Analysis of Investment of Deepwater Drilling Market in Myanmar Oliver Massmann Partner, General Director

Transcription

1 Analysis of Investment of Deepwater Drilling Market in Myanmar Oliver Massmann Partner, General Director Southeast Asia Offshore Summit Yangon Sep

2 Features India s Oil & Gas outlook Oil & Gas Scenario - Myanmar Deepwater Drilling Opportunities - Myanmar Investment Analysis of Myanmar Deepwater Drilling Conclusion 2

3 Introduction Oil and Natural Gas Corporation Limited (ONGC) is an Indian National Oil Company (NOC) under the administrative control of the Ministry of Petroleum and Natural Gas (MOP&NG). It was founded on 14 August 1956 by Govt of India, which currently holds 68.94% equity and spreads from Domestic E&P to Global Energy Chain. Shareholders Shareholding Government of India 68.94% Government Companies 10.09% Banks, Fin Inst. & Insurance co. Foreign Institutional Investors 09.69% 06.27% Private Corporate Bodies 01.83% Individual shareholders 01.65% Mutual Funds and UTI 01.13% 3 Employees 00.11% Total 100.0% ONGC also spreading in renewable energy sectors like solar, wind, tidal, thermal etc.

4 Domestic E&P The company's domestic operations are structured around 11 Assets and 7 Basins spreading throughout India in onshore, offshore and deepwater areas. * excluding JV share Mumbai Offshore KG Offshore Crude Oil Natural Gas Others 31% Others 38% India : 37.8 MMT ONGC 69% India : 35.4 BCM ONGC 62% 4

5 Overseas E&P ONGC Videsh Limited (OVL) is the international arm of ONGC. It was incorporated in 1965 and rechristened in It operates in 17 countries (Brazil, Colombia, Cuba, Venezuela, Vietnam, Myanmar, Russia, Kazakhstan, Libya, Nigeria, Sudan, South Sudan, Mozambique, Azerbaijan, Iran, Iraq, Syria) Myanmar OVL has been awarded two onshore blocks namely B2 (Zebyutaung-Nandaw) and EP-3 (Thegon- Shwegu) in the Onshore Bidding Round It already has a presence in Myanmar with stakes in A-1 and A-3 offshore blocks and Shwe Gas pipeline MMTOE $3.5 Billion $0.7 Billion 5

6 Performance Profit making PSU : India s 1 st (INR 0.22 trillion / US$ 4.1 billion) Market capitalization : India s 2 nd (INR 2.6 trillion / US$ 48.9 billion) Global E&P Co. : World s 3 rd (after Conoco-Phillips & CNOOC) Global Energy 250 : World s 21 st (by Platts) Global Fortune 500 : World s 424 th (annual revenue of US$ 27.6 billion) India E&P sector 6

7 India s Oil & Gas Outlook 7

8 India Story Indian Economy is the third largest economy in the world and reaching to TOP by 2050 Regaining GDP ENERGY 15% of the World s population 0.5% of the World s Oil & Gas reserves India s need for more oil & gas leads to more thrust from Govt for Deepwater Exploration 8

9 India Sedimentary Basin 26 Sedimentary Basins identified Offshore (Shallow / Deepwater) = blocks awarded in 9 rounds Total Sedimentary Area : 3.14 MM Sq KM Onshore : 1.39 MM Sq KM Offshore (Shallow) : 0.40 MM Sq KM Deepwater : 1.35 MM Sq KM

10 India Oil Update Import Gap (83%) World s largest refinery is in India (RIL) 10

11 India Gas Update I bcm = 2.74 mmscmd Import Gap (LNG) 11

12 India Deepwater Update RIL MA-D6, D1 and D3 (Bay of Bengal) Water depth m 60 KM from shoreline 6 oil wells tied to FPSO 18 gas wells connected to CRP Started in MMm3 gas ONGC KG-DWN-98/2 (Bay of Bengal) Water depth m 60 KM from shoreline 3 oil and 8 gas discoveries Production to start in Waxy crude 25 Kbpd 40 MMm3 gas GSPC KG-OSN-2001/3 (Bay of Bengal) Water depth 400 m 30 KM from shoreline FDP plans 15 wells (HPHT) Prod to start in 1-2 year 6-8 MMm3 gas 12 These activities are at KG Basin at East Coast Deepwater Basins which are yet to exploit : Kutch-Saurashtra, Mumbai Offshore, Kerala- Konkan at West Coast Bengal, Mahanadi NEC, Cauvery, Andaman- Nicobar at East Coast ONGC drills world s deepest well NA7-1 in 2013 Block : KG-DWN-2004/1 (East Coast) Rig : DDKG-1 (Transocean) hired from RIL in 2009 WD : 3165 m (TD 5625 M)

13 Oil & Gas Scenario - Myanmar 13

14 Introduction Area : sq-km Population : 53.3 Million (0.1%) Male : 25.7 Million (48.2%) Female : 27.6 Million (51.8%) Age Average : 29.9 Years 1948 : Independence from British : Democratic Country : Under Dictatorship 2010 : Elected Government Borders : India, Bangladesh China, Laos, Thailand Coastal Line : 2832 KM 14

15 Oil and Gas Business The regulation of the oil and gas sector in Myanmar has undergone rapid change since the introduction of political reforms. The Constitution of the Republic of the Union of Myanmar 2008 stipulates that the State is the ultimate owner of all natural resources. Myanmar Oil & Gas Enterprise (MOGE) is the national oil and gas company of Myanmar which also serves as the energy sector's regulatory agency. All foreign participation in oil and gas activity takes place through joint venture arrangements with MOGE. The MOGE falls under the auspices of the Ministry of Energy. Ministry of Energy 15 Energy Planning Department (EPD) Myanma Oil and Gas Enterprise (MOGE) Myanma Petrochemical Enterprise (MPE) Myanma Petroleum Products Enterprise (MPPE)

16 Sedimentary Basin STATUS OF EXPLORATION (Onshore) A. Thoroughly Explored Basins 1.Central Myanmar 2.Pyay Embayment 3.Ayeyarwady Delta B. Explored to Some Extent 1.Chindwin 2.Rakhine Coastal C. Very Little Explored 1.Hukaung 2.Shwebo-Monywa 3.Bago Yoma STATUS OF EXPLORATION (Offshore) A. Thoroughly Explored Basins 1.Rakhine Offshore 2.Moattama Offshore 3.Tanintharyi Offshore B. Not Explored Yet 1.East Andaman Basin D. Not Explored Yet 1.Hsipaw-Lashio 2.Namyau 3.Kalaw 4.Sittaung Valley 5.Mawlamyine 6.Mepale (Oil Shale) Onshore Basins, only 3 explored thoroughly 16 4 Offshore Basins, only 3 explored thoroughly

17 Sedimentary Blocks Shallow Water Rakhine - 7 Moattama - 11 Tanintharyi - 8 Total - 26 Blocks Deep Water Rakhine - 16 Moattama - 3 East Andaman - 6 Total - 25 Blocks Onshore Blocks currently 20 blocks are under operation (15 companies 10 countries) 51 Offshore Blocks (shallow 26 and deepwater 25) currently 25 blocks (shallow 18 and deepwater 7) are under operation (12 companies 7 countries) Bidding Offered Awarded PSC onshore onshore (11S+19D) 20 (10S+10D) offshore Mainly Production Sharing Contract (PSC) of $17 billion

18 Blocks : 20, Companies : 15 Current Onshore Activities Without bidding 1 st (2011) bidding 2 nd (2013) bidding Block Country (11) (18) 10 India Essar : PSC-L Jubilent : PSC ONGC (OVL) : PSC-B2, EP-3 Countries (10): Russia, China, Indonesia, UK, India, Singapore, Hong Kong, Switzerland, Malaysia, Thailand Countries in 2013 for 16 Blocks (10): India, Canada, Pakistan, Italy, Brunei, Russia, Singapore, Malaysia, Thailand, Luxembourg 18

19 Current Offshore Activities Without bidding 1 st (2013) bidding Block 13S + 4D 10S (11S) + 10D (19D) Country 7 8 OVL(STAKE) OIL + Mercator + Oilmax Reliance India : A1, A3 : M4, YEB : M17, M18 Blocks: 25 (18S + 7D), Companies : 12 Countries (7): France, Malaysia, South Korea, Thailand, China, Singapore, Vietnam Countries in 2013 for 20 Blocks (8): UK, USA, Australia, India, Malaysia, Netherland, Italy, France 19

20 Oil & Gas Production Crude Oil Production (BOPD) BOPD = 1.0 MMTPA "Onshore" "Offshore" Natural Gas Production (MMSCFD) 1200 MMSCFD = 36.0 MMSCMD "Onshore" "Offshore" Y axis : 000 BOPD Current Production Oil : BOPD Gas : 2055 MMSCFD : 61.7 MMSCMD : 372,000 BOPD Offshore Oil : 50% Gas : 97% 20

21 Oil & Gas Business Prospects Political and economic reforms New political reforms introduced in 2011 have seen sanctions lifted by the European Union and United States, allowing international players to re-enter the market. Tenders announced In , the Government of Myanmar awarded 20 offshore blocks to international companies and accordingly offered them the preliminary rights to explore and produce from offshore blocks, with exploration likely to start in 1-2 years. A hotspot for exploration Myanmar is one of world s hotspots for exploration: according to research firm IHS Global Insights, Myanmar is estimated to possess 3.2 billion barrels of oil and 18 trillion cubic feet (tcf) of natural gas reserves. Its unproven resources may be vastly greater. 21

22 Potentially valuable resources Myanmar s proven reserves are almost on a par with those in India, which possesses 5.7 billion barrels of oil and 18 trillion cubic feet (tcf) of natural gas and is ranked 16th globally in terms of the value of its resources by British Petroleum s 2013 statistical review of world energy. Limited local capacity Oil & Gas Business Prospects At present, Myanmar s local capacity is limited, which means there is a demand for international suppliers across the entire supply chain. The Government of Myanmar is keen to work with responsible international businesses to ensure that international standards in health, safety and the environment are met. 22

23 Deepwater Drilling Opportunities - Myanmar 23

24 Offshore Blocks Offshore Blocks : 51 Shallow Blocks : 26 Deepwater Blocks : 25 Without Bidding : 4 1st Bidding : 10 Yet to Award : 11 Myanmar offshore Crude oil & Gas Reserves are estimated to be 540 MMBBL & 17 TCF respectively 24

25 25 Deepwater Blocks 4 Blocks without bidding, 10 Blocks awarded, 7 Blocks open and 4 Blocks yet to offer Sl. Blocks Company 1 AD-2 BG + Woodside 2 AD-3 Ophir Energy 3 AD-5 BG + Woodside 4 AD-9 Shell + MOECO 5 AD-10 Statoil + ConocoPhillips 6 AD-11 Shell + MOECO 7 MD-2 Eni 8 MD-4 Eni 9 MD-5 Shell + MOECO 10 YWB Total AD-1,6,8 CNPC 14 AD-7 Daewoo The oil discoveries in deepwater area off the east coast of India (e.g. MA-D6 Field in K-G Basin) in the Bay of Bengal, indicated that deepwater area of Rakhine Basin has very high commercial oil potential in Miocene to Paleocene sediments and wet gas and condensate in Mesozoic sediments.

26 Deepwater PSC Key Terms Study Period 2 Years seismic acquisition, processing and interpretation / geological studies Exploration Period 3 years with extension (1 year x 2 times) seismic and drilling program Production Period 20 years each commercial discovery Domestic Requirement 20% of crude oil and 25% of natural gas of Contractor s share at 90% of market price Governing Law Laws of the Republic of the Union of Myanmar Arbitration UNCITRAL Arbitration Rules Training Fund Exploration Period = 50,000 US$ p/a Production Period = 100,000 US$ p/a R & D Fund 0.5% of contractor s share of profit petroleum 26 Exploratory / Drilling for Deepwater to start from

27 Deepwater PSC Revenue Structure Royalty 12.5% of all available petroleum Cost Recovery 50% (Depth 600 ft) 70% (Depth over 2000 ft) Profit Split (MOGE Contractor) 60-40% to 85 15% 55-45% to 80 20% State Participation 20-25% Income Tax 25% on the contractor's net profit (5 years tax holiday ) Crude oil 600 ft Over 2000 ft BOPD MOGE CONT. MOGE CONT. 0 25, ,001 50, , , , , > 150, Natural gas 600 ft Over 2000 ft MMCFD MOGE CONT. MOGE CONT >

28 Drilling Contractors in Myanmar Offshore Jack-up Rig Semi Submersible Drillship Top Others 46 28

29 Supply Vessels in Myanmar Offshore Most of untapped oil and gas resources in both shallow water and deep water areas will not be suitable for fixed platform and require support vessel like Oil FPSO, LPG-FPSO, FLNG(LNG-FPSO) and FDPSO. After signing the PSC for 2013 Bidding Round, operating blocks in Myanmar offshore will be (14) deep water blocks and (23) shallow water blocks. That will create rapid growth of considerable amount of giant and smaller marginal fields in Myanmar offshore within next seven years. Myanmar offshore will be a hot spot for FPSOs investment in Asia by year Discovery First Oil/ Gas (FPSOs) Signed PSC Currently, E & P in deepwater blocks activities will be at very initial stage in Myanmar offshore. Less demand within country will also attract FPSOs. Only one Supply Base operating at present will not be adequate to cater the activities of all the deepwater blocks. 29

30 Opportunities in Myanmar Offshore Huge size & stock of natural resources oil & gas 20 newly awarded blocks 10 shallow & 10 deepwater 7 Open Blocks (deepwater) Next round of Offshore Bidding shortly Strategic Location Long Coast Lines Excellent Supply Chain Opportunities New Service Areas including new Supply Bases Capacity Building Attractive Foreign Investment Schemes Appreciated GDP growth Knowledge & Technology Transfer Educated nationals returning to Myanmar Government s keenness to diversify commercial partners Many International Companies interest to work with trusted local partners Decline of Deepwater Dayrate Recent low crude oil prices seems to be conducive for carrying out drilling activities at low cost and when the production will start, the anticipated higher crude oil prices will be advantageous to the operators 30

31 Challenges in Myanmar Offshore Water Depth more than 2000 M No Adequate Shipyard / No Deepsea Port / No Logistic Base Need Deepwater drilling rigs largely from International players Need high capital investment from large investors creating entry barriers for smaller companies Unstable Policy & Bureaucracy (Document System) Limited Information (Ministry to Ministry) Shortage of Talents (Weak Capacity) Poor Infrastructure Closed door for 20 Years (Red Tape) Limited Weather Windows in Myanmar Cooperation with Local Responsible Persons before Operation Dependence on Foreign Investors & Service Providers Offshore Rigs Worldwide Fleet Deepwater starts in 1990 Africa leading in Deepwater 31

32 Investment Analysis of Myanmar Deepwater Drilling 32

33 Criteria for Foreign Investment Safeguard of Environment Conservation Transparency and Accountability in Financial Matters Create Job Opportunities Abide Existing Labor Law Support Corporate Social Responsibilities consistent with Regional and International Standard and Agreements Transfer of Technology Encourage and Create Level Playing Field among Investors Nine Laws largely based on British Law Codes of the preindependence Indian Statutes The Oilfields Act (1918) The Petroleum Act (1934) The Oilfields Rules (1936) The Essential Supplies and Services Act (1947) The Oilfields Labour and Welfare Act (1951) The Petroleum Resources Development Regulation Act (1957) The Myanmar Petroleum Concession Rules (1962) The Law Amending the Petroleum Resources Development Regulation Act (1969) 33

34 Scope for Foreign Investment Mature Growing Stars Agriculture Education Garments & CMP Automobiles Fishery Hotel & Tourism Oil & Gas Electronics Forestry Hospitality Energy & Electric Biotech Gems Healthcare IT & Telecom Insurance Job Agencies Food & Consumers Banking & Finance Investment Firm Commodities Mining & Minerals Logistics Real Estate Pharmaceuticals Construction Industrial Supplies Infrastructure Hotel & Tourism 4% Manufacturing 7% Mining 7% Industry 1% Power 39% Agriculture 1% Oil & Gas 40% Others 1% Foreign Investors in Offshore Oil & Gas 1. Australia 2. British Virgin 3. China 4. France 5. India 6. Italy 7. Japan 8. Malaysia 9. Netherlands 10. Russia 11. Singapore 12. South Korea 13. Thailand 14. United States 15. Vietnam 34

35 Recommendations Offshore Oil & Gas Companies in Myanmar Globally Deepwater Investment is steadily increasing BG, Woodside, Ophir Energy, Shell, MOECO, KMDC, Statoil, ConocoPhillips, ENI, OVL, CNPC, CNOOC, Daewoo, Total, PTTEPI, PETRONAS, Petro Vietnam, Rimbunan Petrogas and MPRL E&P etc. 35

36 Conclusion 36 After 50 years of isolation, Myanmar doors have been unlocked & Sanctions have also been moving away. Good market places are also nearby. Overwhelmed by the political and economical reform, Myanmar will be the biggest treasury land for the investors. Myanmar is going to market economy system and the opportunity for exploration and production is likely to be good future. Deepwater Blocks are the upcoming potential for Myanmar Offshore Area. Some Deepwater Blocks are awarded in 1 st Bidding Round. But also some potential Exploration blocks are still opened in deepwater area. Deepwater Operators are motivated to sign PSCs, grabbing the opportunities and ready to overcome challenges. Local and International Partnerships are also getting stronger, although not essential for Deepwater Blocks. Recent low crude oil prices seems to be conducive for carrying out drilling activities at low cost, since when the production will start, the anticipated higher crude oil prices will be advantageous to the operators. The total investment including the investment for supply vessels (FPSO) will be increased rapidly from onwards and the outlook for exploration/production of oil & gas in Myanmar will have bright future.

37 Thank you! Oliver Massmann Partner, General Director 37