RIL signs contracts for two offshore oil&gas blocks in Myanmar

Reliance Industries today signed contracts for two offshore oil and gas exploration blocks in Myanmar as it looks overseas to tide over difficult regulatory environment back home.

"RIL and Myanma Oil & Gas Enterprise (MOGE), an enterprise of the Government of Myanmar, signed production sharing contracts for two offshore blocks (M17 and M18)," the company said in a statement here.

The billionaire Mukesh Ambani-run firm had won the blocks after in Myanmar Offshore Block Bidding Round – 2013.

"RIL will be the operator of the blocks with a 96 per cent participating interest. United National Resources Development Services Co. Ltd. (UNRD), a Myanmar company, will hold the remaining interest in the block," it said.

Both the blocks are located offshore in the Tanintharyi basin of Myanmar in water depths
upto 3000 feet and together encompass total area of 27,600 square kilometers.

"RIL's participation is in line with its strategy to expand its international asset base by investing in internationally attractive oil and gas destinations. The company in this way will leverage its organizational capabilities and expertise to create value for the E&P segment," the statement said.

Myanmar is the latest country where the oil-to-telecom conglomerate is seeking to expand its upstream business after testing waters in nations such as Venezuela and Iraq.

RIL had bid for three blocks in the Myanmar Offshore Block Bidding Round, 2013 and won two.

While Myanmar, like India, offers a similar production sharing contract regime that allows recovery of all costs before sharing spoils, its contractual regime is much more attractive.
Unlike Indian PSC where the work on an area begins with an exploration phase, Myanmar offers 6 months of preparation period, followed by up to 12 months of study period after which companies have an option to exit the block. This way they avoid incurring unfruitful expenditure and liquidated damages for not fulfilling work programme.
Exploration phases begin after this study period.

While Indian PSC provides for a two-year time from approval of development plan to tie up markets for natural gas and development to commence within 10 years of first discovery well, Myanmar allows an operator to retain a discovery for 7 years even after if it is not considered economical. Also, multiple extensions of one year are available.

Oil produced in India can be sold at arms length price but gas can only be sold at a prior approved formula. In Myanmar, oil can be sold at arms length while natural gas can be sold at any price that can be realised from the market.