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.
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 onand, 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. OE
