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Reuters : ANALYSIS-Myanmar's gas su



ANALYSIS-Myanmar's gas success seen double edged 
12:10 a.m. Aug 11, 1998 Eastern 

By Neil Fullick 

SINGAPORE, Aug 11 (Reuters) - Two large gas fields are set to dramatically
increase Myanmar's hard currency earnings despite U.S. sanctions against
the military-led government, but the success could turn out to be
double-edged. 

The Yadana gas field, offshore Myanmar, is due to start producing 325
million cubic feet per day (cfpd) of gas in coming months. The Yetagun
field, also offshore, is due to start up in 2000 with production of some
200 million cfpd. 

``It will be a significant amount of earnings for Myanmar, there is no
doubt about that,'' one diplomat said. 

But the gas fields could prove to be less of a windfall than at first
appears for Myanmar, one of Asia's poorest countries. 

The major discoveries have effectively cornered the gas market for the
region. Additional finds could well mean there is no one to buy the gas,
especially as the economic slump in Asia forces firms to cut back future
demand projections. 

``There is a lot of potential but people are reluctant to explore the
offshore areas because it's gas proven. The two big players have the market
sewn up,'' said Ian Cross, Asia-Pacific director of upstream consultants
Integrated Exploration and Development Services Ltd. 

The best placed buyer for any future Myanmar gas discoveries -- Thailand --
has little appetite to buy beyond Yadana and Yetagun. 

Neighbouring Bangladesh is proving up its own large gas reserves. 

``So if anyone did find gas offshore Myanmar, I don't know what they would
do with it. They would have to sit on it,'' Cross said. 

IEDS estimates that Myanmar currently produces a modest 174 million cubic
feet per day (cfpd) of natural gas from various small fields. 

The introduction of Yadana and then Yetagun will take the country's gas
production to more than 600 million cfpd. 

Yadana operator France's Total SA had targeted July 1 for the start up, but
a delay in completing a power station in Thailand to take the majority of
the gas has pushed that back 4-6 months, equity partner Unocal Corp said on
July 14. 

Nevertheless, within a few months of start up the field will be producing
325 million cfpd, doubling Myanmar's production. 

Output is expected to rise to 500 million cfpd within a year's time as
Myanmar takes some of the gas to feed a 300 megawatt power station and a
570,000 tonne-per-year urea plant. 

Energy consultants Wood Mackenzie of the U.K. estimate that Myanmar's
earnings from the Yadana field will be $2.873 billion in nominal terms over
the expected life of the field to the year 2030. 

Wood Mackenzie estimates Myanmar's earnings from the Yetagun field, which
is due to start up in 2000, will be $823 million through to 2025. 

The estimates are based on the real value of the earnings over the period
using a discounted rate of 10 percent per year. 

Without any adjustments, Myanmar's earnings from the Yadana field would be
just under $15 billion, the company says. 

The fields have been developed despite the U.S.' unilateral sanctions on
Myanmar, which targets U.S. companies investing in the country. 

In recent years, the sanctions have had some effect in prompting Coca-Cola
and Texaco Inc to withdraw from Myanmar. But Unocal remains and is an
active supporter of investment in the country. 


Oil major Texaco sold a 35.42 percent stake in the Yetagun field in 1997. 

The gas earnings will produce a surge in dollar income for a country that
only admitted foreign investors in 1988, after 26 years of self-imposed
isolation. 

``In a large economy it would just be money. In this economy it will be a
very measurable proportion of earnings,'' one diplomat said. 

Myanmar's main foreign exchange earnings have traditionally come from rice,
beans and pulses and to a smaller extent, wood. 

Its foreign exchange reserves are estimated at anywhere between $150
million and $350 million. 

Yadana's first few years of earnings will be used to pay off the debt that
helped finance Myanmar's share of the development costs, analysts said. 

The Myanmar Oil and Gas Enterprise has a 15 percent stake in each field. 

Yadana's shareholders are Unocal with 28.26 percent, and Thailand's PTT
Exploration and Production Plc with 25.5 percent. Total owns 31.24 percent.


Yetagun is made up of MOGE, Malaysia's Petronas, Britain's Premier Oil,
Japan's Nippon Oil and the Petroleum Authority of Thailand (PTT). 

There are 10 other exploration projects underway in Myanmar, but only
Yadana and Yetagun have so far proved major successes. 

IEDS estimated 1997 crude production at 9,600 bpd but there is no
indication of output rising in the years ahead. 

``I think they would be happy to maintain current production,'' Cross said.