Burma’s tender offer for oil and gas firms to bid on exploration blocks is expected to attract European energy firms, but US companies may hold back on bids at this time.
“Europeans are definitely interested and will participate in the next round. The United States is showing interest, but I do not know what type of vehicle they will use to get in,” Ken Tun, the chief executive of Burma’s Parami Energy, told Reuters news agency during a recent visit to Singapore.
Only Switzerland's Geopetrol took away rights to explore one onshore block out of 18 offered by Burma last year. Asian companies took the rest.
Burma has said it will offer six new onshore blocks in the upcoming 2012 tender and re-offer nine or 10 blocks from last year's tender, Tun said. The government has yet to confirm details of the tender.
Parami Energy, one of only a few privately owned oil and gas firms in Burma, will team up with Vietnamese-Russian oil venture Vietsovpetro to bid for blocks, he said.
The two companies agreed this week that Parami would take a 51 percent stake and be the operator in any block awarded to them, Tun said.
US companies may be holding back at this time because of the fluid nature of Burmese business laws and financial system, which have only undergone changes starting in 2011 after decades of control by the former military government, which lacked transparency and was rampantly corrupt. A new foreign investment law has been created, but there is still the issue of the Burmese judicial system, which opposition leader Aung San Suu Kyi has warned is not based on the rule of law according to international standards.
Also, there is the issue of the Myanma Oil and Gas Enterprise, a state-owned company that allocates all oil and gas rights and holds a majority stake in all onshore and offshore blocks, which means all energy firms investing in Burma become partners with the state-run company.
U.S. companies also face new rules created by the US government for doing business in Burma that require them to submit annual reports on issues such as human rights, workers' rights and environmental stewardship if they invest more than $500,000 in Burma.
Foreign firms working in Burma must also set up joint ventures with local companies before investing in Burma’s oil and gas industry, according to Burma's laws.
Parami, which started as a cement business in 2004, is a newcomer to the oil and gas industry and holds a minority stake in an onshore block recently awarded to India's Jubilant Energy.