India, China face-to-face again, this time for gas reserves in Myanmar

ANUPAMA AIRY
The Financial Express: 2 September, 2006

NEW DELHI:  After competing with each other for overseas energy assets, Indian and Chinese firms are now gearing up for yet another face off to secure monetisation rights for the huge gas reserves in the A1 and A3 blocks in Myanmar.

A recent certification by Gaffney Cline and Associates (GCA) has put the total estimated gas reserves in these two blocks at 5.7 to 10 trillion cubic feet. India’s share in these blocks is 30%, with 20% participating interest held by ONGC Videsh Limited and 10% by state-owned GAIL India. Daewoo of South Korea is the operator of these blocks with 60% interest and KOGAS of Korea holds the remaining 10% each.

Significantly, GAIL was earlier (in February 2004) given the status of ‘preferential buyer’ of gas from these two blocks, subject to various conditions including pricing and approval of other partners.

However, the sudden spurt in gas prices, from $3.5-4 per mmbtu in 2004 to over $7-8 per mmbtu currently, is understood to be the reason that led to invitation of global bids by the government of Myanmar for monetising this gas.

Sources said the petroleum ministry had earlier opposed submission of a bid by GAIL and instead wanted the Myanmar government to enforce its decision to sell the entire gas to GAIL. However, as this could have even resulted into delays and a loss of opportunity for India, the petroleum ministry is believed to have now permitted GAIL to bid for monetising gas from the A1 and A3 blocks. Confirming the move, senior GAIL officials said the last date to submit bids is September 7. Although companies from Korea and Thailand will also be in the race to secure rights to export gas from these blocks, India and China are the strongest contenders as the two countries had earlier approached Myanmar for purchasing the entire quantum of gas from these fields.

Thailand is already importing huge quantities of gas from Myanmar through a existing pipeline and Korea is keen to import gas through the sea route in the form of LNG.

Block A1 has two discovered gas fields, Shwe and Shwe Phyu, and Block A3 has one discovered field, Mya. A recently concluded feasibility study for field development by GAIL has forecast that the three fields from A1 and A3 can produce about 16 million cubic meter gas per day for 20 to 25 years.