wikileaks ico  Home papers ico  Cables mirror and Afghan War Diary privacy policy Privacy
Identifier
Created
Classification
Origin
09RANGOON332
2009-06-05 04:26:00
CONFIDENTIAL
Embassy Rangoon
Cable title:  

BURMA: NEW DEVELOPMENTS IN NATURAL GAS SECTOR

Tags:   ECON  ENRG  PGOV  EPET  SENV  BM 
pdf how-to read a cable
VZCZCXRO1273
OO RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGO #0332/01 1560426
ZNY CCCCC ZZH
O 050426Z JUN 09
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9062
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHBK/AMEMBASSY BANGKOK 2924
RUEHBJ/AMEMBASSY BEIJING 2287
RUEHBY/AMEMBASSY CANBERRA 2016
RUEHKA/AMEMBASSY DHAKA 5209
RUEHLO/AMEMBASSY LONDON 2132
RUEHNE/AMEMBASSY NEW DELHI 5491
RUEHUL/AMEMBASSY SEOUL 9087
RUEHTC/AMEMBASSY THE HAGUE 0763
RUEHKO/AMEMBASSY TOKYO 6663
RUEHCN/AMCONSUL CHENGDU 1799
RUEHCHI/AMCONSUL CHIANG MAI 2177
RUEHCI/AMCONSUL KOLKATA 0647
RHHMUNA/CDR USPACOM HONOLULU HI
RUEKJCS/JOINT STAFF WASHDC
RUCNDT/USMISSION USUN NEW YORK 2467
RUEHGV/USMISSION GENEVA 4474
RUEATRS/DEPT OF TREASURY WASHDC
RUEKJCS/DIA WASHDC
RUEAIIA/CIA WASHDC
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC
						C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 000332 

SIPDIS

STATE FOR EAP/MLS; INR/EAP; OES; EEB
DEPT PLEASE PASS TO US DEPT OF COMMERCE, DEPT OF ENERGY
PACOM FOR FPA
TREASURY FOR OASIA:SCHUN

E.O. 12958: DECL: 06/05/2019
TAGS: ECON ENRG PGOV EPET SENV BM
SUBJECT: BURMA: NEW DEVELOPMENTS IN NATURAL GAS SECTOR

REF: A. RANGOON 235

B. 08 RANGOON 741

RANGOON 00000332 001.2 OF 002


Classified By: Economic Officer Samantha A. Carl-Yoder for Reasons 1.4
(b and d).

Summary
-------

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 000332

SIPDIS

STATE FOR EAP/MLS; INR/EAP; OES; EEB
DEPT PLEASE PASS TO US DEPT OF COMMERCE, DEPT OF ENERGY
PACOM FOR FPA
TREASURY FOR OASIA:SCHUN

E.O. 12958: DECL: 06/05/2019
TAGS: ECON ENRG PGOV EPET SENV BM
SUBJECT: BURMA: NEW DEVELOPMENTS IN NATURAL GAS SECTOR

REF: A. RANGOON 235

B. 08 RANGOON 741

RANGOON 00000332 001.2 OF 002


Classified By: Economic Officer Samantha A. Carl-Yoder for Reasons 1.4
(b and d).

Summary
--------------


1. (C) The Burmese Government continues to push for the
development of Burma's offshore natural gas sector.
State-owned Myanmar Oil and Gas Enterprise (MOGE), with
partial funding from Thai-owned PTTEP, plans to construct in
2009 a new gas pipeline from the Yadana Gas Fields to
Rangoon. This pipeline will supplement the existing MOGE
pipeline that delivers Yadana gas via southeastern Burma to
Rangoon. French-owned Total, which operates the Yadana
fields, has offered MOGE technical support. Regime cronies
continue to invest in the offshore gas sector. IGE Co. Ltd.,
owned by the sons of Minister for Industry-1, recently signed
a contract with Indian-owned Reliance Industries Limited to
develop the A5 block. End Summary.

MOGE to Build New Gas Pipeline
--------------


2. (C) Burma is rich in natural gas. Currently only two
offshore fields -- Yadana, operated by Total (with U.S.-based
Chevron as one of several partners) and Yetagun, operated by
Malaysian-owned Petronas -- are in production. In 2008 these
two projects produced approximately 459 billion cubic feet of
gas, exporting approximately 85 percent to Thailand (Ref A).
MOGE, the state-owned company responsible for oil and gas
production, purchases the remaining 15 percent, transferring
it from the Yadana and Yetagun pipelines in Kanbauk,
Tanintharyi Division (southeastern Burma) to refineries in
Rangoon via an on-land MOGE pipeline. According to Minn Minn
Oung, Chairman of Silverwave Energy and a personal friend of
the Minister of Energy, the Kanbauk-Rangoon pipeline is
poorly constructed, often leaking gas into the local

environs. Nicolas Terraz, General Manager of Total Myanmar,
confirmed that the MOGE pipeline, constructed in 2002, does
not meet international standards and is corroded.


3. (C) With the Kanbauk-Rangoon pipeline currently at
capacity, MOGE is interested in obtaining more gas from the
Yadana fields to meet local electricity needs, Terraz
informed us. In 2009 MOGE plans to construct a new
100-kilometer offshore pipeline straight from the Yadana
fields to the Irrawaddy Delta, where it will connect to a new
150-kilometer onshore pipeline to Rangoon, Terraz stated.
MOGE expects the new pipeline will move an additional 200
million square cubic feet of gas a day from the Yadana
fields. Total believes the Yadana field can meet this demand
and still produce until at least 2018. Terraz noted that
laying the onshore portion of this pipeline will be difficult
given the terrain of the Irrawaddy Delta (shallow waters,
rivers, and paddy fields) and the high population density of
the area. MOGE will also have to build new processing and
refinery centers in Rangoon. Total has offered to provide
MOGE with technical support, as it wants to ensure that any
new pipeline connecting to its Yadana site meets
international standards.


RANGOON 00000332 002.2 OF 002



4. (C) MOGE estimates the new pipeline will cost
approximately USD 600 million and will take two years to
complete. Total Operations Manager Jean Monnet estimates it
will take longer and notes that there are many technical
issues that will need to be resolved. Siverwave Energy's
Minn Minn Oung told us that MOGE is approaching both foreign
and domestic gas companies to invest in its new pipeline, in
exchange offering them the inside track to additional
offshore blocks or extensions on current exploration
contracts. Perhaps for that reason, Thai company PTTEP has
already pledged USD 270 million for the project, according to
Nick Lucidi, Chevron Representative for Burma.

Cronies Investing
--------------


5. (C) Indeed, the Burmese Government continues to
encourage foreign and local companies to invest in offshore
natural gas projects, Minn Minn Oung stated. He confirmed
that regime cronies Steven Law and Chit Khaing have already
partnered with, respectively, Chinese National Offshore Oil
Company (CNOOC) and Petro Vietnam for shares in production.
These two cronies have spent a combined USD 50 million in the
last 12 months on exploration in the M10 (CNOOC) and M2
(Petro Vietnam) blocks (Ref A). Minn Minn Oung also told us
that the Minister of Energy recently met with Aung Ko Win,
owner of Kanbawza Bank and more than a dozen jade and gem
mines (septel), about investing in offshore gas blocks.
While Aung Ko Win has yet to invest, he has requested a
meeting with Silverwave regarding a potential partnership in
the A7 block.


6. (C) Regime cronies Nay Aung and Pyi Aung, sons of
Minister of Industry-1 and owners of IGE Co. Ltd., maintain
control over offshore block A5, Lucidi confirmed. In March
2007, IGE Co. Ltd., partnering with Malaysian company
Rimbunan Petrogas, signed a contract with MOGE for the A5 and
M1 blocks (Ref B). In late 2008 Rimbunan withdrew from its
A5 contract, claiming it could not fund exploration in both
blocks. According to Minn Minn Oung, Burmese law states that
when an oil and gas contract is abrogated, the block reverts
to MOGE for a new tender. In the case of A5, the Minister of
Energy told MOGE to allow IGE to maintain control over the
block while the firm looks for a new partner, according to
Minn Minn Oung. IGE Co. Ltd was ultimately successful,
entering into agreement earlier this year with Indian-owned
Reliance Industries Limited to develop the A5 block, Myanmar
Petroleum Resources Ltd. General Manager Terry Howe
confirmed.

Comment
--------------


7. (C) Natural gas is the regime's largest money maker,
bringing in more than USD 2.5 billion in revenue in 2008.
While the regime's efforts to expand offshore production
continue to generate foreign interest, some companies are
finding it difficult to invest given the global economic
crisis. We expect the regime will continue to tap into its
cronies to provide financing for offshore exploration,
repaying them with lucrative contracts in other sectors or
sharing revenues from potential gas sales.

DINGER