The global energy sector from a subsurface perspective
Most people agree that the city of Bagan was founded during the mid-to-late 9th century by the Mranma (Burmans), who had then entered the Irrawaddy valley. Through time, this Burman settlement grew in authority and grandeur, with over 10,000 religious monuments constructed. Bagan is situated in an active fault zone in the middle of the country and has suffered from many earthquakes over time, with over 400 recorded quakes only between 1904 and 1975. Photo by Alexander Schimmeck – Unsplash.
In 2015, Duncan Witts described Myanmar as “one of the World’s current hotspots for oil and gas exploration…”. Forward to 2022, exploration and foreign investment have significantly declined due to operating difficulties, politics, and security concerns, showing for the umpteenth time that the economy of energy rests on the pillars of politics, policy and price.
For centuries, Myanmar (Figure 1) has been a marginal oil producer at a fraction of its considerable potential. Yet, geologists estimate that the country has significant potential for proving additional reserves of oil and gas. In addition, there is a range of enhanced oil recovery opportunities, e.g. thermal and water floods, plus gas storage in depleted oil fields.
Figure 1: Regional plate tectonic map of Myanmar showing the oil and gas producing Central Burma Depression (CBD) that runs from south to north through the country, oil and gas fields, sedimentary basin names with possible oil and gas accumulations, and major geologic structures. Most of the known oil and gas fields of the CBD are structural traps that are the result of transpression associated with the Sagaing fault plate boundary. Additional untested oil and gas traps and sub-basins are interpreted to lie beneath thrust faults and unconformities but not expressed on the earth’s surface as is the case with the known CBD oil fields.
At present, civil unrest consisting of pro-democracy protests in response to the February 2021 Coup d’état and armed insurgency in the countryside will delay any opportunities for years, unless a radical political change takes place overnight. Conversely, the attention from foreign energy players to Myanmar during the last two to three decades will not be easily forgotten against a backdrop of falling production and increasing domestic energy demand (Figure 2).
This article provides a summary of some recent issues affecting the oil and gas sector and its consequences. It shows that especially in complex geological settings such as the onshore fold and thrust belt, the combination of political stability and perseverance is key to unlocking the basin’s potential.
Figure 2: The upper graph shows that Myanmar (Burma) had a nearly 6-fold increase in total energy consumption from petroleum and other liquids from 2012 to 2020 (EIA, 2022). Consumption in quad Btu, that is 1 quadrillion (1015) British thermal units (BTUs). The middle graph shows Foreign Direct Investment (FDI) in USD and the bottom graph % GDP from 2012- 2020 with key political and oil and gas sector events added. The graphs show the correlation of oil and gas policy and political events with FDI and GDP.
OPENING UP
Only a small number of international E&P companies were in Myanmar before 2012 when a new Foreign Petroleum Law (FPL) was passed, making available numerous onshore and offshore blocks to foreign investment.
Foreign direct investment (FDI) from 2012-16 reached a total of USD 28 billion, which was about three-quarters of the FDI in the previous twenty-two years period (Figure 2). Initially, FDI increased with the transition to a more democratic form of government and assisted the flow of technical expertise and knowledge into the oil and gas sector. For instance, the American Association of Petroleum Geologists (AAPG), European Association of Geoscientists and Engineers (EAGE), and the Myanmar Geosciences Society hosted four oil and gas conferences in Yangon from 2014 to 2018 that provided a wealth of knowledge transfer and new contacts.
In 2015, exploration and development interest by foreign companies reached a peak when Myint (2016) reported that thirty-two international companies were operating 65 blocks under production sharing contracts (PSCs, an expression of exploration interest).
COOLING DOWN
By 2022, exploration interest had cooled considerably with only 17 onshore blocks and 18 offshore blocks. Oil and gas production is declining too. From 2012 to 2022, oil production decreased from around 20,000 to 7,500 Bopd (barrels of oil per day; Figure 3).
Figure 3: Graph showing the significant decline in daily crude oil production in Myanmar from 2014 to 2022 (Top). Production is in thousand Bopd. Source: TE (2022) and EIA (2022). The bottom graph shows marketed natural gas production in Myanmar from 2010 to 2021. Production is shown in thousand normal cubic metres of gas.
Myanmar produces, uses, and exports a substantial amount of gas. Marketed gas production increased substantially from 2013-2015, mainly from the offshore gas fields, but it has declined about 10% since 2015. In 2019-2020, around 670,000 Mmscf (million standard cubic feet) was produced, with around 146,000 Mmscf consumed in-country, and the remaining exported to Thailand and China.
Gas sales have supported foreign exchange reserves, but the gas and oil production decline and growing LNG (liquefied natural gas) and crude oil imports are unfavourable trends despite recent higher gas prices. LNG imports are needed for domestic and industrial power (the government wants 2.1 metric tons per annum by 2030) while 7 Mmbo (million barrels) of crude oil were imported in 2020.
BACK TO PRE-2012 LEVELS
Despite popular thinking, several factors negatively impacting exploration and production pre-date the 2021 Coup d’état (Figure 3).
1) No important discoveries have been made since the offshore gas fields Shwe in 2004 and Zawtika in 2007;
2) Unresolved operating and policy constraints between the government and operators with some that have lingered since the 2012 FPL;
3) Onshore operating difficulties in challenging and remote settings with poor infrastructure;
4) A lack of and restricted access to geological and geophysical data in a complex region;
5) Worldwide recognition and condemnation of the government’s response to civil strife in Rakhine State starting in 2016 that curtailed private sector investment. By 2018, FDI had collapsed to USD 1.77 billion, a 63.2% decline from 2017 (Figure 2).
The military declared a state of emergency in February 2021, ousted the previous government of the National League for Democracy (NLD), and FDI was back to its meager pre-2012 levels. The military-led government has promised future elections but has not offered a revised energy policy or stated they would honor existing policies, adding to foreign investment uncertainty.
The long-term impact of the 2021 Coup d’état on oil and gas production remains unclear, but being confronted with a decline from 970,513 to 587,060 barrels of oil year on year from just two onshore fields (Chauk and Yenangyang), there should be some alarm bells ringing.
MISSED OPPORTUNITIES
The Central Basin Depression is in a transpressional tectonic setting along the Sagaing fault (SF) plate boundary, displaying convergent and strike-slip
crustal movements. The SF shares similarities with the San Andreas fault plate boundary of California: both faults have had around 300 km of right-lateral displacement since the early Miocene with the coeval growth of adjacent fold and thrust belts and sediments overprinted on older structures that provide a variety of oil and gas traps styles.
Both settings are active and prolific petroleum systems, with mature and rich source rock units, and a variety of proven reservoir units. Many transpressional settings have been incorrectly mapped with steepening with depth fault patterns, as displayed in cross-sectional view, that forecast very limited sub-fault exploration portions, constraining resource estimates and missing many trapping structures.
For instance, the “flower structure” pattern once used to explain the oil trapping mechanism of the giant oil fields in the oil-rich San Joaquin
basin, California, has been shown to be incorrect and thereby limiting resource estimations. Subsequent new field discoveries in the San Joaquin, along with structural mapping and the recognition of strain partitioning along the San Andreas fault plate boundary, showed that the basin has significant untested oil and gas potential in the sub-fault portions.
Figure 4: Enhanced satellite image of the Salin sub-basin, Central Basin Depression (CBD). Heavy black line is the location of the cross-sections shown in Figure 6. The west-dipping Kabaw reverse fault and the right-lateral strike-slip Sagaing fault form the west and east edges of the CBD, respectively. Abbreviations: IR = Irrawaddy River, MP = Mount Popa, WO = Western Outcrops (surface expression of the fold and thrust belt structures), YC = Yenangyat-Chauk anticlinal structure and oil fields, YY = Yenangyaung anticlinal structure and oil field.
COLD AND UNCERTAIN
The United States, UK, Canada and the EU have implemented economic sanctions on several entities and individuals in the oil and gas sector in response to the 2021 Coup d’état, the government’s role in suppression of the opposition to the coup, plus ethnic cleansing in the Rakhine State.
Export sales of gas are a major source of foreign currency to the government, at risk to further sanctions, and major foreign gas producers such as Chevron, Woodside, TotalEnergies, and Shell have departed and turned their operations over to regional operators.
Even though the direct impact of present sanctions is unclear, additional economic sanctions being considered by the USA, UK, EU, and Canada on the sector will be exceedingly harmful to the population, reduce production and government income, and bring in nations not participating in sanctions. Clearly, by the end of 2022, the plan to improve one of the poorest and least developed nations in Asia through increased foreign investment and PSCs in the oil and gas sector has turned cold and uncertain.
FOLD AND THRUST BELT POTENTIAL OF THE OIL-PRODUCING CENTRAL BASIN DEPRESSION
Despite the political problems and associated uncertainties, opportunities remain in the Myanmar oil and gas sector given present-day prices, long-term price forecasts, and continuing demand for fossil fuels both in and out of the country.
Examples of potential growth areas are offshore natural gas in the Moatama, Rakhine, and Tanintharyi areas, exploration in the onshore Hukawng, Hsipaw-Lashio and Mawlamyine-Mepale basins; and gas storage in depleted oil fields near population centers with growing power demands (Figure 1). Here, onshore exploration opportunities in the fold and thrust belt of the Central Basin Depression (CBD) are discussed in more detail.
Nearly all of Myanmar’s onshore oil and gas production, historic and present, comes from the CBD (Figure 1), a ~1200 km long, narrow trough with a thick sedimentary section including an active petroleum system of proven reservoir and rich source rocks.
Masters et al. (1998) estimated the mean undiscovered petroleum resources at 1.4 Bbo for the Burma Basin (primarily composed of the CBD) and they estimated 6.2 Tcfg for the combined Burma Basin and Andaman Sea.
Wandrey (2006) provides a mean estimate of undiscovered oil and gas reserves for the Central Burma Basin Assessment Unit of 516 Mmbo; 2,008 Bcfg; and 99 Mmboe in natural gas liquids. Myint (2016) estimated 566 Mmbo cumulative and 85 Mmbo remaining recoverable for the Central Myanmar Basin (equivalent to the CBD).
Seismic reflection profiles, drilling results, cross sections and geologic mapping show that a significant portion of the undiscovered potential is in the fold and thrust part of the CBD. Such complex belts, even those with rich source rocks, are often resource-underestimated in the early stages of exploration.
Worldwide, oil and gas-prone fold and thrust belts can be enormously rich with giant trapping structures. However, these areas are difficult to explore due to their fault and fold complexity, and often take decades to fully develop through drilling. Likewise, the ultimate potential of fold and thrust belts is difficult to estimate initially without extensive geologic and seismic reflection data and initial drilling results.
The fold and thrust belt of the CBD play is the lowest risk and largest exploration opportunity in onshore Myanmar based on the location of existing oil production, the presence of rich and mature source rocks, and the limited amount of exploration drilling away from the most obvious surface anticlines, e.g., Yenangyaung and Yenangyat-Chauk oil fields (Figure 4).
To assist exploration in such complex structural settings, geologists have developed models based on observation and theory, with restorable cross-section techniques to assist seismic interpretation and cross-section construction (Figure 5).
Figure 5: Schematic cross-sectional model of a convergent wedge forming a triangle zone within a fold and thrust belt, illustrating a concealed oil and gas trap (anticline above floor thrust).
This has not been done sufficiently in the CBD. Figure 6 is a very generalised application of this approach that illustrates the potential oil and gas trapping areas hidden beneath the faults in the CBD. Exploration in the CBD will require detailed surface geologic mapping using existing well records and seismic reflection profiles. That level of data availability is generally not available or does not exist and geologists must be content with the regional works of Bender (1983), Pivnik et al. (1998) and Racey and Ridd (2015).
Figure 6: Transpressional deformation along the Sagaing fault plate boundary in Myanmar has produced a fold and thrust belt with untested oil and gas opportunities. These two highly generalized interpretations show the same cross-sectional line of the Salin sub-basin, CBD. Both interpretations show the CBD with a fold and thrust belt structural style. The upper cross section shows untested oil and gas potential in the inferred triangle zone structures (TZ) along the deformed margins of the CBD. The lower cross section is a more resource-conservative interpretation of the fold belt (Pivnik et al.,1988). The location of the cross sections is shown in Figure 4, vertical=horizontal scale and in meters, MSL = mean sea level.
PATIENCE REQUIRED
To sum up, the development and further exploration of its offshore gas resources that looked so promising a decade ago are currently stalled in Myanmar. Likewise, onshore oil exploration is now more a dream than a reality. However, the political chaos will end sooner or later, with a new government likely facilitating the return of foreign companies given the attractive opportunities.
In addition, government recognition of and assistance in clearing operational obstacles would be beneficial; making exploration data easily available would cost little and increase foreign interest. The government needs to appreciate that exploration in the CBD will be more demanding, as successful exploration in structurally complex belts requires lots of geological and geophysical data, patience and large investments that will not depart after the first dry hole.
This will require favourable government understanding, policies, and terms that recognise the great financial risk taken by operators in such settings. The costs for even a modest exploration program in a remote fold and thrust belt is probably well north of USD 50 million. For now, the significant oil potential in the fold and thrust belt part of the CBD will remain untested and undeveloped but not forgotten by the world’s oil and gas industry.
REFERENCES
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ITA, 2022, Burma – Country Commercial Guide, Oil and gas, The International Trade Administration (ITA), USA Department of Commerce, Last published date: 2022-07-28
Harding, T. P., 1976, Tectonic significance and hydrocarbon trapping consequences of sequential folding synchronous with San Andreas faulting, San Joaquin Valley, California: AAPG Bulletin, v. 60, no. 3, p. 356–378.
Jamison, W.R., 1983, Mechanical Stability of the Triangle Zone: The Backthrust Wedge: Journal of Geophysical Research, v. 98, no B11, p. 20,015-20,030.
Masters, C.D., Root, D.H., and Turner, R.M., 1998, World conventional crude oil and natural gas. Identified reserves, undiscovered resources, and futures: U.S. Geological Survey Open-File Report 98-468, 105 p.
Myint, L., 2016, A Synthesis of Myanmar Petroleum Geology and Potential, AAPG Search and Discovery Article #30453 (2016), Adapted from oral presentation given at The Second AAPG/EAGE/MGS Conference Innovation in Geoscience: Unlocking the Complex Geology of Myanmar, Yangon, Myanmar, November 19-20, 2015,
Pivnik, D.A., J. Nahm, R.S.Tucker, G.O. Smith, K.Nyein, M. Nyunt, and P. H. Maung, 1998, Polyphase Deformation in a Fore-Arc/Back-Arc Basin, Salin sub-basin, Myanmar (Burma), AAPG Bulletin, V. 82, No. 10 (October 1998), P. 1837–1856.
Racey, A. and Ridd, M.F., 2015, Petroleum Geology of Myanmar, Geological Society Memoir No. 45, The Geological Society of London, 123 p.
Shaffer, B., 2009, Energy Politics, University of Pennsylvania Press, 200 pgs. ISBN: 978-0-8122-0452-0.
Thant Myint-U, 2021, The Hidden History of Burma: Race, Capitalism, and the Crisis of Democracy in the 21st Century, W. W. Norton & Company publisher, paperback 320 pgs., ISBN: 978-0-393-54143-4.
