Oil And Gas Transactions In Myanmar: New Rules For Foreign Investors

Summary and implications

Overview - the oil and gas market in Myanmar

Despite Myanmar being one of the world's oldest oil and gas producers, its upstream oil and gas sector is considered to be relatively underdeveloped. After the oil and gas industry was nationalized by the Myanmar government in 1962, there are currently several offshore and onshore blocks that are at different stages of development - i.e. exploration/production, improved petroleum recovery and reactivation of suspended fields.

The outcome of the last bidding (in 2013) for the exploration of the bulk of Myanmar's offshore oil and gas reserves (deep and shallow water blocks) was one of the most eagerly awaited events in the industry. However, the actual capacity and economic potential of the new blocks, however, is a subject of intense speculation. Because of the long-running international economic sanctions against the country, introduced in the mid-1990s and only substantially relaxed approximately two years ago, little work has been done so far to determine the capacity of the country's oil and gas fields, so estimates vary widely.

Though the proven energy reserves are still relatively modest, the unofficial estimates seem extremely promising and have attracted the interest of several major players. Indeed, some experts have stated a view that the potential of Myanmar's fields could be on a par with Britain's North Sea before it was exploited, or Brazil's reserves now. This has supported the Myanmar government's drive towards attracting foreign investments and technical assistance in this sector.

As a result of this spike in government attention, the oil and gas and investment regulatory framework and government practice in Myanmar is undergoing rapid change. Potential investors would hence need to come to terms with newly issued legislation and also monitor important reforms that are currently in the process of being issued. These include the new Foreign Investment Law passed in 2012 (together with its constituent rules, the FIL), the rules issued under the new Environmental Conservation Law, as well as a number of new policies regarding transparency and good governance.

Foreign investment law and rules

The FIL (which replaces the previous Myanmar Foreign Investment Law of 1988) represents a key element of the regulatory framework for foreign investments in the oil and gas sector in Myanmar. Of particular importance is the fact that "oil and gas" is one of the industries...