Myanmar earns close to US$1 billion a year from natural gas sales.

Much of this money is not paid directly from oil companies to the government. It flows through Myanma Oil and Gas Enterprise (MOGE), a state-owned enterprise with deep links to the military’s business empire. Alarmingly, the recent military coup places MOGE and the rest of the government under direct military control.

MOGE doesn’t publish its accounts or even have a website of its own and attempts to make its activities more transparent are likely to grind to a halt.

This opacity increases the risk that gas revenue will pour into the pockets of corrupt officials, as well as be used to fuel the military regime’s international crimes against ethnic and religious minorities, including genocide, war crimes and crimes against humanity.

Investors face possible sanctions against the regime from the international community.

Justice For Myanmar calls for all businesses with commercial ties to MOGE to immediately cut ties.

If it’s business as usual, foreign investors in Myanmar’s gas will be funding an illegitimate and brutal military regime as they did before 2011, when the country was under full military rule.

The people of Myanmar have mobilised against dictatorship through a national campaign of civil disobedience and boycotts against military-owned products. Even MOGE’s own staff are publicly protesting.

‍

 Trouble for Total

The prospect of international sanctions against the military regime in Myanmar poses particular problems for Total, which operates the giant Yadana offshore gas project and owns 31.24 per cent of it.

Chevron owns 28 per cent of the project, with the rest being owned by Thailand’s PTTEP and MOGE. The partners also own stakes in a company which pipes the gas to its main market in Thailand.

Total has reported that it paid €229.6 million (US$257 million) to Myanmar in 2019 in taxes and the government’s share of gas production.

« Total is likely to be the military regime’s single biggest source of revenue. »

While the taxes are paid to Myanmar’s finance ministry, earnings from the government’s share of gas are collected by MOGE.

The Yadana project has been very profitable for Total, whose subsidiary Total E&P Myanmar reported profits before tax in 2019 of €76 million (US$85 million). [1]

Chevron does not publish details of its finances in Myanmar but is likely to make comparable profits on its stake in the gas project.

Total is also leading a new huge offshore gas development, known as A6, which is crucial to shoring up Myanmar’s declining gas production and would be a key source of funds for a protracted military dictatorship.

The French extractive industry giant will now have to decide whether to push ahead with this project, whose other investors are Australia’s Woodside and MPRL, a Myanmar company that is registered in the British Virgin Islands, a notorious tax haven.

Final decisions to go ahead with A6 and smaller new fields have reportedly not been taken yet [2].

‍

 Four Giant Gas Projects

Natural gas is Myanmar’s second biggest export after manufactured goods and almost all of the government’s hydrocarbon revenues come from Yadana and three other giant gas projects.

The most recent figures [3] for all companies show that in the year to March 2018, Total, which operates the Yadana gas project, paid roughly US$254 million to Myanmar.

Petronas, which operates the Yetagun project, paid the equivalent of US$208 million to the government that year while South Korea’s Posco, which operates the Shwe project, paid US$194 million.

Thailand’s PTTEP, which runs the smaller Zawtika gas project, paid US$41 million.

These giant projects, which supply natural gas to Thailand and China, accounted for almost all of Myanmar’s US$737 million in oil and gas earnings in the year to March 2018. The government earned another US$300 million that year from transport fees paid by companies to use gas export pipelines, built on land confiscated from indigenous people.

Myanmar was forecast to earn 2,305 billion kyat (about US$1.5 billion) from oil and gas revenues in 2020/21, according to a budget brief from the Ministry of Planning, Finance and Industry.

‍

‍

 The Black Hole of MOGE

Myanmar earns most of its gas revenues from sales of the government’s share of gas production, rather than from taxes. This money is collected by MOGE, which is an investor in the gas sector as well as a regulator of private companies in a systemic conflict of interest.

Revenue should be passed on to the national budget for the benefit of the Myanmar people and future generations, within a democratic system with the military under civilian control.

But MOGE, like other state companies in Myanmar, has a history of holding onto huge sums of revenue in opaque “other accounts” which are supposed to cover its own expenses. A report for the Extractive Industries Transparency Initiative (EITI) showed that as of early 2018, MOGE’s “other accounts” contained the equivalent of US$4.6 billion in revenues.

The government pledged in 2019 to shut these “other accounts” and move the money to the national treasury.

By grabbing power through a coup, the military regime has reversed these reforms so that revenues collected by MOGE from foreign oil companies will no longer be subject to even the basic scrutiny of a national budget process.

Revenue collected by MOGE will bankroll the military regime and enrich its leaders.

‍

‍

State oil companies in many countries have been used by autocratic regimes for off-the-books financing, as happened in Myanmar under military rule before 2011. This opacity also makes them vulnerable to large-scale corruption : a recent example is Brazil’s Petrobras [4], where investigations have uncovered billions of dollars in corrupt transactions.

Under the National League for Democracy-led government, MOGE boosted the profitability of businesses run by the military and its allies in recent years by selling the state’s gas to them at a subsidised rate (see MEITI’s 2016-2017 report [5], appendix24).

Total, Chevron and POSCO have been a key target of activists for working in Myanmar during the period of military rule before 2011 and during the genocide against the Rohingya people. POSCO is operating off the coast of Arakan State, where the military continues to commit war crimes and crimes against humanity.

The military coup has left international oil and gas companies with no option but to end their relationship with MOGE and the military government that controls it. The international community must impose immediate targeted sanctions against MOGE and all other military businesses. Hear the outcry of the Myanmar people. Act now.

Justice for Myanmar

----------------------