Parliament to pass new law affecting upstream oil & gas sector

Parliament is currently debating a bill on petroleum exploration, drilling, and production, which is intended to apply to both offshore and onshore activities. The law will mainly repeal outdated regulations from the 1950s and intends to serve as a way of organizing the sector. The bill follows the long-awaited Mining Rules issued in February 2018 and is part of an effort by the Union Government to provide more transparency to the extractive sector in Myanmar after the country joined the Extractive Industry Transparency Initiative.

Upstream activities have so far been governed by the terms of the production-sharing contracts (“PSCs”) executed between the private sector and the Myanma Oil & Gas Enterprise (“MOGE”). The draft bill provides for maximum time limits for each type of activity (notably, a maximum of 20 years for the production period, which could only be extended for two periods of five years each). It also formalizes the need to conduct tenders prior to award blocks, which was already put into practice by the MOGE.

One notable change is that the draft bill allows different modes of cooperation with the private sector. In addition to production sharing, the parties will also be able to opt for profit sharing or more traditional joint ventures. The same move was included in the mining sector in 2015. However, it is yet to be seen whether these other modes of cooperation will be used by the MOGE.

For existing players in the sector, companies that have already executed a PSC will not be subject to the law.