Recent improvements in the terms offered for oil and gas exploration and production (E&P) in Myanmar signal a clear resolve to attract foreign investment,
A report recently published by research and consulting firm GlobalData, has found that production sharing contracts for hydrocarbon E&P is sending out positive signals to investors, promising improved transparency and increased investor returns.
“The effects of reform are already apparent”, says Jonathan Lacouture, GlobalData’s lead analyst for upstream activities in the Asia-Pacific region. ”There has been a great deal of foreign interest in the April 2013 bidding round.”
Myanmar’s hydrocarbon resources are relatively undeveloped and are thought to hold significant potential given the country’s proximity to Asian growth markets; pipelines to China are already under construction. The company believes that deepwater exploration opportunities will be especially sought after, as investors are not required to partner-up with a state-owned entity.
This recent amelioration of the business environment for oil and gas firms is a continuation of the Myanmar government’s program of parallel political and economic reform, marking another step in developing a more collaborative and profitable relationship with the international community. Last week saw the European Union permanently lift trade and economic sanctions, following a similar warming of trade relations with the US.
“This strategy of bringing forward economic changes at the same time as pro-democracy reform may prove to be a recipe for success. The terms of investment are improving just as restrictions on foreign investment are being withdrawn,” says Lacouture.
While the current government is nominally civilian, significant power is still retained by figures associated with the military junta which formerly ruled the country, so a level of uncertainty remains regarding the extent to which reform will be supported. But the firm believes that the steps taken so far have been positive for business and a degree of cautious optimism prevails.
