Myanmar's Parliament Adopts Foreign Investment Law

Introduction

The recent adoption by Myanmar's Parliament of the long anticipated Foreign Investment Law (FIL) is expected to result in more favorable ground rules for foreign companies planning to invest in Myanmar. Legal and economic reforms, in particular with respect to the energy sector of the economy, have followed on the heels of the appointment of Thein Sein as Myanmar's President in February 2011 and the participation of the National League for Democracy in the April 2012 by-election. Most recently, on 19 September 2012, Aung San Suu Kyi, in a speech in Washington, urged support for the reform process by the further easing of sanctions. In July 2012, U.S. sanctions against Myanmar were amended to allow investment by U.S. persons in Myanmar, subject to certain remaining restrictions. These remaining restrictions include a prohibition on new investment if it involves the Myanmar Ministry of Defense or any state or non-state armed group, and U.S. persons involved in new projects will have a reporting requirement to the U.S. government. Similarly, the majority of the E.U.'s sanctions programs in respect of Myanmar have been suspended for a one-year period.

Investment Opportunities

Based on discussions with industry players, we believe that Myanmar offers significant potential for oil and gas exploration and development. According to reports, Myanmar has extensive undeveloped gas reserves; only 12.4 billion cubic meters of the 0.2 trillion cubic meters of proven natural gas reserves were produced in 2011.1 Myanmar's domestic energy shortage should create opportunities for the oil and gas industry; in 2011, the consumption of petroleum products and the direct combustion of crude oil in Myanmar stood at 40.62 thousand barrels per day, while total domestic crude oil production was only 20.79 thousand barrels per day.2 Investment opportunities also lie in the substantial upgrading or replacement of the existing energy infrastructure in Myanmar, including refineries, pipelines, and electricity-generating and transmission facilities, some of which date back more than 50 years.

2011 and 2012 Bidding Rounds for Oil and Gas PSCs

According to the Myanmar Ministry of Energy (MOE), 19 onshore blocks and 22 offshore blocks are currently operated by multinational companies in Myanmar, including CNOOC, SIPC Myanmar, North Petro-Chem, Essar, and Total. The MOE expects a further 34 onshore blocks and up to 29 offshore blocks, the majority of which are...