Myanmar's decision to sell gas from blocks in Rakhine offshore is likely to be mired in legal disputes. South Korean multinational conglomerate Daewoo International Corporation, which has the concession for two of these blocks, has objected to the Myanmar Government's decision to sell gas to China at $4 per million British thermal units (mBtu).
A high-powered team of legal experts and Daewoo executives presented their case before the Myanmar government last fortnight. They contended that the decision to sell gas at $4 per mBtu to China would lead to huge losses to the consortium that has invested in the oil and gas fields. The South Korean conglomerate has contended that the price of gas should be at least $4.41 per mBtu.
India's ONGC Videsh Limited (OVL) and GAIL have a 30 per cent stake in these two blocks, while Daewoo is the operator with a 60 per cent stake. South Korea's Kogas has the remaining 10 per cent interest. Analysts said the decision to sell gas was the result of recent opposition by China to a US-led move in the UN to restore basic standards of democracy and human rights in Myanmar.
Daewoo wants the consortium to be engaged with downstream projects of the two gas blocks, including payment of tariff from the proposed Chinese pipeline. China has reportedly told Myanmar that it will lay a 900 kms pipeline to transport the gas from the offshore area to the Myanmar-China border.
The distance from the gas field to the India-Myanmar border is about 290 kms, making it the most economical export option but Myanmar's military leadership preferred to go with China, according to sources.
Daewoo is also planning to offer an "economic package" to the Myanmar government to counter the Chinese offer of buying gas from these blocks. Though Myanmar is unlikely to retract from its commitment to China, it may accommodate Daewoo's interests by extending some other concessions.
Hydrocarbon reserves in one of the blocks, according to independent observers, are estimated to be in the vicinity of 4.8 trillion cubic feet. Reserves in the other are not yet known and the Myanmar government has commissioned a survey on the block.