Photo: A drilling platform off the coast of the United States (cclark395/flickr)
Amid Myanmar’s oil & gas tender awards, issues of corruption, human rights linger
In 1901, having already secured his fortune through investments in Australian gold, William Knox D’Arcy discovered oil in Persia – the first time in the Middle East – and in the process shaped the course of the 20th century.
Twenty-five years before D’Arcy’s lucrative find, Burmah Oil – Britain’s first oil company – was established in Yangon. It later provided the bulk of D’Arcy’s financing, which set the stage for the epic geopolitical battle for control over Middle Eastern oil that ensued.
Although the global role of British oil interests in Myanmar has been consigned to a historical footnote, Myanmar is now at the centre of another “Great Game” for control over its resources in the wake of political and economic reforms that have occurred over the past three years. Decades of isolation and sanctions largely prevented Western oil companies from exploiting the country’s significant reserves, but they are now keen to get on board.
Last week, Myanmar’s Ministry of Energy announced the winners of 20 offshore oil and gas exploration blocks, evenly split between deep and shallow-water concessions. The awards follow an earlier announcement of the winners of 13 onshore blocks last October.
Today, would-be investors in Myanmar’s oil and gas sector are forced to partner with Burmah Oil’s domestic successor, Myanmar Oil and Gas Enterprise (MOGE), which has long been criticised for its opaque practices. Myanmar is trying to achieve compliance with the Extractive Industries Transparency Initiative (EITI), a set of internationally recognised revenue reporting standards revolving primarily around the principle that companies should publish what they pay governments, and governments should publish what they receive. By most standards, MOGE’s full compliance is a long way off.
“MOGE is improving, but it has a way to go to catch up with some of the frontrunner ministries in the Myanmar government like telecoms,” Vicky Bowman, director of the Myanmar Centre for Responsible Business and Britain’s ambassador to Myanmar from 2002 to 2006, told The Edge Review. Although any company could submit proposals in the bidding rounds, the circumstances under which the winners were chosen was less than transparent.
Although MOGE announced the candidates early in the tendering process, the reasons for the winners were selected have not been officially explained. In contrast, the tendering process for two mobile operator licences, concluded by the Ministry of Communications in June, was widely praised for its transparency.
“[The Ministry of Communications] published the bid award criteria and scoring in advance of the auction of the telecoms licence awards, and ensured that sustainability was explicitly taken into account when scoring companies’ bids,” Bowman said. “MOGE has not yet made the bidding rounds this transparent, although EITI membership will require them to do so.”
The US government considers MOGE’s sheer economic power – natural gas revenue is the Myanmar government’s single largest source of income – to be of special concern, and passed a unique set of reporting requirements last year, requiring US companies to inform the State Department of any dealings with MOGE.
Two US companies won exploration and production (E&P) rights in the offshore bidding round, and companies from Western countries make up the bulk of the new winners. With the exception of two Indian winners of shallow-water blocks – industrial conglomerate Reliance and a consortium led by state-owned Oil India – all the other winners of the 20 offshore blocks are headquartered in Western countries.
The winners of the 10 deep-water blocks are dominated by some of the world’s largest E&P firms, owing to the high cost and technical difficulty of operating far offshore. Shell – which took in more revenue than any other company in the world last year – won the rights to three offshore blocks, the most awarded to any single company.
Other deep-water winners included Norway’s Statoil, ConocoPhillips from the US, Italy’s ENI and France’s Total. Only two winners – Total and Chevron, which won rights to explore one shallow-water block – have existing operations in the country; the two companies jointly operate the Yadana oil field in the Andaman Sea.
The onshore winners are a more diverse bunch, with some winners hailing from neighbouring states, including Thailand’s PTTEP and Malaysia’s Petronas. MPRL E&P, a concern owned by local tycoon Michael Moe Myint, won the rights to two on-shore blocks, making it the only Myanmar company to have been awarded concessions. Its bid for offshore rights, however, was unsuccessful.
More than 60 companies submitted bids for the offshore tendering process, including Chinese, Thai and Malaysian companies that were ultimately passed over in favour of Western and Indian ones.
But as Myanmar’s reforms have accelerated, the human rights violations closely linked with oil and gas development have not diminished.
Hydrocarbon development in Western Myanmar’s sectarian-conflict-ridden Rakhine (Arakan) State has had no positive impact on local people, claims Jockai, the director of Arakan Oil Watch, which conducts training on international human rights standards and negotiation tactics with local officials and oil companies. Rakhine is the starting point for twin pipelines that cross Myanmar, carrying crude oil and natural gas from the Bay of Bengal to China’s relatively underdeveloped west.
The land needed to construct the pipeline and a planned, adjacent industrial zone was acquired by displacing farmers and ranchers, who, in many cases, were not offered compensation. Forced labour and systemic violence have been hallmarks of E&P activities elsewhere in Burma, which were publicised by a lawsuit filed by Karen villagers against Chevron in the 1990s.
“People affected by the project feel kind of hopeless, like they can’t really do anything, [but now] they can hope for a response from officials or companies or the government,” Jockai said. “Because Burma is becoming a bit more open, they have to listen to the international community, so when local people complain, they have to respond. But it doesn’t mean they will follow the local voices.”
Although civil society consultation is one of its main pillars, the EITI process does not explicitly address social or environmental concerns. But by establishing a basic level of transparency that governments are beholden to, its proponents hope EITI can act as the foundation for further policymaking.
But the legal framework to ensure compliance with human rights and environmental standards is still in limbo. “The Government hasn’t yet finalised the ESIA [Environmental and Social Impact Assessment] procedures, although they are circulating in draft,” Bowman said. “There is unfortunately a risk that the process will rapidly become overloaded by new investors undertaking ESIAs, so companies and government should work together to make sure that the assessments are conducted effectively and efficiently and are valuable in identifying ways to avoid negative impacts,” she explained.
She said she is confident that even if comprehensive laws haven’t been passed yet, the new entrants will play the part of responsible stewards. “Many of the new players in the offshore oil and gas sector are publicly listed companies who have industry-leading policies on [health and safety], labour and community relations, which they apply globally,” she said. “So, I would expect them to be making extra efforts to ensure that their operations here are international best practice.”
But as far as Jockai is concerned, the establishment of a stout legal framework that safeguards human and environmental rights must occur before large-scale extractive projects are allowed to get underway. “I don’t think there’s any company that’s trustworthy, Asian companies or Western companies; they just do their business,” he said. “In Burma, it will be same-same. They just want to make profit… [their priorities] are not human rights, the environment or revenue transparency.”
Although the government has expressed an interest in becoming EITI-compliant, it still hasn’t accounted for billions of dollars missing from public coffers. Last October, allegations that the government held US$11 billion in secret offshore accounts raised a political furore; the government responded that it did, in fact, hold US$7.6 billion abroad, comprising “national budget funds as well as privately-held accounts,” but did not clarify the origin of these funds or break down their ownership structure.
Transparency may be a pressing issue, but dealing with mismanagement and graft, Jockai asserts, should come first. He said he feels the government’s new push for transparency is suspect when it still hasn’t come clean about its past misdeeds. “Burma has been exporting gas to Thailand for [over] 20 years, so where is all the revenue, when we’re talking about transparency?” he said. “We still don’t know where the money is, where they’ve kept it, or how they manage it.”