Interview: Javier Rielo
How important are deepwater projects, and how can break-even costs be reduced?
JAVIER RIELO: Natural gas accounts for 35-40% of the power generation mix and is mainly sourced from fields developed in the late 1990s. A new generation of resources needs to be sourced during the next decade to maintain the supply-demand balance.
In order to achieve this, Myanmar conducted a successful licensing round for exploration blocks in 2013-14, during which time mostly deep offshore blocks were awarded, coinciding with the collapse of global gas prices. In light of the volatility of the price environment, we need to be able to develop deepwater projects that will remain resilient in the face of low prices.
Both the government and international oil companies can help to reduce break-even costs and managing costs through design optimisation, strong enforcement of competition among contractors in the procurement phase, the careful planning of operations and stringent discipline in operating expenses. The authorities can also contribute by expediting administrative requirements for projects. But the most important requirement is the promotion of good, sustainable fiscal terms to attract the huge investments that are necessary to develop and produce hydrocarbons.
Given the projected decline of the gas output from Yadana field by 2020, what action should be taken?
RIELO: The Total and Yadana field partners have been investing consistently since 1992 to extend the life of the field for as long as possible. In 2017 we added a compression platform to the offshore production complex and developed the Badamyar satellite gas field.
In 2019-20 we intend to have a new drilling campaign in Yadana. All of these investments will have the combined effect of boosting production rates in the field. In order to mitigate the inevitable depletion of reservoirs, a vast and sustained exploration effort is needed in order to discover new gas fields for development.
What changes do you see in gas production, and how could other energy sources be used as substitutes going forward?
RIELO: Gas production in Myanmar is a top commodity, generating 40% of domestic power and substantial government revenues, with its export amounting to over $3bn in 2016, or 25% of the total. Gas demand is set to grow in the coming decade, alongside electrification plans and consumption forecasts.
Nonetheless, those gas fields that are currently producing will see a severe decline in output. This will challenge the upstream operator’s ability to supply both domestic and export markets. In the coming years, the Ministry of Electricity and Energy will focus on clean energy sources such as hydro-power, gas and renewables. In the meantime, liquefied natural gas can be the bridging energy supply.
How can domestic energy needs be met while there is a commitment to using clean energy?
RIELO: Beyond natural gas, Myanmar is blessed with immense resources that can produce clean energy, namely hydro and solar power. The government has taken many steps to develop hydropower, with notice to proceed recently given to projects using this as a source. But this alone cannot meet all current needs. The authorities are aiming for solar to account for 12% of the power generation mix by 2025.
What potential is there for growth in the refined petroleum products segment?
RIELO: Myanmar’s refined products market is among the fastest growing in the region. However, it remains characterised by inconsistent standards. Moreover, it is still dominated by a handful of national players. The authorities have welcomed international investors into the market and in 2017 the government adopted a new petroleum products act, showing their commitment to creating a conducive environment for such investment.
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