A1 and A3 consortia have no choice but to accept

Vol 10, PW 24 (05 Apr 07) People & Policy

Myanmar’s decision to export gas to China might be unpopular but Daewoo, OVL, GAIL and KOGAS have no choice but to fall in line.

Look to the profit gas split between Yangon and the consortium to understand why. Under the A1 and A3 contract, the consortium has a 100% working interest in both blocks, but the government’s share of profit gas ranges between 55% and 68%.

“Profit gas share is almost always in favour of the host government,â€‌ a source tells us. “Myanmar is no exception.

â€‌ Left with the consortium is the balance: about 35%. Assume plateau production of 18m cm/d for 20 years as projected from the present recoverable reserves of 4.8-tcf and the consortium’s share of profit gas is just 6.3m cm/d.

Adds our consortium source: “Whoever comes in first and lays the pipeline will get all the gas.â€‌ Once Myanmar signs a deal – expected shortly - with Petrochina, “it makes no sense for the consortium to lay a separate pipeline to export just 6.3m cm/d of gas.

â€‌ More so since the pipeline to Thailand’s border will have to travel a distance of about 1900-km and to India’s border along a 1500-km long route from A1 and A3 blocks. Consortium sources also know that importing gas from Myanmar is part of a larger regional geopolitical game being played out by China.

“Beijing wants to reduce its dependence on the sea route for importing oil from the Middle East and is believed to be planning to bring oil to Myanmar so that it can be transported north by pipeline to China,â€‌ we are told. “The gas pipeline from A1 and A3 to China will run parallel to this oil pipeline.

â€‌ Gas from Myanmar will feed the east-west domestic pipeline grid being planned in China. All the same, the consortium is keenly waiting for Petrochina to quote a fresh price, expected any day now.

“It would be interesting to see if Petrochina jumps from its earlier quote of $4 per mmbtu to $6 per mmbtu.â€‌ But this is of only academic interest, “because the Myanmar government has already made up its mind in favour of China.


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