Myanmar’s Ministry of Electricity and Energy is apparently assessing the fiscal terms of its production sharing agreements before the bidding round for an offshore oil & gas contract at the end of 2018. The government seems to be going ahead with its assessment plans even though the private players have cautioned it against the move.
The private sector claims that the financial conditions described in the production sharing contracts (PSCs) can impede the investment in the oil & gas sector. U Zaw Aung, the director general of the Oil and Gas Planning Department, has stated that the government is reviewing the fiscal terms and will adjust them to increase the investment in the O&G sector. He further emphasized that the decision on the adjustment of terms will be taken after consulting with the Ministry of Electricity & Energy office and then obtaining the green signal from the Ministry.
Sources cite that as per the oil production sharing agreements, nearly ninety-four percent of revenues accrued by the oil & gas ventures in Myanmar are deposited with the government. The high ‘government take’ along with low costs of oil & poor infrastructure facility has forced many firms to withdraw from their activities across the oil & gas basins in the country. About 50% of the offshore oil blocks provided to the firms during the 2014 bidding round have now been abandoned.
Experts believe that current PSC slab has proved to be non-competitive for Myanmar though it helped in the expansion of four key offshore oil reservoirs across the country. The fall in energy costs has also resulted in many companies scaling down their exploration & production business operations across the offshore oil basins.
Industry professionals such as U Kyaw Kyaw Hlaing are of the opinion that comprehensive assessment and amendments in the PSC structure are the need of an hour. However, he has also cautioned that revision of the PSC fiscal terms should be both fair to investors as well as the administration.