While offshore production activity in Myanmar began in 1998, deepwater E&P in the country is arguably still nascent. However, recent deepwater gas discoveries off Myanmar seem to have bolstered the confidence of oil companies sufficiently for them to start planning deepwater drilling campaigns, in spite of weaker energy prices. Could these first steps be indicative of Myanmar’s deepwater E&P potential?
Historically, E&P activity offshore Myanmar was focused in shallow waters, with discoveries in water depths of less than 200m accounting for 78% of all offshore finds in the country as of start September 2017 (all bar one of these are gas fields). One of the earliest offshore discoveries was the Yadana gas field, found by Total in 1982 and brought online in 1998. On the other hand, Myanmar’s first deepwater find, the Mya South gas field, located in water depth of 560m, was not discovered until 2007, by Daewoo International. Myanmar then held its debut Offshore Licensing Round in 2013, awarding 20 offshore blocks, of which 13 were located in deep or ultra-deepwater areas, indicating strong operator interest in Myanmar’s deepwater potential at the time.
These 13 blocks were awarded before the downturn but with energy demand from Myanmar’s major gas export partners (Thailand and China) and its domestic market expanding, there are still incentives for operators to get involved in E&P activities in these deepwater blocks, which are though to hold large gas reserves. Moreover, loosely upheld cabotage rules (due to a lack of locally-flagged OSVs) have increased competition in the charter markets, driving down rates, potentially lowering deepwater E&P costs.
The discovery of very large gas fields like Shwe Yee Htun and Thalin (at depths of 2,000m and 836m respectively) has also strengthened operator interest in Myanmar’s deepwater acreage. For example, Woodside has a five-well deepwater drilling campaign scheduled to commence in 2017, while Shell is reportedly planning to drill in its deepwater blocks soon. Meanwhile, Total has recently farmed into 50% of Block MD-7 (average water depth, 2,436m) and on the NOC front, Petronas acquired a 36% stake in the AD-9 and AD-11 ultra-deepwater blocks in March.
Offshore E&P trends in Myanmar’s Asian neighbours, where NOCs like Pertamina and PTTEP are looking to take over more domestic acreage, could serve to heighten the relative attractiveness to IOCs of deepwater E&P in Myanmar, where 53% of currently licensed acreage is located in water depths of at least 500m. However, it is not all plain sailing for Myanmar. The country lacks the logistical infrastructure to support a rapid ramp-up of deepwater E&P activity, while risk factors reflecting the country’s ongoing political transition may represent excessive exposure for some operators (on top of the risks already inherent in weaker energy prices).
So there are obstacles to be overcome if Myanmar’s still young offshore sector is to grow to maturity. And in the short term, the existing drilling plans may frame the country’s deepwater outlook. But in the longer term, rising gas demand, strong IOC interest and a friendlier investment climate could lead to rather more expansive growth in Burmese deepwater E&P.