Myanmar three years on - Progress made but obstacles remain
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Myanmar three years on Progress made but obstacles remain Key observations from our team in Myanmar Much has happened in Myanmar since the beginning of 2012 when Allen & Overy started to re-engage with the country. And yet, much remains to be done. During this time, the Government has made great strides to welcome foreign businesses in tandem with navigating the concerns of the local business community, which has, to date, been sometimes reluctant to accept free market competition. Senior Government officials are taking a pragmatic approach to growth in certain key sectors, albeit with mixed levels of success. At the core of these economic reforms are a few dynamic Nay Pyi Taw Government officials who are working seven days a week, and often with only a handful of staff who really understand what needs to be done or who have the requisite expertise to assist. It is a lonely path for these few. © Allen & Overy LLP 2014 www.allenovery.com
Myanmar three years on – Progress made but obstacles remain 2
There is also a growing realisation among foreign business been subject to considerable lobbying from the local
people who are in the country of the need to work with business community, which is understandably concerned
and take into account the concerns of local businesses as that the international gorillas will muscle out the local
certain sectors open up. The IFC and the Union of players, possibly forever.
Myanmar Federation of Chambers of Commerce and
Power sector reform, including the award of IPPs, has
Industry (UMFCCI) are working to bring together the
progressed much slower than necessary and we are now
world of foreign and local business as well as the
only starting to see any real process.
Government in the Myanmar Business Forum. Modelled
on the Vietnam Business Forum, the Myanmar Business The oil and gas sector (which, until the suspension of
Forum aims to assist these communities to cooperate on sanctions in 2012, was the only sector in which the
areas of common interest, although it has experienced international business community was heavily involved)
varying degrees of success to date. has proceeded reasonably well, with the recent issue of
onshore and offshore blocks to foreign bidders. Much
Businesses are increasingly more familiar with the levels of
remains to be done, however, and new production will not
bureaucracy and the difficulties of carrying out simple
be on tap until around 2020. Longer term, investment in
functions including, for example, the monthly payment of
oil and gas will bring into Myanmar much needed revenue,
salary taxes and the onerous penalties that apply for minor
which will enable the Government to fund a number of
errors in filing company documents. Three years on, it is still
significant projects which are required to enhance the
difficult to remit funds into Myanmar from offshore,
living standard of the people of Myanmar.
although businesses are working around this and Singapore
is used as the primary conduit for international remittances. Today, people can at least have an informed discussion
International banks are, however, still generally reluctant to about how things are done, or at the very least, to better
deal with people in Myanmar, and those on the ground understand the grey areas of law and procedure (of which
sometimes find that their normal banking relationships may there are many). Much has been promised in terms of new
be terminated if they move to the country. laws to modernise the legal system and to meet the (often
misplaced) demands and complaints from the foreign
There is also no interbank clearing in Myanmar and simple
business community for the enactment of new laws. The
transactions such as making account transfers between two
Hluttaws are overloaded with draft bills and there have,
domestic banks can often take up to half a day to process.
understandably, been significant delays in the enactment of
That said, there has been some progress: the number of
certain instruments and unexpected changes in others.
automatic teller machines visible on the streets of Yangon,
in particular, has ballooned over the past two years, A functioning Foreign Investment Law (passed in 2012) and
although not all ATMs work at all times due to power a new Telecommunications Law (passed in late 2013) have
shortages and a general lack of internet capacity. facilitated the entry of substantial amounts of foreign
investment in many sectors, including the roll out by Telenor
The flagship bidding process for the two foreign mobile
and Ooredoo of two new mobile telecoms networks.
telecommunications licences was generally considered to
have been well run in accordance with international Nevertheless, these laws remain a work in progress: the
standards, and has been replicated to a certain degree IFC is currently working with the Directorate of
(including, for example, through the use of the same Investment and Company Administration (DICA) to
international consultants) for the recent foreign bank upgrade and amalgamate the foreign and domestic
licensing process. This is a positive sign and it is hoped investment regimes, and the underlying regulatory
that similar bidding processes will be rolled out in other framework for telecoms remains incomplete.
areas where there is the potential to liberalise (including, Myanmar has acceded to the New York Convention on the
for example, the insurance sector). However, both the Recognition and Enforcement of Foreign Arbitral Awards
telecoms and the foreign bank licensing processes have (1958) (New York Convention) and the Cape Town
© Allen & Overy LLP 2014 www.allenovery.com
Myanmar three years on – Progress made but obstacles remain 3 Convention on International Interests in Mobile and not unexpected, grumbling from those who want to Equipment (2001), but domestic legislation for the move faster, but these grumblings need to be put into purposes of implementing the New York perspective. Myanmar has only very recently emerged into Convention remains in draft form and with no fixed the international business community from decades of date for enactment. isolation and it will take time for things to work out. Although most countries have suspended or eliminated the The enthusiasm and willingness to work things out is majority of sanctions against Myanmar and specific evident at both international and domestic levels. There individuals, the Specially Designated Nationals List (SDN has been a few false starts with the development of the List) maintained by the U.S. Department of Treasury’s legal and regulatory framework, and a number of key Office of Foreign Assets Control remains in place and reforms remain a work in progress; however, with sensible many Myanmar business people are still off limits for those international assistance and a well thought through international businesses who are taking a cautious domestic response, it will be possible to create a approach for dealing with those on the SDN List as a framework that not only encourages increased investment result of legal and reputational reasons. While the U.S. is but also strikes an appropriate balance between the actively encouraging listed individuals to apply to be interests of both international and domestic investors. removed from the SDN List, and is making encouraging noises in this area, it still views sanctions as a useful and necessary policy tool. The process of removing individuals from the SDN List is slow and additions to the SDN List were made in advance of President Obama’s visit to Myanmar in November 2014. There have been a number of exciting and significant legal and regulatory developments in Myanmar’s business sector over the past two years. These developments, however, need to be considered in light of the upcoming elections in late 2015. Investors are generally approaching the elections with a degree of caution, if not only because the outcome remains uncertain, but also because the consequences of a change in government may not be fully quantifiable (regardless of the result) for some time thereafter. This cautious approach is evident in the amount of capital that investors are currently prepared to inject into Myanmar; certain investors are adopting a “wait and see” approach, others are merely sticking their toes into the water, and a few of the more adventurous are taking the plunge in a serious way. If all goes well, those who have taken the plunge will no doubt reap the first mover rewards that are on offer. An overall conclusion of developments over the last two years would have to be positive. A number of substantial projects are currently underway; the growing numbers of real businesses on the ground in Myanmar is palpable and it is obvious that things are happening. There is the usual, © Allen & Overy LLP 2014 www.allenovery.com
Myanmar three years on – Progress made but obstacles remain 4
Banking and Finance Insurance – Until 2013, state-owned Myanma Insurance
was the only insurer in Myanmar. In May 2013, twelve
local companies were granted conditional approval to
Overview
provide insurance services in Myanmar. To date, the
Insurance Business Supervisory Board (which operates
Myanmar has been without a properly functioning
under the Ministry of Finance) has licensed approximately
financial sector for nearly five decades. Critical but limited
nine of the twelve companies who have met the significant
reforms have been introduced since 2011, including
capital requirements (being MMK6bn (approximately
reforms to the exchange rate and the granting of a degree
US$6m) for life insurers and MMK46bn (approximately
of formal autonomy to the Central Bank of Myanmar (the
US$47m) for composite insurers offering both life and
Central Bank). Pending reforms include a new financial
general insurance). Although a number of foreign insurers
institutions law and other changes to the broader
have established representative offices for the purposes of
regulatory framework that governs the operation of
liaison and other non-revenue generating activities, foreign
financial institutions in Myanmar.
investment in the sector is still prohibited and foreign
insurers are not currently able to provide broking,
Key legal developments underwriting or re-insurance services other than through
Myanma Insurance. It is unclear when the sector will be
Floating of the Kyat – In April 2012, the Central Bank opened to foreign insurers – a key step along the way to
adopted a managed float for the Myanmar Kyat, changing helping the country develop.
its value from the previous official rate of US$1:MMK6.4 Autonomy of the Central Bank – Enacted in July
(which was pegged to the IMF’s special drawing rights) to 2013, the Central Bank of Myanmar Law (the Central
a market rate of US$1:MMK815. The Central Bank has Bank Law) separates the Central Bank from the Ministry
since licensed a number of private domestic banks (in of Finance and establishes the Central Bank as a relatively
addition to the state-owned banks) to deal in foreign independent institution, which now falls under the
exchange and to operate foreign currency accounts. President’s Office. This law tasks the Central Bank with
Numerous money changer licences have also been granted financial sector supervision and price and currency
to domestic banks and other organisations and enterprises, stability, including the authority to implement monetary
including hotels. and exchange rate policies independently of the Ministry
Foreign exchange controls – The Foreign Exchange of Finance. Although the Central Bank Law marks a
Management Law was enacted in August 2012 and significant development in Myanmar’s financial sector, the
provides that any physical transfer of foreign currency Central Bank’s independence from the Ministry of Finance
between Myanmar and another country may only be has delayed the progress of pending regulatory
carried out in accordance with the associated Foreign developments (including the foreign exchange regulations)
Exchange Management Regulations, which were issued in as the Central Bank adjusts to its new role.
September 2014 after a lengthy delay. Although the Mobile financial services – In December 2013, the
regulations go some way towards clarifying the restrictions Central Bank issued a directive regulating the provision of
on certain foreign exchange transactions, the mobile financial services (MFS) in Myanmar. The directive
characterisation and approval processes for capital account contemplates a bank-led model for the provision of mobile
transactions, in particular, remain unclear. We expect that financial services and permits the Central Bank to licence
these issues will become clearer once the processes under Myanmar banks to provide certain mobile financial
the FEM Regulations begin to be tested. services, including domestic and international remittances
and cash deposits and withdrawals in Kyats through
agents, bank branches, ATMs and mobile network
© Allen & Overy LLP 2014 www.allenovery.com
Myanmar three years on – Progress made but obstacles remain 5
operators. The Central Bank is currently drafting additional Foreign bank licensing process
regulations to govern MFS (including a directive aimed at
regulating e-money issuers), although the timing and
The Financial Institutions Law permits the Central Bank
content of the proposed regulations is unclear.
to grant banking licences to branches of foreign banks and
New financial institutions law – The Central Bank is representative offices of financial institutions established
in the process of finalising a new financial institutions law outside of Myanmar. In practice, whilst foreign banks are
which will repeal the existing Financial Institutions of permitted to open representative offices in Myanmar (and
Myanmar Law (1990). Although we understand that the 43 foreign banks have done so to date), foreign banks have
draft bill will be published shortly for the purposes of a not been permitted to establish branches or engage in any
public consultation process, it is unclear when the bill will banking business beyond liaison activities and the
be put before parliament for approval. monitoring of loans granted to onshore and other entities.
Security – Myanmar law permits the creation of English- However, in July 2014, the Central Bank announced that it
law style security structures, including certain types of had received applications from 25 foreign banks as part of
mortgages and fixed and floating charges. While the the second stage of a tender process for the issue of a
Myanmar Companies Act (1914) (the Companies Act) limited number of restricted wholesale banking licences to
requires the companies registrar, the Directorate of foreign banks and, in October 2014, announced that nine
Investment and Company Administration (DICA), to banks had been successful in winning licences. Despite
establish and maintain a register of mortgages and charges, some of the restrictions embedded in the licence conditions,
DICA does not currently maintain such a register and, this is a positive step in the development of Myanmar’s
therefore, perfection of mortgagees and charges under the banking sector.
Companies Act is difficult (if at all possible) as debate
continues over whether filing for registration is sufficient.
Key issues
While we have now seen non- or limited recourse financing
into Myanmar in the telecoms tower sector, secured lending
into Myanmar remains difficult, and investors and other Progress has been made recently in reforming Myanmar’s
stakeholders are encouraging the government and DICA to financial sector, however, much remains to be done. The
use the current legislative framework as a means of creating economy is largely cash-based, with an antiquated banking
and registering a broad range of security interests. DICA is system, and there is no centralised clearing system. Although
currently drafting a new companies law with assistance many domestic banks are engaging with regional financial
from the Asian Development Bank. We expect that a draft institutions and recruiting foreign technical expertise, domestic
of the new law will be issued for public consultation during banks are still significantly constrained by a chronic lack of
the course of 2014 but it remains to be seen what impact, if capital, both human and financial. This lack of capacity
any, this will have on prevailing practice. coupled with strict lending criterion and other restrictions
imposed by the Central Bank, will no doubt affect the ability of
domestic banks to compete with their foreign counterparts.
© Allen & Overy LLP 2014 www.allenovery.comMyanmar three years on – Progress made but obstacles remain 6
Infrastructure – Power Fuel supply and developing an appropriate mix for
Myanmar’s power sector further adds to the challenges.
Local coal is not adequate for power production, so the
Summary
development of significant coal-fired power plants will
only come after the development of ports and supporting
During the past two years there has been significant focus infrastructure required to allow imported coal to be used.
on Myanmar’s power sector. Foreign investors have seen Given the short-term challenges faced in developing coal
massive potential, and improving electrification rates plants, the focus has largely been on the development of
(currently around 30%) has been a key development gas-fired plants to bring additional dry season capacity
priority for the Myanmar Government. Despite or perhaps online sooner rather than later. The challenge, however,
because of this, early progress has been somewhat with gas is that the vast majority of Myanmar’s gas has
haphazard, with many players with competing interests and been allocated to Thailand and China under long-term
priorities jostling for position. In recent months, however, contracts. This raises question marks over whether
significant progress has been made and it now appears that sufficient gas is available. There are also concerns around
we are at the early stages of what is hoped to be a the quality of gas, given outdated pipelines and other
successful and active IPP program. infrastructure. This means that the Government has to
take the risk on fuel supply for gas-fired power projects.
Key issues for the infrastructure Clearly, the sector with the most long-term potential is
power sector hydropower although, to date the focus has been
elsewhere. This is, however, changing with a number of
Given the low electrification rate, there is no doubt that international consortia now starting to look seriously at
there is significant upside and growth potential in developing hydropower plants. Solar and wind also have
Myanmar’s power sector. In order to tap into this potential, with solar plants seen as a good option for
opportunity, however, it will be critical that reliable developing small grids in rural areas to help electrify
structures are implemented to attract foreign investment, smaller townships.
as the Government simply does not have the financial As part of its longer-term planning, the Myanmar
capacity to support the growth required. The Government Government, with support from multilateral and bilateral
is, therefore, grappling with issues such as whether to agencies, has developed a 20-year Electricity Master Plan,
provide Government guarantees to underpin IPP projects which includes a proposed energy mix and aims to provide
and, if so, on what terms. a framework for the country’s generation development,
The obvious need for additional capacity and expansion of and gives investors a good indication as to how the sector
the grid is clear. However, so is the need for improvements may develop.
to the country’s existing infrastructure. Myanmar currently
has enough capacity from existing hydropower plants to Key developments
meet the demand from the existing grid during the wet
season. The frequent black-outs experienced during the
The projects implemented to date have been led by a small
wet season are entirely the result of outdated and poorly
number of private consortia, consisting primarily of Thai,
maintained transmission and distribution infrastructure.
Korean, Singaporean and Myanmar based groups, which
During the dry season, lack of capacity simply worsens
have bilaterally negotiated terms for the development of
the problems.
© Allen & Overy LLP 2014 www.allenovery.comMyanmar three years on – Progress made but obstacles remain 7
power plants with the Ministry of Electric Power (MOEP)
and Myanma Electric Power Enterprise (MEPE). To date
these projects have been entirely funded through equity,
although there is talk in the market about at least one of
these projects now being refinanced using a project finance
structure. Whether or not this can be achieved remains to
be seen but, if it does happen, it will be a significant
development for the market.
Generally, the power purchase agreements (PPAs) for
these initial projects are relatively short form and may not
be seen to meet the standards expected for bankability
elsewhere in the region. Moreover, the lack of precedent
transactions in Myanmar also means a lack of track record
of performance by MEPE and associated uncertainty
around how MEPE would perform its obligations in
practice. Notwithstanding these concerns, the initial
projects have been successfully completed and MEPE has
entered into PPAs and is paying for power produced.
Interestingly, it appears that MEPE has also now formed a
view that it can make payments under PPAs directly into
offshore accounts in Singapore, which is a positive
development for foreign investors.
The next major step in the power sector is the Myingyan
gas-fired IPP project. The bidding process for this project
is currently nearing its conclusion, almost a year after
MOEP first called for submissions. IFC’s involvement as
an adviser to Government through the bid process is
expected to encourage bids from well-established
international players and will, hopefully, set a strong
foundation for future projects, including the development
of a more sophisticated, bankable PPA.
© Allen & Overy LLP 2014 www.allenovery.comMyanmar three years on – Progress made but obstacles remain 8
Infrastructure – urban also questioning how projects are being prioritised, as
certain projects that are in the market do not, on their face,
development and seem particularly attractive from a risk/return perspective.
infrastructure Notwithstanding this, the Government is seeing keen
interest in the projects it puts out for tender, with long
shortlists often being announced. Again, this can create
Summary some confusion in the market, as it is difficult to assess
which consortia are particularly serious about certain
projects, as often consortia who lodged initial interest on a
Whether it is the improvement of existing infrastructure or
speculative basis (for example, simply by purchasing the
new projects, Myanmar’s demand for infrastructure
bid documents) are listed on a formal shortlist.
development is exceptionally high, with opportunities
across almost all sectors. Development has so far been Another significant issue is that almost all land in Myanmar
piecemeal, with a number of airports, ports, railways, is state owned. This means that engagement is still needed
hotels and urban renewal projects currently in the making. with the Government (or, in some cases, with multiple
Investors, nevertheless, face a number of significant arms of the Government) on what in many other countries
hurdles in this sector, including the lack of a formal legal would be a purely private sector venture. This is
framework surrounding public procurement processes. particularly the case with urban construction projects, such
as hotels and condominiums. A draft condominium law
has been circulated which would approve ownership of
Key issues for infrastructure sector residential units by foreigners subject to some conditions,
but there is no visibility on when the actual law may be
Ultimately, the biggest issue for the infrastructure passed or its final content.
development sector in Myanmar is simply that so much
development is needed. Apartment buildings, other
housing, hotels, airports, roads, railways, ports, LNG Key developments
storage facilities (and the list goes on), are all urgently
needed if the country’s development goals are to The Government’s current development focus appears to
be achieved. be in aviation, port, and railway and road infrastructure.
However, despite this pressing need, the procurement The country is expected to become Asia’s next large
processes vary across ministries and there does not aviation growth market. Apart from building the new
appear to be a centralised plan for staged development. Hanthawaddy International Airport, Myanmar has planned
Multilaterals are working with the Government to expansion and rehabilitation projects for the Yangon and
establish a PPP framework, which should help with Mandalay international airports, as well as upgrades to
concerns around procurement. However, while this is several domestic airports around the country. As for its
being developed, the Government is pressing ahead with ports, Myanmar intends to develop deep sea ports in
many projects with varying procurement processes Thilawa, Dawei, Kyauk Phyu and Sittwe. Notably,
being implemented. construction of the port at the Thilawa Special Economic
Zone (SEZ) has been slated to begin this year. The SEZs
The haphazard approach to infrastructure development is
themselves continue to be the focus of much discussion,
resulting in many players taking a ‘wait and see’ approach,
particularly following the enactment of the Special
as it is not always clear at the time a tender is announced
Economic Zone Law in January 2014, which grants
whether the project will actually proceed. Some people are
investment incentives to projects located within an SEZ in
© Allen & Overy LLP 2014 www.allenovery.comMyanmar three years on – Progress made but obstacles remain 9
lieu of those available under the Foreign Investment USAID. The priority is on more dangerous parts of
Law. The Thilawa SEZ, with significant Japanese existing major cross-country routes between major cities,
backing, is moving ahead faster than the Dawei and with these works to then be used as a model for wider
Kyauk Phyu SEZs. roll-out throughout the country.
The country’s railway system is also expecting a facelift Due to the critical lack of accommodation, particularly in
with Myanma Railways, inviting expressions of interest to Yangon, the private condominium and hotel sectors are
undertake design and build work for the Yangon Central also seeing significant activity. Several major hotel chains,
Railway Station and plans are already underway to upgrade including Peninsula, are expected to be operational in
the Yangon circle line rolling stock, with some services Myanmar in the coming years. Brands such as Hilton have
expected to be privatised. The government is also expected already opened, and a number of large condominium
to issue international tenders for the upgrade of railway projects are under construction. These developments are
lines running throughout the country. expected to reach completion from 2016 onwards and
include a mix of residential, retail and office space.
Road infrastructure is being upgraded on an adhoc basis,
with support from various international donors, including
© Allen & Overy LLP 2014 www.allenovery.comMyanmar three years on – Progress made but obstacles remain 10
Energy Licensing Rounds
Overview The past few years have seen three licensing rounds: two
onshore and one offshore. In the first, in July 2011, the
Myanmar is blessed with a unique geographic location and Ministry of Energy offered up 18 of its onshore blocks.
potentially significant (and largely unexplored) reserves of For the first time, foreign bidders were required to partner
oil and gas. Despite the risks, many international investors with a local company in making their bids. Nine of the
have taken a calculated bet on the country’s oil and gas blocks were awarded to seven foreign companies, including
sector over the past two years, both through licensing Thailand’s PTTEP and Malaysia’s Petronas Carigali.
rounds and through M&A. A second onshore licensing round (widely viewed as the
first “post-sanctions” round) was launched on 17 January
Updated standard terms 2013, comprising 18 blocks. Once again, foreign bidders
were required to partner with a local company in making
and conditions
their bids. The round did not attract as many IOCs as had
been hoped for. In October 2013, the government
In August 2013, the Ministry of Energy published an awarded 16 out of the 18 blocks. Eni (the only major IOC
update to the standard terms and conditions for bidder) was awarded two blocks. Other winners included
production sharing contracts (PSCs), previously published Canada’s Pacific Hunt Energy Corp, India’s ONGC
in July 2012, and for the first time published standard Videsh, Malaysia’s Petronas Carigali, Thailand’s PTTEP
terms and conditions for improved petroleum recovery and U Moe Myint’s MPRL E&P.
(IPR) contracts. Among other things, the updated
standard terms and conditions reflect an increased focus On 11 April 2013, the country’s first formal offshore
on the part of the government on environmental and licensing round was launched in respect of 11 shallow
social issues. water and 19 deep water blocks. This had originally been
due to take place in September 2012 but MOGE delayed
For deep water offshore blocks, the revised terms and the launch in order to improve the bidding process in
conditions provide for more favourable cost recovery and response to concerns raised by major IOCs about a lack of
profit split percentages in favour of the PSC contractor. clarity with the bidding process and a perceived lack of
In what is seen as a further concession, the Ministry of transparency. For the shallow water blocks (but not the
Energy suggested prior to the bid submission date for deep water blocks), bidders were required to partner with a
last year’s offshore licensing round (discussed below), local company in making their bids. The winners were
that bidders would not necessarily be bound by the profit announced on 26 March 2014. This time, the bidders (and
split percentages set out in the standard terms and the winners) included many big names such as Shell,
conditions and that they could set out in their bids what Statoil, ConocoPhillips, Chevron, BG, Total and
proportion of the profits they were willing to share with Woodside, who had shied away from the last year’s
the government. onshore licensing round.
While there will always be critics, the general consensus is
that the bidding in the last three rounds (but particularly in
the latest round) was conducted in a reasonably
transparent manner.
© Allen & Overy LLP 2014 www.allenovery.comMyanmar three years on – Progress made but obstacles remain 11
Gas projects coming onstream It has for a number of years committed to sign up to the
Extractive Industries Transparency Initiative (EITI) and in
July this year was finally approved as an official
July 2013 saw the start of operations of the Shwe gas
“Candidate” country. EITI is a global organisation aimed
pipeline that stretches from Ramree Island in the Bay of
at promoting transparency in the mining and energy
Bengal to China’s Yunnan province. The capacity is 500
sectors in developing countries. Myanmar needs to meet all
MMcfd, with CNPC’s peak contracted offtake volumes at
requirements set out by the EITI (which include disclosure
400 MMcfd and the remainder for the domestic market.
of details of recent oil and gas bidding rounds) within
PTTEP commenced output from its Zawtika gas project three years to become EITI complaint. The PSC standard
in March this year. Domestic market volumes are 100 terms and conditions now include an express provision
MMcfd, up from the initially agreed 60 MMcfd. PTTEP requiring MOGE and the PSC contractor to collaborate to
still plans to export 240 MMcfd to Thailand, by using the implement the EITI.
field’s swing capacity to push up output to 340 MMcfd.
The government is also working on the country’s energy
sector policy and it has been reported that this will be
Domestic gas supply ratified by Myanmar’s parliament policy before the end of
this year. The policy aims to integrate the work of the six
Although gas production in Myanmar is significant, most ministries - covering energy, mines, electric power, industry,
of these volumes are contracted for export to Thailand science and technology, and the environment - that are
(Yetagun, Yadana and Zawtika projects) and China (Shwe involved in renewable and non-renewable energy and will
project). The lack of domestic gas supply is hampering the outline energy objectives, principles and a working
development of new gas-fired power plants, which are a programme for implementation. It is being developed with
key part of the government’s electrification programme. the assistance of the Asian Development Bank.
The Ministry of Energy has announced that, after the
Zawtika project (beginning with PTTEP’s M-3 U.S. Sanctions
development), new gas field developments must be
prioritised for domestic use. In the meantime, the country
In addition to the U.S. sanctions issues discussed already, it
is looking at other options, such as LNG imports, to stem
is worth highlighting one particular requirement in the
the supply gap in the short to mid term.
context of oil and gas investments. That is that the U.S.
rules require U.S. persons engaging in any new investment
Reforms of more than USD500,000 (over any period of time) or
any investment with MOGE to disclose such business to
The Myanmar Government has continued along its path the U.S. State Department and provide two reports on
of reforms aimed at boosting investor confidence. such business annually, one of which is made public.
© Allen & Overy LLP 2014 www.allenovery.comMyanmar three years on – Some progress but obstacles remain 12
Oil products Myanmar’s import capacity. Trafigura affiliate Puma
Energy, working with local partner Asia Sun, is building an
80,000-cubic-metre import and storage facility for gasoline,
Like much of Myanmar’s infrastructure, the country’s three
diesel and bitumen at Thilawa on the Yangon River.
oil refineries are aging and underutilised. They are run by
Similarly, Vitol is planning to construct a fuel-import
state-owned Myanmar Petrochemical Enterprise, who
terminal for gasoline and diesel in the Yangon area. The
wants investors to upgrade. Thailand’s largest refiner Thai
attraction of frontier markets such as Myanmar is
Oil is understood earlier this year to have proposed to
heightened by the growing competition in fuel markets in
upgrade two of these existing refineries in exchange for the
other parts of the world.
right to build a new large-scale refinery with a capacity of
150,000 b/d. Only half of present demand can be met by Myanmar’s
three refineries. Imports of diesel, gasoline and jet fuel come
In an indication that the development of a new refinery in
from Singapore and Thailand. Demand is set to increase
Myanmar may still be many years down the line, a number
further, primarily driven by a burgeoning transport sector.
of investments have been made focussing on developing
KEY CONTACTS
Simon Makinson Kathryn Thornton Chris Burkett
Partner – Myanmar Senior Associate – Myanmar Senior Associate – Myanmar
Tel +662 263 7603 Tel +95 (0) 1 441 3120 Tel +95 (0) 1 441 3119
simon.makinson@allenovery.com kathryn.thornton@allenovery.com chris.burkett@allenovery.com
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Allen & Overy LLP or an affiliated undertaking has an office in each of: Abu Dhabi, Amsterdam, Antwerp, Athens (representative office), Bangkok, Beijing, Belfast,
Bratislava, Brussels, Bucharest (associated office), Budapest, Casablanca, Doha, Dubai, Düsseldorf, Frankfurt, Hamburg, Hanoi, Ho Chi Minh City, Hong Kong,
Istanbul, Jakarta (associated office), Johannesburg, London, Luxembourg, Madrid, Mannheim, Milan, Moscow, Munich, New York, Paris, Perth, Prague, Riyadh
(associated office), Rome, São Paulo, Shanghai, Singapore, Sydney, Toronto, Tokyo, Warsaw and Washington, D.C.
© Allen & Overy LLP 2014. This document is for general guidance only and does not constitute definitive advice. | CA1411069
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