China expected more gas from A1 and A3 in Myanmar

Vol 11, PW 15 (15 Nov 07) People & Policy

China is “disappointedâ€‌ with the eventual recoverable reserves number of 4.5-tcf that has emerged from exploration and appraisal of the offshore A1 and A3 blocks in Myanmar, in which OVL and GAIL hold a combined 30% stake in each.

“The Chinese were expecting much more gas, at least double this number,â€‌ reports a source in Yangon. “There is no chance of any significant upside right now.

Some unexplored areas are still there but unless there is clarity on the gas sales agreement and the development plan, no fresh exploration is planned.â€‌ Daewoo, operator of both blocks, has shot more than 2000-sq km seismic over A1 and A3 but is making it clear to Myanmar authorities that it will not begin more exploration or development work to commercialise the gas unless a firm price is first agreed with China.

PETROWATCH learns that last week A1 and A3 consortium partners met in Yangon for a meeting of the Technical Committee for Gas Marketing to review exploration and development carried out so far and the way ahead. “All development work on the blocks is directly linked to finalisation of the gas sales agreement between Myanmar and (state-owned) Petrochina,â€‌ we are told.

“Only when the gas sales agreement is signed will the consortium begin work on a development plan and order long lead items needed to develop the fields.â€‌ One of the items on the agenda for the consortium’s October meeting was exploration and development work for 2008.

“It has been decided that no drilling will be carried out next year,â€‌ we hear. “All the exploration commitments in the contract have been carried out.

â€‌ Myanmar authorities and Petrochina have yet to agree a gas price, despite several rounds of discussions. Myanmar authorities want “nothing lessâ€‌ than the price of gas sold to Thailand from the Yadana and Yetagun fields, which is believed to be $4.5/mmbtu at the wellhead.

Add transportation costs to the border with China and Myanmar is looking for a delivered price of not less than $6/mmbtu.

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