, 2012

Myanmar places offshore prospects in the spotlight

Myanmar places offshore prospects in the spotlight

from: Offshore Engineer
  by: John Mueller
  Sunday, February 01, 2004

Building on the success of the substantial offshore Yadana and Yetagun gas producing fields, Myanmar is offering generous incentives for shelf and deepwater prospects along its entire coast, from the Bay of Bengal southwards to the eastern Andaman Sea. John Mueller reports.

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Myanmar has extensive offshore prospects arranged north to south in shallow to, in places, rapidly deepening acreages adjacent to the Bay of Bengal and the Andaman Sea, which have been, for the most part, lightly explored.
Oil and gas exploration have a long history in Myanmar, but it is only since the 1990s that offshore efforts, first begun in the 1960s, have resulted in commercial production. The success of Yadana and Yetagun and the growing regional need for gas is spurring the government to offer some of the most attractive terms in Southeast Asia to encourage exploration. Prospects in the shallower areas are receiving attention from a number of, mostly Asian, companies. The lure of deeper sectors, much heralded by the national oil company Myanmar Oil & Gas Enterprise (MOGE), are largely untouched and awaiting a decision on undetermined maritime boundaries with neighbouring states Thailand, India and Bangladesh.

Estimates of Myanmar offshore reserves, so far primarily gas with significant quantities of condensate, vary but reliable sources generally place recoverable gas reserves at around 9-10tcf.

The Myanmar offshore area has been divided into 25 blocks covering an area of about 270,000km2. To the west of the Rakhine coast along the Bay of Bengal, in the north, are situated seven blocks, A-1 through A-7. Eleven blocks, M-1 to M-11, are located in the Gulf of Martaban (aka Gulf of Moattama), in the northern sector of the Andaman Sea, and seven blocks from M-12 to M-18 are by the Tanintharyi coastline, in the south, west of the Mergui Archipelago.

Deepwater areas are both within the western margins of blocks in the Rakhine (A-2 through A-7), Moattama (M-2, M-5, M- 6, M-8 and M-11) and Tanintharyi (M-12, M-14, M-15, M-16, M-17 and M-18) zones, and westward of these permits in what Myanmar considers its Exclusive Economic Zone.

Myanmar can still be considered as a frontier area moderately explored both on and, especially, offshore.

The country’s hydrocarbon prospectivity is evidenced by a long history of exploitation, going back over 100 years to the discovery of such large, and still producing, onshore oilfields as Yenangyaung and Chauk.

Oil and gas exploration offshore Myanmar was initiated in 1965 with a seismic survey in the Rakhine area. Subsequently, from 1966 to 1988, seismic surveys were carried out in most of the 25 offshore blocks.

MOGE drilled 12 exploration wells from 1972 to 1974 of which four tested gas, resulting in the discovery of the Badamyar gas field in block M-5.

In 1975 four foreign oil companies, among them Esso and AODC, entered into service contracts with MOGE for offshore oil and gas exploration. A total of 18 wells were drilled in 11 blocks, one well testing gas at 18.5mmcf/d in block M-7.

From 1982 to 1987, MOGE carried out seismic surveys in the Gulf of Martaban and Tanintharyi offshore areas and drilled 15 wells, with the discovery of the Yadana gas field in block M-5.

In 1990 Premier Oil was awarded a PSC for blocks M-13 & M-14. Two years later, after farmins by Texaco and Nippon Oil, and the acquisition of block M-12 by this group, exploratory well Yetagun-1 discovered gas in block M-13. Petronas International Corporation (PICL) then became involved in Yetagun through the acquisition of Texaco’s 30% project interest in 1997.

In 1995 and 1996, Arco entered into PSCs for blocks M-7 and M-9. After investing $50 million over a three-year period, Arco decided not to renew the leases and completely withdrew from the blocks in1998. Although Arco found no commercial gas, it has been reported that the six exploration wells it drilled, two in block M-7 and the others in block M-9, gave rise to an initial gas reservers estimate of 1.7tcf.

Also in 1996, Total and Unocal conducted a six-well appraisal and exploration drilling campaign in Moattama blocks 5 and 6, flowing 32mmcf/d of gas from the Badamyar sands structure, and discovered the Sein gas field, located just 10km south of the Yadana field.

Unocal Myanmar Offshore Co and Total Myanmar Exploration & Production signed a PSC with MOGE in 1997 for exploration in block M-8, which covers 11,068km2 in the Andaman Sea, southwest of the Yadana field. Before eventually relinquishing the permit, the co-venturers reportedly shot 5000km2 of 2D seismic.

In 1999, Genting Oil & Gas, already operator of block M-4 through its subsidiary Roundhay, gained block M-3 through acquisition of Jamberoo. The following year, Genting relinquished block M-3 after concluding the permit was unlikely to contain commercial hydrocarbon. An exploratory well, Ye-1, drilled in block M-4 found only noncommercial quantities of gas.

Petronas’ interests in Myanmar received a double boost over the past two years. First came the award in 2002 of four PSCs for blocks M-15, M-16, M-17 and M-18, with Petronas Carigali Myanmar II Inc acting as operator and holding 100% equity. Then came the completion in 2003 of the asset swap which saw Premier Oil transfer its 26.67% stake and operatorship in the Yetagun field to PICL.

Yadana and Yetagun

The bulk of gross national hydrocarbon production in Myanmar is accounted for by the prolific Yadana and Yetagun offshore fields, which have a combined average output of over 800mmscf/d of gas. About 80% of this yield is piped to Thailand, the balance going to domestic needs, all of which is used for electrical power generation.

Yadana Natural Gas Project: Following the discovery of gas in the Yadana field, Total Myanmar Exploration & Production (TMEP) carried out 2D/3D seismic surveys in blocks M-5 and M-6 of the Moattama Offshore Area followed by four appraisal wells, which established 5.7tcf of recoverable reserves from both carbonate and clastic reservoirs.

A 30-year gas sales agreement (GSA) signed in February 1995 calls for a Daily Contract Quantity (DCQ) of 525mmscf/d of natural gas to be sold and delivered to the Petroleum Authority of Thailand (PTT) and 125mmscf/d under a separate contract for domestic consumption. Gas output is to rise to 600mmscf/d with demand, eventually peaking at 900mmscf/d.

TMEP also found several satellite gas fields that include the Sein field and detected additional prospects in blocks M-5 & M-6, with a potential 6.5tcf of gas.

Yadana Natural Gas Project comprises three platforms, production, wellhead (WH) and living quarters (LQ) and a 36in, 256- mile long submarine and overland pipeline to the Myanmar-Thai border at Nat-Ein- Taung (Ban-E-Tong). Yadana started delivering gas to Thailand in July 1998, the total project having cost $1.184 billion.

Yetagun Natural Gas Project: After the discovery of the Yetagun field by Premier Petroleum Myanmar (PPML), delineation wells in Tanintharyi Offshore Area blocks M-12, M-13 and M-14 located the Yetagun North and South satellite fields along with other prospects. Certified reserves of 3.2tcf of gas and 84.6 million barrels of condensate were confirmed. A 30-year GSA was signed in March 1997 stipulating a DCQ of 260mmscf/d of natural gas was to be delivered to PTT from July 2000.

The Yetagun project consists of a single production, WH and LQ platform plus a 170-mile subsea and overland 24in pipeline, also to the Myanmar-Thai border at Nat- Ein-Taung. Gas deliveries to Thailand started in April 2000. Total project cost was about $840 million.

During the first half of 2003, gross average gas production rates were 282mmscf/d of gas and 8017b/d of condensate. Offshore pre-works and module fabrication are under way for an upgrade to 400mmscf/d of sales gas, and a corresponding increase in condensate production to around 11,500b/d, with effect from April 2004. This project is accompanied by a programme of in-fill production drilling.

Current offshore exploration

As offshore exploratory efforts have been ongoing to delineate and extend the Yadana and Yetagun fields, new ventures are being undertaken in block A-1 by Daewoo of South Korea and in the newly acquired blocks M-7 and M-9 by PTTEP. And in the southernmost offshore region, Petronas is continuing its exploratory efforts.

Daewoo International, operator, is scheduled to drill its first exploration well, Shwe-1, in block A-1 in Q4 2003. block A-1 covers 3885km2, and is located in the northernmost permit of the Rakhine Offshore Area.
Daewoo evaluated the Shwe prospect from newly acquired 2D seismic, estimating its potential gas reserves at as high as 10tcf. Discovered gas would be exported to the Indian market, transported by one of three proposed pipeline routes. Two overland possibilities are direct from Myanmar or via Bangladesh, with a third option by a subsea link under the Bay of Bengal. India is reported to be preparing onshore distribution infrastructure for anticipated gas importation from Myanmar by 2006-2008.

Daewoo holds a 60% stake in Block A-1, and its partners are ONGC Videsh (20%), GAIL (10%) and Korea Gas Co (10%).

PTTEP has signed a PSC for offshore petroleum exploration blocks M-7 and M-9, located in the Gulf of Martaban some 150- 250km south of Yangon, covering an area of approximately 27,000km2. In the first four years, PTTEP, as operator and 100% interest holder, expects to spend around $16 million for geological and geophysical studies, seismic surveys and the drilling of two exploration wells.

Petronas is conducting an exploration programme in its M-15, -16, -17 & -18 blocks, the southernmost of all offshore permits, located in the Tanintharyi Offshore Area.

Deepwater geology

The geological setting of the three offshore zones, Rakhine, Moattama and Tanintharyi, differ considerably with knowledge of the petroleum systems and reserves in Moattama and Tanintharyi better established.

The Rakhine Offshore Area is comprised of an extremely thick sequence of Middle Miocene and younger shelf sediments. Since it is situated south of the Bay of Bengal, below which is the submerged delta of the Ganges, the thickness of sedimentary rocks on the seabed is believed to vary from 18km in the north to 8km in the middle, tapering to 1km in the southern part of the Bay. Preliminary test drillings in the Rakhine Offshore Area indicate natural gas reserves of up to 14tcf.

The deepwater of the Moattama Offshore Area has rollover and anticlinal traps, caused by growth faults with the possibility of traps related to mud diapirs. Water depths over the delta-shelf are less than 200m and deep objective depths are thought to lie between 2000m and 5000m.

The Tanintharyi Offshore Area lies between the Mergui platform of the southwest coast and east central Andaman Sea, where the seabed steeply slopes in a westward direction, with water depths ranging up to 1000m. It is expected that a significant sediment thickness should be affected both by folding and faulting. As in the Mergui platform, prospects may include both Miocene reefs and argillaceous sequences. Thus both reservoirs and source rocks are expected to be developed.

Exploration incentives

The terms and conditions of production sharing contracts are not rigidly fixed and include a renegotiation clause allowing adjustments in the event of unforeseen situations.

The range of attractive PSC incentives granted includes: exemption of duties on import of petroleum industry equipment and materials, a three-year tax holiday with corporate rate of 30% on taxable income, no export duty levied on export of petroleum and an accelerated depreciation of 25% per annum. In addition, data can be reviewed, with the assistance of technical staff, free of charge.

Myanmar is in the process of clarifying its maritime boundaries with its immediate maritime neighbours, Thailand, Bangladesh and India.

In accordance with the United Nations Convention on the Law of the Sea (UNCLOS), the Myanmar government declared in 1977 an Exclusive Economic Zone (EEZ) to 200 nautical miles (nm) from the nearest coast.

With regard to the demarcations of the 200nm EEZ with India and Thailand for the area of the Gulf of Martaban and Tanintharyi, Myanmar has reported no problems have been encountered. Bangladesh, on the other hand, requires negotiation as Myanmar seeks to establish a 200nm boundary in the Rakhine Offshore Area of the Bay of Bengal, along the overlapping area of the western part of the Rakhine coast.

Additionally, the 200nm EEZ can be extended to 350nm upon approval by the UNCLOS commission on the continental shelf, providing the existence of 1km of subsea sediment thickness can be demonstrated.

According to paragraph 3, article 76 of UNCLOS, the ‘continental margin’ is defined as comprising the submerged prolongation of the land mass of a coastal state and consisting of the seabed and subsoil of the continental slope, and the continental rise, but does not include the deep ocean floor with its oceanic ridges or the subsoil thereof.

As the continental margin of the Rakhine coastal region, situated at the southern part of the Bay of Bengal, is of the convergent type where the crust is generally marked by a deep trench, the existence of 1km of sediments is expected.

According to paragraph 5, article 76, the Union of Myanmar is entitled to establish the outer limit of the continental shelf to 350 miles from the baseline which lies along the Rakhine coast.

The Myanmar government is making preparations for the possible extension of its outer limit to 350 miles, with the expectation that a four-year survey period can begin in 2004. If the data so acquired is in accordance with the UNCLOS declaration, a proposal will be submitted to the UN not later than May 2009.

Conclusion

Myanmar, in an attempt to capitalise on the appreciable reserves of the Yadana and Yetagun blocks and adjacent areas as well as offshore gas and condensate processing infrastructure, has been more intensively promoting offshore prospects, highlighting the potential of deepwater along all of her territorial waters. So far, though, most activity still centres around the nearer shore blocks and adjacent to those permits with proven reserves.

Nevertheless, interest has been accelerating, with Daewoo, PTTEP and Petronas stepping up exploratory activities.

Myanmar has been showing a definite preference for gas development with increasing volumes exported to Thailand and plans in the works for pipelines to India and possibly Bangladesh. India has been especially encouraged by the Myanmar Ministry of Energy not imposing any duty on the export of oil and natural gas and the concession given to Gail Ltd to export 90% of any gas produced from fields in the A-1 Block.

Furthermore, MOGE has stated its willingness to negotiate terms on a blockby- block basis, dependent on water depth and potential.

It is hoped that these flexible terms will hearten more investors to explore in the offshore blocks on offer: six in the northern Rakhine area, A-2 to A-7, and including M-1, M-2, M-3, M-8, M-10 and M- 11 in the central Moattama region.

Although there US and European companies are thin on the ground in Myanmar, with Premier the latest to depart, Unocal and Total provide two prominent exceptions, Each has bucked criticism of its presence in Myanmar, in particular Unocal for its role in the construction of the onshore segment of an export pipeline. But Unocal has affirmed that it is not considering withdrawing from its investment in the Yadana Natural Gas Project.

This western sentiment has not deterred a number of Asian firms from investing, however, prominent among them being Malaysia’s Petronas which is now active in seven of Myanmar’s offshore blocks.

Deepwater is a new and promising frontier for Myanmar, with acreage totaling around 113,400km2, underlying which is significant sediment thickness and a variety of structures favourable for hydrocarbon accumulation. However, as only some deepwater is in existing blocks, exploration in these regions may only take off once resolution of maritime boundaries has been achieved.

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