BANGKOK (TrustLaw) – Economic and political reforms over the past year in Myanmar have started to transform the strategically located and resource rich country from an impoverished Southeast Asia nation run by corrupt military generals into the next El Dorado for extractive industries.
Foreign investors are eyeing offshore oil and gas deposits, hydropower, timber and minerals such as copper, lead and gold and precious stones -- once accessible to only a handful of companies, many of them linked to or friendly with the country’s powerful army. Natural gas offers the greatest potential. The International Monetary Fund estimates it will account for 3.7 percent of Myanmar’s GDP by fiscal year 2012/2013.
In July, President Thein Sein said Myanmar would join the Extractive Industries Transparency Initiative (EITI), a global standard for governments and companies to report how much is paid for extracting natural resources. The move would shed some light on a sector that has reaped billions of dollars for the previous military government.
Activists and rights groups welcomed the move but say EITI is just one part of a wider range of reforms Myanmar needs to improve governance, combat corruption and address ethnic conflicts, environmental degradation and land rights issues.
Following is a look at the resources that are up for grabs.
OIL & GAS
- Myanmar exported its first oil barrel in 1853, making it one of the world's first oil producers. The U.S., in comparison, built its first commercial oil well in 1859. But proven oil reserves are relatively small, totaling 104 million barrels onshore and another 35 million offshore. It ranks 75th in the world for output at 19,600 barrels of crude a day, and it is ranked at a similar level based on reserves.
- Myanmar natural gas output is more significant at 1.475 billion cubic feet daily, putting it in 36th place globally. Its gas reserves are estimated at 410 billion cubic feet onshore and 11 trillion offshore, for 37th place in the global rankings, according to U.S. and government statistics. BP, however, says proven gas reserves are smaller at 7.8 trillion cubic feet, or 0.2 percent of the world’s total.
- Gas exports totaled $2.5 billion in 2010/11 fiscal year, its government figures show. https://www.mnped.gov.mm/html_file/foreign_trade/s06MA0206.htm) and were the biggest source of export revenues contributing about $11 million to the approximately $4.9 billion in total government revenues, according to the International Monetary Fund. http://www.imf.org/external/pubs/ft/scr/2012/cr12104.pdf
- The gas sector also is the largest recipient of foreign direct investment. Exports from the Yadana and Yetagun projects in southern Myanmar were worth more than $3.5 billion in 2011-2012, the government said.
- Natural gas exported from Myanmar accounts for about 30 percent of Thailand's consumption, mostly used in power generation, while 74 percent of Myanmar’s 60 million people have no access to electricity, the Asian Development Bank said.
- As of 2011, 24 foreign companies worked 26 offshore oil and gas blocks, while 13 foreign firms were active in 10 onshore blocks. The biggest players include France’s Total, China’s CNOOC and CNPC, Korea’s Daewoo, and Thailand’s PTTEP. U.S.’s Chevron and UNOCAL are also involved, according to Reuters 2011 data.
- Two major projects, Shwe and Zawtika, are under construction and expected to be operational by 2013. The Shwe project would deliver about 500 million cubic feet of gas and 200,000 barrels of oil and includes pipelines from Myanmar’s northern coast to southern China’s Yunnan province, which would carry Middle Eastern oil to China, bypassing the Strait of Malacca, and natural gas from Myanmar's offshore reserves in the Bay of Bengal.
- Most of the natural gas from the Zawtika project, which has a daily average wellhead of 300 million cubic feet and is located in far south-eastern Myanmar, is bound for Thailand.
- Thailand’s Italian-Thai Development Plc is developing the $50 billion complex in Dawei in southern Myanmar, which includes a deep-sea port, steel mills, refineries, a petrochemical complex and power plants but it has been struggling for financial backing.
- The government is expected to release its next series of gas blocks for development in September.
- The principal rivers are the Irrawaddy, Sittaung, Thanlwin and Bago. According to the Ministry of Agriculture and Irrigation, Myanmar has a tremendous hydro power potential of over 100,000 megawatts.
- Chinese firms, including Sinohydro and China Southern Power Grid, are expected to build and run 33 of the 45 or so hydropower plants scheduled for Myanmar, with Thailand’s EGAT and India’s NHPC holding stakes in the other projects. Almost all the power generated would be exported to those countries.
- Foreign-backed hydropower projects are controversial in Myanmar. In September, President Thein Sein suspended the Chinese-led $3.6 billion Myitsone dam, the country’s largest hydropower project, after weeks of public outrage. Located at the source of the Irrawaddy River in northern Myanmar, the dam would flood an area roughly as large as Singapore.
- Observers also blame dams for fuelling conflict, pointing to renewed fighting between the military and the rebel Kachin Independence Army in northern Myanmar near the Chinese-backed Dapein dams. An estimated 75,000 people have been displaced since June 2011.
- Myanmar is rich in coal, copper, gold, zinc, tungsten, gems and other minerals. The vast majority of high-quality rubies on the world market originate from Myanmar. It is also a top producer of jadeite, the most expensive form of jade.
- Daily coal production is 1.5 million short tons, the 42nd largest producer in the world, based on U.S. government estimates.
- Gem sales provide significant revenue for the Myanmar government, bringing in more than $3.7 billion between March 2011 and February 2012. The country produced over 13 million carats of rubies, sapphires, spinel and peridot and more than 43 million kilograms of Jade in 2011 − 2012.
- A 2008 Human Rights Watch report said gem mining is in a deplorable condition, with rampant land confiscation, extortion, forced labor, child labor, environmental pollution, and unsafe working conditions. HIV/AIDS, drug-resistant malaria, and tuberculosis are common, it added.
- The U.S. Geological Survey said the country produced more than 217,000 metric tonnes of coal, 12,000 metric tonnes of copper and 7,000 metric tonnes of zinc in 2010.
- Under their contracts with the Ministry of Mines, foreign companies must pay 30 percent of the value of minerals extracted, plus taxes and royalties to the Myanmar government, a steep price which discourages many foreign investors.
- The major foreign companies in the mining sector currently are China’s Norinco and CNMC and Thailand’s SEAMET. Companies from Australia, Russia and Vietnam are also involved, sometimes through third parties.
- Environmental groups say that Myanmar has Asia’s most extensive intact tropical forest ecosystems and possesses the world’s only remaining golden teak forests. It is the largest exporter of timber in Indochina, with teak accounting for 60-70 percent of the export earnings from forestry products, generating $309.6 million in revenues in fiscal year 2011-2012. Deforestation has reduced the amount of land covered by timber from 57 percent in 1990 to 47 percent in 2005.
- Advocacy group Global Witness said in a 2009 report that illegal logging was causing rapid destruction of Myanmar's northeastern forests, most of which was smuggled into China's Kunming province in 2008. In 2005, one truck carrying 15 tonnes of illegal logs crossed the China-Myanmar border every seven minutes, it said.
(Sources: Reuters, Reuters AlertNet, Total, Myanma Oil and Gas Enterprise, Myanmar Times, Burma Rivers Network, Global Witness, Pala International, Shwe Gas Movement, Earthrights International, Extractive Industries Watch, U.S. Geological Survey, Ministry of National Planning & Economic Development, Ministry of Agriculture and Irrigation, Environmental Investigation Agency, Food and Agriculture Organisation, BP, European Forest Institute, Human Rights Watch, International Monetary Fund and Energy Information )