Tuesday, September 22, 2015

Shwe gas cost to be covered within four years

Myanmar Times    Monday, 03 August 2015

The cost of building the Shwe gas project in the Rakhine offshore basin will be recovered within four years, as the gas field was less expensive to develop than other offshore projects, officials said.

Shwe is one of four offshore natural gas sites currently in production. It is operated by Daewoo from South Korea, and began pumping in 2013.

Of the 12 wells planned at the Shwe site, eight have already been completed, a Myanma Oil and Gas Enterprise official said yesterday.

“The production capacity of the wells is much better than expected,” he said.

“Every well can produce at least 70 million cubic feet per day of natural gas. This is the best result in the Myanmar oil and gas industry.”

Myanma Oil and Gas Enterprise is a minority partner in the project.

The high rates of production mean that fewer wells than expected may need to be dug, resulting in fewer costs for its developers.

The eight wells at the field are currently producing over 500 million cubic feet per day (MMCFD), of which 400 MMCFD is exported to China through a pipeline and the remainder is for domestic use.

Oil and gas companies have been active in the Rakhine offshore basin since 1966, with several companies from countries like Japan, France and the United States exploring in the blocks.

They were ultimately unsuccessful, until Korea’s Daewoo signed a production sharing contract for offshore block A-1 in 2000 and began exploration. It later announced a discovery in 2004 of proven gas reserves of 4.5 trillion cubic feet.

China National Petroleum Cooperation was awarded the right to buy gas from Shwe, with an agreement inked in 2008.

The Myanma Oil and Gas Enterprise official said the cost of developing the project was $2.6 billion, plus additional operation expenses.

With the project now generated about $1 billion a year, he said the costs will be covered in four years.

Daewoo is the operator of the project, holding a 51pc stake. Myanma Oil and Gas Enterprise has a 15pc stake, while another Korean firm and two Indian companies own the remainder.