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NEWS - Analysis-Myanmar's Gas Succe



Analysis-Myanmar's Gas Success Seen Double Edged

            Reuters
            11-AUG-98

            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.