Feasibility Study for Introduction of LNG Receiving Facilities in ...

Study on Economic Partnership Projects

in Developing Countries in FY2013

Feasibility Study for Introduction of LNG Receiving

Facilities in Myanmar

Final Report

February 2014

Prepared for:

The Ministry of Economy, Trade and Industry

Ernst & Young ShinNihon LLC

Japan External Trade Organization

Prepared by:

The Japan Research Institute, Limited

Mitsui O. S. K. Lines, Ltd.

JGC Corporation

Sumitomo Mitsui Banking Corporation

Reproduction Prohibited

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Preface

The report summarizes the results of the Study on Economic Partnership Projects in Developing

Countries in FY2013, entrusted to The Japan Research Institute, Limited, Mitsui O. S. K. Lines,

Ltd., JGC Corporation and Sumitomo Mitsui Banking Corporation by the Ministry of Economy,

Trade and Industry.

This study entitled “Feasibility Study for Introduction of LNG Receiving Facilities in Myanmar”

was carried out in order to assess the feasibility of the project to construct FSRU, jetty and pipeline

at total cost of around 77 billion yen. The aim of this project is to solve the problem of gas supply

shortage for power generation in Myanmar.

We sincerely hope this report will contribute to the implementation of the aforementioned project and provide

practical information to parties concerned in Japan.

February 2014

The Japan Research Institute, Limited

Mitsui O. S. K. Lines, Ltd.

JGC Corporation

Sumitomo Mitsui Banking Corporation

Project Site Map

Proposed Site for FSRU and Pipeline Routes

Source：Prepared by Study Team

Details of Proposed Pipeline Routes

Source：Prepared by Study Team

List of Abbreviation

Abbreviation Full Name

ADB Asian Development Bank

CDM Clean Development Mechanism

CSO Central Statistical Organization

EIA Environmental Impact Assessment

EIRR Economic Internal Rate of Return

EMC Energy Management Committee

EPD Energy Planning Department

ESE Electricity Supply Enterprise

FIRR Financial Internal Rate of Return

FSRU Floating Storage and Regasification Unit

HPGE Hydropower Generation Enterprise

IEE Initial Environmental Examination

IFC International Finance Corporation

IPP Independent Power Producer

JBIC Japan Bank for International Cooperation

JETRO Japan External Trade Organization

JICA Japan International Cooperation Agency

LNG Liquefied Natural Gas

MECF Myanmar Environmental Conversation and Forestry

MEPE Myanmar Electricity Supply Enterprise

MIC Myanmar Investment Commission

MOE Ministry of Energy

MOEP Ministry of Electric Power

MOF Ministry of Finance

MOGE Myanmar Oil and Gas Enterprise

MOT Ministry of Transport

MOU memorandum of understanding

MPA Myanmar Port Authority

MPPE Myanmar Petroleum Products Enterprise

MPE Myanmar Petrochemical Enterprise

NEMC National Energy Management Committee

NLD National League of Democracy

NPV Net Present Value

ODA Official Development Assistance

PPA Power Purchase Agreement

SAIFI System Average Interruption Frequency Index

SLORC State Law and Order Restoration Council

SPDC State Peace and Development Council

SRV Shuttle Regasification Vessel

VGF Viability Gap Funding

YESB Yangon City Electricity Supply Board

Table of Contents

Preface

Project Site Map

List of Abbreviations

Table of Contents

Executive Summary

(1)Background and Necessity of the Project ················································································ S-1

1. The Myanmar Government’s Development Programs in the Gas and Electricity Sectors; Priorities of Projects

Based on Future Prospects ····································································································· S-1

2. Project Scope and Expected Users ······················································································ S-2

3. Effects of the Project ······································································································ S-3

(2) Parameters/ Items in Determining Project Details ···································································· S-4

1. Demand Forecast ·········································································································· S-4

2. Identifying and Analyzing Issues before Exploring and Determining Project Details ·························· S-5

(3) Project Outline ··············································································································· S-6

1. Project Site ················································································································· S-6

2. Specifications for Equipment Introduced ·············································································· S-6

3. Project Cost ················································································································ S-7

4. Financial and Economic Evaluation ···················································································· S-7

(4) Project Implementation Schedule ························································································ S-11

1. Preconditions for project implementation ·········································································· S-11

2. Project Schedule (Proposed) ·························································································· S-12

(5) Feasibility to Implement the Project ····················································································· S-13

(6) Potential Business Scheme ······························································································· S-15

(7) Technical and Economic Advantage of Japanese Companies ······················································· S-17

(8) Maps, which shows the site for the project in the country surveyed ················································ S-19

Chapter 1 Overview of the Host Country and Sector

(1) Economic and Financial Status···························································································· 1-1

1. Myanmar: Summary ····································································································· 1-1

2. Society and Economy of Myanmar ····················································································· 1-4

(2) Summary of Targeted Sectors ····························································································· 1-6

1. Energy Related Organizations in Myanmar ·········································································· 1-6

2. Primary Energy Composition in Myanmar ··········································································· 1-7

3. Gas Demand Situation in Myanmar ··················································································· 1-8

4.Electricity Supply and Demand in Myanmar ········································································· 1-10

5.Efforts and Issues to Resolve Electricity Shortages in Myanmar ·················································· 1-12

(3) Situation in Subject Areas ······························································································· 1-13

1. Current Situation of Gas-Fired Power Plants and Gas Pipeline Network in Yangon ························· 1-13

2. The Current Situation of Yangon River Basin and Andaman Sea ··············································· 1-16

Chapter 2 Study Methodology

(1) Scope of Works·············································································································· 2-1

(2) Study Methodology and Structure ······················································································ 2-3

1. Study Methodology ······································································································ 2-3

2. Structure of the Team ··································································································· 2-3

(3) Study Schedule ············································································································· 2-9

Chapter 3 Justification, Objectives and Technical Feasibility of the Project

(1) Project Background: Why the Project Is Needed ····································································· 3-1

1. The Myanmar Government’s Development Programs in the Gas and Electricity Sectors;

Priorities of Projects Based on Future Prospects ···································································· 3-1

2. Project Scope and Expected Users ················································································· 3-3

3. Issues Expected in Case of Absence of the Project ····························································· 3-3

4. Effects and Impacts of the Project ················································································ 3-4

5. Alternatives to the Import of LNG ················································································ 3-4

(2) Upgrading and Streamlining Energy Use ·············································································· 3-6

(3) Factors to Examine for Determining Project Contents ······························································· 3-6

1. Demand Forecast ········································································································ 3-6

2. Identifying and Analyzing Issues before Exploring and Determining Project Details ······················· 3-0

3. Examination of the Proposed Project Site: Conclusion ···························································· 3-10

4. How to Source LNG ······························································································· 3-15

5. Technical Approaches (compared to alternatives) ································································ 3-19

(4) Project Plan Outline ······································································································ 3-25

1. Basic Policies for Determining Project Details ····································································· 3-25

2. Conceptual Design and Specifications of Applied Facilities and Equipment ································· 3-25

3. Proposed Project Details (Site and Investment Cost for the Project) ············································· 3-30

4. Issues on Proposed Technologies and System;Solutions ·························································· 3-31

Chapter 4 Evaluation of Environmental and Social Impacts

(1) Analysis of Environmental/ Social Aspects ··········································································· 4-1

1. Project Areas ············································································································· 4-1

2. Future Forecast ··········································································································· 4-2

(2) Environmental Improvement Achieved through Project Implementation ········································· 4-2

(3) Environmental and Social Impacts Associated with the Project ····················································· 4-3

1. Reviewing Environmental and Social Considerations ······························································· 4-3

2. The Environmental Impacts of the Alternative Proposals ····················································· 4-18

3. Result of Information Collected on Environmental and Social Impacts ·········································· 4-18

(4) Overview of the Country’s Environmental and Social Related Regulations and Necessary Measures ······ 4-20

1. Overview of Regulations and Schemes Related to the Environment ············································· 4-20

2. EIA Related Matters ······························································································· 4-20

(5) Requirements to Deliver Projects in This Country

(by Implementing Organizations and Related Organizations) ·························································· 4-21

Chapter 5 Financial and Economic Evaluation

(1) Estimated Project Costs ··································································································· 5-1

1. Cost Estimate Breakdown ······························································································ 5-1

2. Project Costs ········································································································· 5-1

3. Disbursing Plan of the Project Costs ·················································································· 5-4

(2) Summary of the Result of Preliminary Financial/ Economic Analysis ············································ 5-5

1. Financial Analysis ······································································································· 5-5

2. Economic Analysis ······································································································ 5-8

Chapter 6 Planned Project Schedule

(1) Project Implementation Schedule ························································································· 6-1

1. Preconditions for Project Implementation ············································································ 6-1

2. Project Schedule (Proposed) ····························································································· 6-1

Chapter 7 Implementing Organization

(1) Relevant Ministries Agencies and Their Roles ········································································ 7-1

(2) Required Capabilities for the project implementation ································································ 7-2

Chapter 8 Technical Advantages of Japanese Company

(1) Assumable Forms of Participation by Japanese Enterprises ························································· 8-1

(2) Superiority of Japanese Enterprises in Implementing This Project (Technologically and Economically) ····· 8-5

(3) Measures Necessary to Help Japanese Enterprises Win Contracts ················································· 8-6

Chapter 9 Potential Funding Source for the Project

(1) Reviewing Fund Sources and Financing Plans ········································································· 9-1

(2) Feasibility of Fund-Raising ································································································ 9-2

1. ODA by the Japanese Government ····················································································· 9-2

2. Investments by Japanese Companies ··················································································· 9-4

3. Loans/ Guarantees from Japanese Export Credit Agencies ························································· 9-5

(3) Cash Flow Analysis ········································································································· 9-6

1. Financial Analysis ········································································································· 9-6

2. Economic Analysis ········································································································ 9-9

Executive Summary

S-1

(1) Background and Necessity of the Project

1. The Myanmar Government’s Development Programs in the Gas and Electricity Sectors; Priorities of Projects

Based on Future Prospects

a. Ministry of Energy’s gas production and supply plans

Myanmar produces natural gas. The Ministry of Energy (MOE), which is responsible for oil and gas sector from

gas exploration and production to distribution, has been promoting the development of offshore gas fields; for

example, Zawtika and Shwe fields are expected to start gas production in 2014, and M3 field in 2020. Most of the

produced gas within Myanmar, however, is exported to China and Thailand, so the domestic gas demand cannot

be sufficiently satisfied.

b. Ministry of Electric Power’s power development plan

The Ministry of Electric Power (“MOEP”) has drawn up power development plan that covers years up to 2030.

The Ministry plans to increase power capacity in tandem with the demand growth. The MOEP plans to build

several new gas-fired power plants to secure short-term power sources, especially for the dry season in Yangon

where electricity demand is very large. These plants are scheduled to start operating sometime between 2013 and

February 2016, with their planned capacity up to about 4.2 GW (see the chart below). The IPPs plan to build three

new power plants (BKB, UREC, Hydrolanchang) and are in discussion with MEPE for the signings of MOUs

(Memoranda of Understanding) for the Feasibility Study and/or PPA (Power Purchase Agreement).

S-2

Table Summary-1: Gas-Fired Power Plants Being Built or To Be Built in Myanmar

Source: Created by the research team based on information provided by the MEPE and an interview with the

NEWJEC

Although the MOEP and IPP projects have been proceeding with the construction of additional gas-fired power

generation facilities, they have been unable to increase the natural gas supply for the power generations, owing to

the tight gas supply-and-demand situation in the country.

Under these circumstances, the MOEP asked for a public bidding for importing LNG for gas-fired power

generation in July 2013. The study team interviewed the MEPE and found out that this was to obtain gas for IPPs

that are supposed to newly engage in gas-fired power generation mainly in the Yangon area. Applications are

received and reviewed by the Yangon Electricity Supply Board (YESB), which is a Yangon-based government

entity owned by the MOEP.

2. Project Scope and Expected Users

This study firstly examined the LNG supply chain from the LNG purchase to its consumption, and then clarified

certain project to be developed using expertise of private sector, in which Japanese enterprises will support to

start yearCapacity

(MW)

2014 26

2014 28.55

2014 243

2016 243

MSP 2013 52

EGAT 2014 240

2014 82

2015 39

CIC 2013 53.6

2015 167

2016 336

2014 127

2016 386

2016 500

2016 50

2021 500

2015 98

2016 132

Kyaukphyu/Rak

hine StateMOEP 2014 50

2015 175

2016 350

Myin Gyan Myin Gyan 2016 250

Kyause Rental 2013 100

Yangon

Other area

in Myanmar

Name

Hlawga

Zeya

Hydrolanchang

（IPP,China)

Ywama

Myanmar Lighting

Dawei Power

UtilitiesKanpouk

Mawlamyaing

Ahlone Toyo-Thai

Thaketa

BKB

(IPP,Korea)

UREC

(IPP,China)

Hlaingtharyar

Thilawa

Ayeyarwaddy

S-3

install storage and regasification facilities (i.e., facilities for receiving LNG) and facilities for gas transport to the

point of demand or the point of delivery designated by gas users.

It is difficult to analyze future national gas demand with limited research period, which is acceptable for the

investment decision of LNG import facility,. Therefore, this research assumes that imported gas is used to meet

the demand only for gas-fired power generation based on the master plan developed by MEPE

The MEPE owned by the MOEP purchases from the MOE home produced gas supplied to existing gas-fired

power plants. Through the interview with the MEPE and other relevant entities, the study team concludes that

MEPE will be able to play the same role for not only domestic gas produced but also imported LNG. Namely,

MEPE becomes the purchaser from LNG supplier and distributor to IPPs. Since MEPE is the sole entity to import

LNG in Myanmar, it is expected to have bargaining power to negotiate the LNG price with suppliers.

3. Effects of the Project

As stated earlier, domestic demand for natural gas has not been filled in Myanmar. Natural gas is used not only for

power generation, but also for petroleum refining, fertilizer production, iron manufacturing, utility gas, and other

purposes. The natural gas supply is vital for Myanmar, in order to accelerate the economic development.

Installation of FSRU will enable Myanmar to receive LNG with a relatively short lead time. This will contribute

to balancing natural gas supply-demand, hopefully bringing the following effects:

• The operating rates of gas-fired power plants will rise and more electricity will be generated, which will

make outages shorter and less frequent.

• Increased electricity supply will enlarge the national industrial platform increasing manufacturing and

production capacity of the country that will lead to improve standard of living of the population.

• There will be larger domestic supplies of gas for petroleum refining, fertilizer production, iron

manufacturing and utility gas, which will strengthen cost competitiveness and increase industrial

production volumes.

S-4

(2) Parameters/ Items in Determining Project Details

1. Demand Forecast

Demand estimation for LNG gas using the formula below:

Demand for LNG import = Quantity of gas needed for gas-fired power generation – Domestic gas

production x Percentage of gas distributed to electric power sector

Quantity of gas needed for gas-fired power generation

As mentioned before, the MOEP has drawn up power development plans that cover years up to 2030. This study

assumes that additional gas-fired power plants will be built according to the plans. The current plans state that

additional power plants will be completed by 2016 or 2017, and that the government will ensure steady electricity

supplies mainly through hydropower generation plants that require some development period.

With regard to the domestic gas production, many onshore and offshore projects are underway as mentioned

above, although many of them have not specified when production will begin and how much gas they aim to

produce except for certain gas fields. This study assumed only the production volumes from the ZawtikaShwe,

and M3 gas fields, for which the MOE is scheduled to launch development projects additional domestic gas

production volumes. The supply from domestic gas fields will be 290 BBtud between 2013 and 2014, and then

476 BBtud between 2020 and 2021.According to the MOE, how much domestic gas production will be distributed

for electricity generation in the future has not yet been decided, while 60 to 80 percent of the domestic gas

production has usually been reserved for electricity supply. This study assumed that the 65 percent of gas to be

supplied by the MOE will be distributed to electricity sector during 2013 and 2014. Additionally, although specific

LNG supply sources have yet to be determined, the team assumed that the calorific value of LNG is 1,040 Btu/cf,

which is the typical level in the market.

Given these assumptions, LNG demand for gas-fired power generation is expected to rise to 72 mmscfd between

2013 and 2014, and then to 354 mmscfd between 2016 and 2017. From 2020 onward, the demand will depend on

trends in the development of new domestic gas fields, while it is expected to be around 350 to 450 mmscfd.

S-5

Figure Summary-1: Demand for Imported LNG in Myanmar

Source: Created by the research team

2. Identifying and Analyzing Issues before Exploring and Determining Project Details

To define the detail of the project, the below items are studied/ studied;

Site to install FSRU and specification

Options for ownership FSRU

Options for introducing an FSRU

Jetty design

Pipeline construction route and specifications

Financing pipeline construction

LNG procurement

S-6

(3) Project Outline

To overcome electricity shortage as soon as possible, MOEP is considering LNG import for electric power

generation. As the demand forecast shows, the amount of gas needed is meant to fill the gap between domestic gas

supply and gas demand based on the capacity of gas-fired power plants in the power development plan.

Given this background, MOEP intends to realize quick start of LNG import. However, further discussion on the

detail including required cost to be held through, among MOEP and relevant entities. In this study, the team

examined project details in accordance with the physical and financial restrictions mentioned earlier, and with the

needs of the various Myanmar government organizations.

1. Project Site

Taking into account such factors as the intention of the Myanmar government physical constraints and economic

efficiency, FSRU should be installed 80km offshore from the Yangon River, and a gas pipeline route will be laid

up to South Dagon in the existing pipeline network in Yangon.

The water depths should be at least 13m for a regular LNG carrier to safely approach. However, as detailed data

on the depth of water from recent years is unavailable, the team used a nautical chart to pick areas about 15 m

deep just to be on a safer side.

The team regard to pipeline, analyzed the three cases, considering location of an FSRU, the distance and route to

the land, ensuring that the route between S. Dagon and Thilawa is in line with the Myanmar government’s

expansion plan. The required length of onshore pipeline on the route will be 50 km.

The Myanmar Port Authority (MPA) in charge of the Yangon River requested that the offshore gas pipeline route

bypass the Yangon River (i.e., the pipeline should not run across the riverbed)), if possible The team took this

request into account in selecting recommended pipeline route. With regard to the offshore pipeline, we based our

examination on the parts immune from the plan for building the large deep-water port and other plans.

2. Specifications for Equipment Introduced

a. FSRU specifications

The team assumed a newly-built FSRU with the tank capacity of 173,000 m3, which is close to the capacity of

150,000 – 160,000 m3 that many of the countries placed their orders in the recent years.

b. Jetty design

The location of FSRU will be as far away as 80 km from the port, which makes it difficult for tugboats to be

deployed for quick rescue should the FSRU has to leave the jetty in an emergency. Therefore, the study team

assumes the design based on the cross-jetty system.

S-7

c. Size of pipelines

From the viewpoint of minimizing the initial cost, and from the required capability of the gas transportation, it is

suggested that 24 inches pipeline size needs to be set.

3. Project Cost

The total investment cost is about US$624 million, and the annual running cost about US$24.0 million.

Table Summary-2: Initial Cost of the Project


4. Financial and Economic Evaluation

a. Preconditions of financial analysis

The following table shows the preconditions set for the project.

Cost Foreign Currency Local Currency

($1 million) ($1 million) （1 million Kyat）

Construction/Equipment Cost Total 514 460 52,503

FSRU 278 264 13,622

Jetty 82 57 23,936

Pipeline (offshore) 154 138 14,945

Consulting Cost 15 12 3,748

Interest in construction period

and handling fee69

Tax for capex 25

Initial cost total 624

Expense Items

S-8

Table Summary-3: Financial Analysis Preconditions

Project period 25 years

Research/Construction period 5 years

Operating period 20 years

Regasification capacity 360 mmscfd

Profit Charter FSRU, Jetty, and offshore pipeline (including fuel cost of FSRU

operation of USD 10.8 million per year: assumed LNG unit price:

approx. $14/mmbtu): $135 million/year

Initial cost 624MMUSD

Operating cost 24.0 MMUSD /year

Capital ration 25%

Interest rate on borrowing Initial rate 10% (incl. handling fee), 3% during the loan period

Payback period of borrowing 18 years from date of draw down

Depreciation period FSRU, jetty: 20 years, Pipeline: 10 years

(Straight-line depreciation for both. Salvage value after the closure of the

business is not estimated).

Corporate tax rate 25%

Commercial tax 5%

Custom duties 0.5%

Hurdle rate of FIRR 10% (Long-term interest rate in Myanmar as of October 2012)

Sensitivity analysis Case1: The location of the FSRU is 100 km offshore (80 km for the base

case)

Case2: The operational period is 10 years.:

Sources: Created by the research team

The following table shows profitability of the project.

Table Summary-4: Result of Calculation of Performance Indicators

NPV（discount rate 12%） 132MMUSD

B/C (discount rate 12%) 165%

IRR 11.5%

(Long-term interest in Myanmar 10%)

Case1: IRR_offshore100km 10.5%

Case2: IRR_operation period is 10

years

6.9%


Based on the result above, it is estimated that the project has good financial viability even if the FSRU is

constructed 100km offshore, with a higher rate than the long-term interest of 10% in Myanmar.

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If the duration of operations is cut by 50% to 10 years with the chartering cost unchanged, IRR will remain at

6.9%.

b. Economic Evaluation

The advantage that the implementation of the project could bring to the economy of Myanmar is the financial

effect delivered through increased electricity supply and avoidance of power outage. To calculate the economic

effect of the project, it is necessary to evaluate the difference by comparing the effect of the project with a

baseline case, where the project does not take place. This study made a rather conservative assumption that in the

case where the project did not materialize, the hydropower generation plants would be developed instead,

generating the equivalent amount of electricity per year. However, Myanmar has a dry season for 3 months, and

therefore it was also presumed that there will be rolling power cuts caused by electricity shortage, deriving from

the inability of hydropower generation especially in the last half of the dry season. The difference in economic

effect between the baseline case and the case the project is implemented can be the difference created by avoiding

power failures during the dry season, as well as the difference between the construction and operational costs of

hydropower plants and the operational costs of gas-fired power plants.

Capex and opex of new onshore pipelines that MOGE may build and own are assumed to be covered by MOGE,

not by the project.

c. Evaluation of economic feasibility

The preconditions for economic analysis are as below.

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Table Summary-5: Preconditions for Economic Analysis



Operation period 20 years


Profit Reduction of the cost of power cut in last half of the dry season (1.5

months) (Power shortage amount in the dry season1,555

GWh×$1/kWh1)-（New land gas pipeline costs +operational costs of

gas-fired power plant – construction/operational costs of a

hydropower plant）

Initial cost 624 MMUSD

Operational cost 24.0 MMUSD/ year

Hurdle rate of FIRR 12% (Average figure of opportunity cost in developing countries2)

Sensitivity analysis Case1: The location of the FSRU is 100 km offshore (80 km for the

base case)

Case2: The operational period is 10 years.


To estimate the volume of power shortage during the dry season, the expected output of gas-fired power plants is

calculated based on the below assumptions;

(i) the electricity volume generated from 360mmscd of gas with a generating efficiency of 40% for 18 hours per

day excluding off- peak season for 1.5 months (46 days)

(ii) transmission loss (21%)1

The operational cost of a gas-fired power plant (excluding fuel costs), construction/operational costs of

hydropower plant are adopted from the average operational cost in China (gas fired: 10.88/kWh, hydropower:

$36/kWh) in the “Projected Costs of Generating Electricity 2010 Edition” by the OECD. For the fuel cost of a

gas-fired power plant, this study team applied the price deducing $0.5/mmbtu (=equivalent of the transport cost

between Myanmar and Japan, assuming it will be transported from the Middle East,) from Japanese LNG prices

described in the “New Policies Scenario” in the IEA’s “World Energy Outlook 2012”. The price is drifting at

$14/mmbtu during the operational period.

1Source: FY 2011 Infrastructure System Export Promotion Investigations (Project formation of yen loan/private

infrastructure investigations), Study on the substation rehabilitation project in Yangon, the Republic of the Union of

Myanmar (November, 2012) 2 Guidelines for Preparing Performance Evaluation Reports for Public Sector Operations, ADB (2006)

S-11

The profitability of the project is as below.

Table Summary-6: Result of Calculation of Performance Indicator



IRR 28.0%

（opportunity cost for developing country 12%）

Case1: IRR_100 km

offshore

26.2%

Case2: IRR_Operational

period is 10 years

26.6%


As shown in the above table, the result exceeds a 12% opportunity cost under the both cases where we assume

FSRU is located 100km offshore or project period of 10 years. However, the calculation of the above performance

indicators are based mainly on various assumptions, as including matters and elements outside the scope of the

study and therefore contains some uncertainties in its result, It is necessary to conduct further detailed study in the

future.

5. Analysis of Environmental/ Social Aspects

(1) Analysis of Environmental/ Social Aspects

Except for some items in which relevant permits are needed in the future as Myanmar is now under the process

to making relevant laws and regulations, most check items were not applicable for this project, or its effect is

expected to be relatively small.

(4) Project Implementation Schedule

1. Preconditions for project implementation

For the successful completion of the project, the following preconditions need to be decided by the relevant

companies/entities or by the discussion among them.

The determination of these preconditions will expedite the project.

• Appointment for the responsible entity of the project, and the main body of the counterpart governments for

charter ship contract

• Decisions of basic conditions of fuel gas procurement (quantity/gas components etc.)

• Decision of gas delivery point

Change of the gas delivery point influences on the whole project design of gas pipeline including project

schedule, etc.

• Policy on fund sourcing

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Development of appropriate financing plan related FSRU / pipeline introduction, the LNG purchase.

• Schedule of legislation for Environmental Impact Assessment (“EIA”)

Affected by preparation of the EIA process and progress of parliamentary approval

2. Project Schedule (Proposed)

From basic development plan to gas delivery, the project is composed of three stages:

1. From making basic development plan to final investment decision (FID)

2. From FID to installation of FSRU, jetty facilities and pipelines

3. Connecting the facilities to the existing gas pipeline network

The schedule in this study is made based on the assumptions that the above preconditions have been appropriately

satisfied at each stage, and that the schedule of one stage does not influence on that of other stages each other.

Figure Summary-2: Detailed Schedule for Project Implementation


Followings are the estimated duration in the main tasks:

• Basic Plan: 3 months

• Basic Design/Ministries approval: 12 months

• Detailed Design: 6 months (part of this work can begin earlier)

• FSRU: LNG reception can begin 33 months after order placement

• Jetty Facilities: complete in 31 months after order placement, in 23 months after the start of construction

• Setting up of Pipeline and Valve Station: complete in 30 months after order placement

LINE DESCRIPTION

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

1

2 Basic planning

3

4 Basic plan

5 Basic design

6 Comfirmation of project base

7 Collect additional data and survey marine data

8 Write EIA report

9 Environmental approval received work10 Inquiry plan

11 Inquiry・Select sub-constructor12

13 14 Detailed design 15 16 Final Investment Decision17

18 Order sub-constructor 19 20 Lower side of jetty21 Contract

22 Detailed design・Construction design

23 Site work

24

25 ipper side of jetty26 Detailed design

27 Equipment purchase

28 Equipment carried

29 Installation and piping, electrical

30 and instrumentation work

31 Offshore Pipeline Contract

32 Material purchase /on-site installation

33

34 FSRU35 Contract

36 basic design

37 detailed design

38 Production design

39 Construction and manufacturing

40 Transport and installation to the site

41 Preparation for operation

42

42 Whole system inspection43 Ready　For　LNG　Receiving

Main MilestoneBasic

planning

Complete

of basic

design

Start of the

ProjectStart of the

Construction

LNG

Receiving

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(5) Feasibility to Implement the Project

FSRU business has been implemented in several countries with the good track records of bankable finance

scheme.. Such project will become feasible when reliable equipment, operation, funding, etc. are provided by

experienced parties through the cooperation of the host country’s government.

Considering the roles of related ministries and agencies as well as implementation capabilities needed for this

project, it is suggested that the MOEP/ MEPE/ YESB and the MOE/ MOGE need to collaborate each other.

However, based on the fact that the MOEP requires immediate import of LNG to overcome the domestic energy

shortages mainly due to the rapid increase of electricity consumption, it would be beneficial to unify the business

contact window of the government, to promote this project quickly. Currently, since the LNG import is mainly for

gas-fired power plant, it is suggested MOEP should be the primal contact window for project

participants/stakeholders.

Although the MOEP has appointed the YESB as the managing body of a public bidding for LNG import, it would

be very challenging for YESB because it is an unprecedented project in Myanmar, thus YESB does not have any

past experiences. This may become one of the obstacles for companies to enter into this market. In addition,

inadequacy of transmission and the distribution network also will be an obstacle in electricity supply, which

generates another risk to newcomers. Therefore, to enhance the feasibility of the project, well-organized

development plan and project management for not only power generation plants but also transmission/distribution

grid expansion are critical.

Considering the abovementioned aspects, new organization under MOEP would be required, whose missions are

to become the supervisory agency for firepower sector and LNG import, to manage this project and relevant

agencies such as the transmission sector of the MEPE and YESB. MEPE is an organization with an

implementation capability and robust operating competency for the plan. Furthermore the firepower sector of the

MEPE has signed a memorandum of understanding about the gas-fired power generation plan with South Korean

and Chinese companies, so it would be suitable for MEPE supervisees the IPP players’ power plant developing

plans. So, MOEP can control the power generation plan by supervising the MEPE to the implementation of the

IPP business as planned.

This study suggests that the MEPE should be the purchaser of the LNG, which has the contract directly with LNG

supplier because of the two main reasons. First, MEPE is already the purchaser for domestically produced natural

gas to fuel gas-fired power plants. Therefore, MEPE would be able to play the role in adjusting domestic demand

and supply gap for the consumption of gas-fired power plants. Second, sole entity to purchase the natural gas from

overseas can be expected to have a bargaining power to acquire the lower LNG price, contributing to supply

cheaper electricity price to consumers.

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About the chartered ship to the FSRU and also the pipeline transportation service, the MEPE would favorably be a

contract entity, in terms of consistency of the contract, as well as the unification of the business access posts.

Furthermore, capacity building would be necessary for the MOEP/MEPE, to manage and supervise IPP players,

realize the electric power development as planned, and enable the operators to carry on business in a stable

manner because the delay of the construction and/or the critical problems of the operation would adversely affect

the FSRU project as well.

In addition, for the success of the power plant development, financial assistance would be vital. Especially, it is

necessary to complement the revenue shortages for purchasing gas, in order to make it cover costs. Financial

enhancement by the government guarantee, secured by the MOF, is needed.

Lastly, to involvement of the MOE/MOGE, would be important because of their expertise of the development,

and provision of on-shore pipeline to support the MOEP/MEPE. Though this project assumes that the imported

LNG is utilized only for gas-fired power plant, LNG would be supplied to other consumers such as petrochemical

industry in the future. Considering this, MOE/MOGE should be involved at the early stage of this project to

understand the logistics of imported gas and to get the know-how to handle the gas, because the role of these

entities will be very important to distribute natural gas to such different users in the future.

Based on the above, the chart below shows the suggestion of role sharing in the LNG import & transport project

Figure Summary-3: The Suggestion of Role Sharing in the LNG Import & Transport Project

Source: Prepared by Study Team

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(6) Potential Business Scheme

There will be two ways for how to cover the costs: owning the FSRU and the pipeline on its own, or chartering

FSRU from the owner of the FSRU and requesting wheeling through the pipeline.

The advantage of the owning FSRU is that the possessor can fully customize and upgrade the specifications

during the period of operation as per the requirement of the terminal. This allows for the configuration flexibility

with respect to regasification capacity, layout, shore integration and any future enhancements. While this case has

the disadvantage in increased work burden including higher initial investment, and all ship management tasks to

be conducted by the possessor, such as the arrangement and administration of crew. Based on the above study,

this project adopts the charter scheme, which holds down initial investment for the counterpart in the case of

FSRU, and has low work burden to the counterpart when initially installing FSRU.

On the other hand, as to the land pipeline, it will be effective to construct a state-run grid because in most cases,

grids are not built by private companies for their inherent purposes, but are built as national common-use

infrastructure in nature, when building pipelines in terms of responding to wide-ranging gas demand not only for

this electricity generating purposes, but also for commercial use except electricity generation in the medium and

long run.

In addition, it will be desirable for private operators and the entire economy in Myanmar for MOGE with a track

record of construction and operation to own a pipeline for constructing and operating it, though the initial costs

are higher, considering that the compulsory purchase of land will become an issue for private operators in building

pipelines. MOGE will be incentivized with increased profit through wheeling and an increase in the utility value

of the entired related infrastructure, with the extended pipeline networks and capacity.

Regarding offshore pipelines, which are different from land pipelines in nature, it is difficult to plan their

diversification and development except their main purpose, and existing sea pipelines were commissioned to

foreign private companies. Considering that MOGE has no experience of constructing them, it will be desirable

for the counterpart to use wheeling in view of the work and initial investment burdens, as in the case of FSRU.

A unit of SPC in which Japanese companies invest is considered to own, maintain, and operate FSRU and

offshore pipeline and lease the facility to charterer. The FSRU receives LNG from tankers, regasify the LNG and

transports gas to such points of delivery as designated by charterer.

Our team assumed the buyer of gas from an LNG portfolio supplier will be MEPE as mentioned before, which has

operated gas-fired power plants, in addition to procuring gas domestically.

Based on the above, the table below shows a plan of introduced equipment and player make-up, assumed by this

study team.

S-16

Figure Summary-4: Introduced Equipment and Player Make-up (Planned)


Regarding financing, it is necessary for FSRUs, the pipeline and the SPC to secure funds as the initial investment

for the project. The SPC is assumed to raise funds from Japanese financial institutions, including Export Credit

Agencies and commercial banks, as well as investment from Japanese and foreign companies.

In addition, it is assumed that MEPE as the off-taker or its upper organization MOEP will supply equity in the

SPC because such financing may help enhance the prospect for realizing this business from the viewpoints of

easing the investment burden and risk that foreign companies may face, as well as lowering the risk bar for the off

taker arising out of cancelation of the project. However, generally speaking, under this arrangement, conflict may

occur about how to handle the assets for liquidation after the project is over, or the realistic and best structure in

terms of tax cannot be made because of government involvement. (For instance, there may be restrictions which

do not allow establishment of an SPC in low-tax countries like Singapore, making the requirement that it must be

a Myanmarese corporation possible.) Also, quick decision-making can be compromised by governmental

influence over operating the SPC. The above can be disadvantageous to this arrangement. As after all, this is only

one option of schemes. Therefore, it is necessary first to judge whether MOEP intends to invest in this project or

not, from the viewpoint of acquiring technology/know-how for similar projects in the future. If so, it will be

necessary to investigate the ratio of ownership, roles, rights, obligations, etc., of each parties. If MOEP invests in

the SPC, utilizing the back finance of the funds by ODA to secure financing, will be useful bringing down the

initial costs of the Myanmar side, and in reducing the risk of investors (a risk of investment shortage).

Furthermore, it is necessary to study how to procure LNG and finance FSRU chartering. It will be desirable to

enter a contract with MEPE in consideration of integrating the contacts for actual work of procuring LNG,

chartering FSRU, and pipeline wheeling.

MEPE will be able to reduce the initial investment in equipment and facilities related to receiving LNG, by

chartering FSRUs under the scheme that was proposed by this study. Also, as the imported LNG through this

project will be eventually used for generating electricity, fees for use of FSRU and the pipeline should be paid

S-17

basically by government subsidies. However, given that it is not easy to raise electricity rates due to objection

among the population, and that government finances are tight, there is a possibility that this project cannot secure

enough profits to be viable only with additional funds from the Myanmar side (a possible gap between costs and

profits). Viability gap funding, as a measure to help fill the gaps, the back financing of this fund by ODAs can be

utilized.

With the above issues sorted out, the table below shows a project scheme

Figure Summary-5: Project Scheme (Proposed)


(7) Technical and Economic Advantage of Japanese Companies

a. Provision of highly reliable long-term operation services for the FSRU

Since the contract period of providing FSRU chartering and operation services persists over a long period of time,

ranging from a few years to 20 years, stability and reliability of operator are essential elements required to provide

constant services during the contract period.

As the world’s largest LNG carrier, Mitsui O.S.K. Lines has established top-level know-how of LNG transport,

handling technologies and vessel management know-how all essential for the operation of the FSRU.

While there are currently only a few companies that enjoy a track record of offering operation services of

regasification through FSRU on a global basis, Mitsui O.S.K. Lines has accumulated unique know-how on FSRU

since participating jointly in the shipboard LNG regasification project on the east coast of North America

(“Neptune project”) with a partner shipping company in Norway from 2006, and independently signed a

S-18

long-term charter party for FSRU with a subsidiary of GDF Suez S.A., a French company, in October 2013, to

make a full-scale entry into the FSRU business. Among FSRU operators, Mitsui O.S.K. Lines has more stable

financial foundation compared with other providers, and high reliability in provision of long-term services.

b. Support in fund securing

To materialize the project, funding arrangement to pay costs for implementation of the FSRU, jetties and pipelines

is necessary, and it is essential to realize investment and lending to the planned SPC.

SMBC, a Japanese financial institution, has a strong track record in LNG-related project finance including FSRU,

and may possibly take part in this business as a financial advisory, or in the form of lending.

Having a record of participation to the investment in two LNG ships with shipboard regasifiers (FSRU)

(investment ratio: 48.5%) in the Neptune project described above, Mitsui O.S.K. Lines might have strong interest

of investment for the project.

In addition, advantage of Japanese companies includes a possibility of securing ODA loan by Japanese

government, and the Japanese export credit agencies.

Such experience enables the company to offer services for the entire LNG value chain that includes financing.

S-19

(8) Maps, which shows the site for the project in the country surveyed

Figure Summary-6: Proposed Site for FSRU and Pipeline Routes


S-20

Figure Summary-7: Details of Proposed Pipeline Routes


Chapter 1 Overview of the Host Country and Sectors

1-1

(1) Economic and Financial Status

1. Myanmar: Summary

The Republic of the Union of Myanmar (hereinafter, Myanmar) is located in South East Asia, bordered by

Thailand and Laos on the east, and India and Bangladesh on the west. The population is around 60 million (2010),

of which around 70% is Bamar with the rest comprised of a number of ethnic minorities. The capital city is

Naypyidaw and its economic center is its largest city, Yangon.

http://en.wikipedia.org/wiki/Naypyidaw

1-2

Figure1-1: Myanmar Summary

Time Difference

between Japan and

Myanmar

-2.5 hours *No daylight savings time

Exchange Rate

1MMK (kyat) ＝ 0.10 yen

<Source> Trade Statistics of Japan “Foreign Exchange Rate” (22.09.2913 –

28.09)

Capital City Naypyidaw

National Territory

Area 676,578 km

2 *1.8 times larger than Japan

Ethnic Groups Bamar - about 70%

Religion Buddhist: 89.4%, Christian: 4.9%, Islam: 3.9%, Hindu: 0.5%

Language Burmese (official language)

Government Presidential, Constitutional Republic *Head of State – President, Thein Sein

Total Population 59.78 million (2010) (according to documents released by the Government of

Myanmar)

Source: Prepared by Study Team based on various sources

Naypyidaw

Yangon



1-3

Figure1-2: Weather at Yangon

Source: Prepared by Study Team based on various sources

Myanmar has long been criticized by the international community for its suppression of democracy by the long

serving military regime, since its independence in 1948. However, after achieving the transition to civilian rule,

there has been an increased interest from the international community in its large population and potential

economic growth.

5 2 7 15

303

547 559 602

368

206 60 7

17.9 19.3 21.6

24.3 25 24.5 24.1 24.1 24.2 24.2 22.4

19

32.2 34.5

36 37

33.4 30.2 29.7 29.6 30.4 31.5 32 31.5

0

100

200

300

400

500

600

700

0

10

20

30

40

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Aver

age

pre

cip

itat

ion

（m

m）

Aver

age

tem

per

atu

re（℃

）

Average precipitationAverage minimum temperatureAverage maximum temperature

1-4

Table1-1: History of Myanmar

Year Month Events

1948 - Gained independence, becoming the Union of Burma

1974 - Established the Socialist Republic of the Union of Burma. General Ne Win as President.

1988 - The Socialist government, which lasted for 26 years, was brought down by pro-democratic

demonstrations.

1989 - Military forces suppressed pro-democratic demonstrations and formed the State Law and

Order Restoration Council (SLORC), which then seized power.

1990 May A general election was held, with the National League for Democracy (NLD) led by Aung San

Suu Kyi winning the majority; with the SLORC rejecting transfer of power.

1997 - Joined ASEAN, and the SLORC was dissolved, with the State Peace and Development

Council (SPDC) established.

2003 Mar Announced the Seven-Step Roadmap to Democratization.

2008 May The ratification of the new constitution by referendum, with a general election to take place in

2010.

2010 Nov Changed the name of the country to the Republic of the Union of Myanmar.

2010 Nov Held a general election in accordance with new constitution.

2011

Jan The first assembly was called, and the Vice President was elected.

Mar In a shift to civilian rule, the new government led by President Thein Sein was founded.

Nov US President Obama visited, announcing a partial trade embargo lift.

2012 Jan Ceasefire agreement with the Karen National Union after 60 yearlong conflicts made.

Nov Established the Union of Myanmar Foreign Investment Law

2013 May Japanese Prime Minister Abe visited, deciding to provide yen loans to the country after a gap

of 26 years.

2014 - Chairmanship of ASEAN (planned)

Source: Prepared by Study Team based on various sources and press reports

2. Society and Economy of Myanmar

The population of Myanmar is steadily increasing, and reached around 60 million as of 2010, according to

information provided by the Government of Myanmar. 10% of the total population is concentrated in the Yangon

Region, with the numbers gradually increasing.

Statistics from international institutions show that GDP per capita of Myanmar as of 2012 is 868 USD which is

relatively low in comparison to other ASEAN countries. This figure is expected to grow rapidly to 1,344 USD

(estimate) in 2018, which will still be low compared with other ASEAN countries, however, a high pace of

growth is expected to continue following in the footsteps of Laos and Cambodia, with expectations for future

growth linked to its large population.

http://en.wikipedia.org/wiki/Aung_San_Suu_Kyi

http://en.wikipedia.org/wiki/Aung_San_Suu_Kyi

1-5

Figure1-3: Total Population and Change in Percentage of Population in Yangon Division

Source: Prepared by Study Team based on “Statistical Yearbook 2011”

by Central Statistical Organization Nay Pyi Taw, Myanmar

Figure1-4: Comparison of GDP, GDP per Capita, and Growth Rate of GDP

2012 2018 (estimate)

Bangladesh

Cambodia

Indonesia

Lao

Malaysia

Myanmar

Phillipines

Thailand

Vietnam

4

5

6

7

8

9

0 5,000 10,000 15,000

Gro

ss d

om

estic p

rodu

ct,

const

ant pri

ces（

%）

Gross domestic product per capita, current price（USD）

Bangladesh

Cambodia

Indonesia

Lao

Malaysia

Myanmar

Phillipines

ThailandVietnam

4

5

6

7

8

9

0 5,000 10,000 15,000

Gro

ss d

om

esti

c p

rod

uc

t,

co

nst

ant

pri

ces

(%

)

Gross domestic product per capita, current price （USD）

*Bubble shows GDP (current prices) of the country.

Source: Prepared by Study Team based on “World Economic Outlook October 2013” by IMF

There has been a change in industrial structures after 2003, as the percentage of GDP accounted for by primary

industry dropped more than 10%. On the other hand, however, the proportion influenced by the manufacturing

and transportation sectors has increased.

1-6

Figure1-5: Change in the Percentage of GDP Accounted for by Primary Industry

*Standard Year = FY1985, 2000, 2005 (From April to March)

Source: Prepared by Study Team based on JETRO website

(2) Summary of Targeted Sectors

1. Energy Related Organizations in Myanmar

There are various ministries and agencies associated with natural gas. The main stakeholders in this study are the

MOE (the Ministry of Energy) and the MOEP (the Ministry of Electric Power). The MOE has 4 lower branches,

of which the counterparts for the current study are the Energy Planning Department, which is responsible for the

planning of gas production and supply, and the MOGE (the Myanmar Oil and Gas Enterprise), which is

responsible for building and operating the pipeline from E&P in the domestic gas sector. The MOEP also has

public corporations beneath it, each responsible for electric power generation, electric power transmission and the

delivery of electricity. The counterparts for this study are the MEPE (Myanmar Electric Power Enterprise), which

is responsible for development and operation of gas-fired power plants, as well as supplying gas to IPPs

(Independent Power Producers), the YESB (Yangon City Electricity Supply Board) which is responsible for

controlling delivery of electricity in the Yangon Region, and has also acted as the public offering office for LNG

imports, which will be referred to later in the study, and the MOEP.

42% 41% 40% 37% 36% 34% 32% 30%

9% 9% 10% 8% 8% 8% 8% 7%

10% 11% 11% 14% 15% 16% 17% 19%

7% 8% 8% 11% 11% 12% 12% 12%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Commercial

Other Services

Social/ Administrative Service

Financial Business

Communication

Transportation

Construction

Electricity

Manufacturing Industry

Mining

Energy

Forestry

Stockraising/ Fishery

Agriculture

1-7

Figure1-6: MOE Organization Chart and Division of Major Roles

Source: Prepared by Study Team based on MOE materials

Figure1-7: Operating Structure of MOEP

Source: Prepared by Study Team based on MOEP materials

2. Primary Energy Composition in Myanmar

Primary Energy Composition in Myanmar is dominated by biomass, which makes up around 70% of the total,

followed by natural gas that makes up around 20%.

Ministry of Energy

(MOE)

Myanmar Oil and Gas

Enterprise

(MOGE)

Energy Planning

Department

(EPD)

Myanmar

Petrochemical

Enterprise

(MPE)

Myanmar Petroleum

Products Enterprise

(MPPE)

• Gas development

and production

• Pipeline

construction and

operation

• CNG production

• Regulation

• Adjustment of plans

• Gas production and

distribution

management

• Petroleum refinery

• Production of

fertilizer, LPG,

CO2 and methane

• Marketing and sale

of petroleum

products

HPGE

(Hydraulic and coal-fired)

MEPE

(Gas/oil thermal) IPPs

MEPE

YESB

(Yangon)

ESE

(Outside Yangon)

Consumers

Public corporations under the umbrella of MOEP

Electricity generation

Electricity transmission

Electricity distribution

1-8

Figure1-8: Primary Energy Composition

Source: Prepared by Study Team based on ”Myanmar Energy Sector Initial Assessment”

(2012) by ADB materials

3. Gas Demand Situation in Myanmar

The transition in the volume of domestic natural gas production shows that it has increased dramatically after the

2000, 2 years after offshore production began.

Myanmar exports most domestically produced natural gas, and the ratio between export and domestic

consumption is 86:14. Exports account for 85-90% of total production, which has remained unchanged over the

past 10 years.

This is because the Government of Myanmar promoted the development of resources with the aid of foreign

capital, intending to secure foreign currency, despite economic sanctions. Resources development in Myanmar

was advanced under a scheme where companies provided the capital to develop resources in Myanmar,

maintaining complete control over the use of said resources, on condition that they would provide 10% of the

output for domestic use. This still remains the case, and most of the country's output is exported outside the

country.

Biomass

69%

Natural Gas

18%

Oil

10%

Hydro Power

2%

Coal

1%

1-9

Figure1-9: Natural Gas Production History of Myanmar

Source: MOE materials (2013)

Figure1-10: Change in Percentage of Domestic Use and Export of Natural Gas

Source: Prepared by Study Team based on ”Myanmar Energy Sector Initial

Assessment” (2012) by ADB

As described before, domestic demand for natural gas is much greater than supply in Myanmar, as the country

exports most of the natural gas produced in the country overseas.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

(million ft3)

(Year)

Domestic Use (Left)

Export (Left)

Percentage of the Domestic Use (Right)

1-10

Figure1-11: Gap in Demand and Supply of Natural Gas


The main use of natural gas produced in Myanmar is for electricity generation, accounting for 65%.

Figure1- 12: The Main Use of Nnatural Gas Produced in Myanmar (July 2013)


4. Electricity Supply and Demand in Myanmar

The amount of electricity generated in Myanmar increased dramatically after 2010, seeing the average annual

growth rate of 12.7% from 2009 to 2012, as opposed to 4.3% from 2003 to 2009.

265

515 471

918

0

100

200

300

400

500

600

700

800

900

1,000

FY2012 FY2013

(mmcfd)

Suuply Demand

60.4% 20.0%

7.9%

7.2%

1.9%

0.9% 0.2% 1.5%

Electricity

Government Factories

Fertilizer

CNG

Refinery

LPG

Private Factories

Others

1-11

Figure1-13: Change in Generation of Electricity

Source: Prepared by Study Team based on MOEP materials (2013)

The main source of power generation in Myanmar is hydropower, which makes up most of total power generation.

The breakdown in 2010-2011 was 72% hydropower, 21% for gas and 7% for steam and diesel.

Figure1-14: Change in Power Generation by Source

*Number above the graph shows the total power generation.

Source: Prepared by Study Team based on

“Statistical Yearbook 2011” by Central Statistical Organization of Myanmar

5,426 5,608 6,064 6,164 6,409 6,622 6,971

8,633

10,424 10,965

0

2,000

4,000

6,000

8,000

10,000

12,000

(million kW)

(Year)

2,643

3,762

5,1185,608

6,064 6,1646,398 6,622

6,964

8,625

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

（GWh）

Deasel

Steam

Gas-fired

Hydro

1-12

Due to the dependence on hydropower generation, the electricity supply drops in drier seasons, creating shortages

with supplies falling below demand to the extent that timed outages takes place regularly every dry season;

especially in Yangon city.

Figure1- 15: Demand and Supply for Electricity and Supply by Season (Estimate)

Source: Prepared by Study Team based on MEPE materials (2013)

5. Efforts and Issues to Resolve Electricity Shortages in Myanmar

As described above, due to electricity shortages in drier seasons, the MOEP plans to change the electricity source

structure from one centered on hydropower generation, to one more focused on gas-fired power generation. The

plan is to focus on developing around 2GW of power resources in Yangon.

2,060 1,841

2,420

3,259

2,509

3,911

4,584

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2013 2014 2015

(MW)

Demand

Supply (dry season)

Supply (rainy season)

1-13

Figure1-16: Plan for Developing Power Resources (2013-2016)

Source: Prepared by Study Team based on MEPE materials (2013)

While expansion of gas-fired power generation facilities by the MOEP and IPP projects is moving forward, the

situation nevertheless remains that they cannot increase the electric-generation capacity of gas-fired power plants,

as natural gas supplies for power generation cannot be increased, due to the strains on domestic gas supplies. For

this reason, the MOEP asked for a public offering for LNG imports for thermal power plants in July 2013.

(3) Situation in Subject Areas

The subject area of this study is the Yangon Region, where there is a plan for building large scale gas-fired power

plants, that requires the government’s actions for gas imports.

1. Current Situation of Gas-Fired Power Plants and Gas Pipeline Network in Yangon

Currently gas-fired power plants are located in four areas in Yangon: Hlawga; Ywama; Thaketa; and Ahlon, and

power plant expansion is in progress in each of these areas. The capacity of power plants was around 470 MW

before 2012, however, there are 5 more power plants (Zeya, MSP, EGAT, Toyo-Thai and CIC) that will start

operation or are planned to start operating between 2013 to September 2014, making total capacity around 520

MW. Furthermore, the IPPs plan to build three new power plants (BKB, UREC, Hydrolanchang) and are in

discussion with MEPE for the signings of MOUs (Memoranda of Understanding) for the Feasibility Study and/or

PPA (Power Purchase Agreement), being discussed with the thermal power section of MEPE. There also are

construction plans in Thilawa, Hlaingtharyar and Ayeyarwaddy.

471

2,494 244

1,099

2,259

2,760

120

470

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2013 2016

(MW)

(year)

The Others

Hydro

Gas-fired (except Yangon）

Gas-fired (Yangon）

1-14

Table1-2: Gas-Fired Power Plants in Yangon (Existing and Planning)

Source: Prepared by Study Team based on information provided by the MOEPE and an interview with the

NEWJEC

Existing gas-fired power plants are connected to gas pipelines, and gas is also supplied from the offshore gas field

in Yadana. Expansion and the additional construction of pipelines is needed to enlarge gas supply capacity, as

there is no extra capacity in existing pipelines in Yangon city. According to what have been heard by the team

from the MOGE, the construction of a 30-inch gas pipeline network is planned on the same route as the existing

14-inch gas pipeline. It has also become clear that to connect an external pipeline to the existing gas pipeline

network, it will have to be connected from the South Dagon Junction near the Thaketa power plants.

Start yearCapacity

(MW)

Existing GT/ST 1996/1999 154.2

2013.05 26

2014.02 28.55

2014.11 243

2015.05 243


MSP 2013.07 52

EGAT 2014.02 240


2013.06 82

2014.09 39

Existing GT/ST 1990/1997 92

CIC 2013.07 53.6

2015.02 167

2016.01 336

2014.12 127

2016.03 386

2016 500

2016 50

2021 500

Hlaingtharyar

Thilawa

Ayeyarwaddy

Name

Thaketa

Ahlone

Ywama

Hlawga

BKB

(IPP,Korea)

UREC

(IPP,China)

Toyo-Thai

Hydrolanchang

（IPP,China)

Zeya

1-15

Figure1- 17: Flow of Gas Supply in Yangon

Source: Prepared by Study Team based on information provided by the Yangon Electricity Supply Board (YESB)

1-16

Figure1-18: Pipeline Network in Yangon

Source: MOGE materials

2. The Current Situation of Yangon River Basin and Andaman Sea

The Yangon River runs from Yangon into The Andaman Sea. The Yangon River is navigable for seagoing vessels,

and ships run via a pilot station in the estuary region to Yangon Port, near Yangon city and Thilawa Port, 25km

south of Yangon.

The difference between the high and low tides of the Yangon River is extreme3, and there is an extensive outflow

of soil. As a result, the colour of the river is muddy as far as the estuary mouth, as the soil carried away creates a

shallow sea bed. It is presumed that soil is suspended in the sea where the sea bed is shallow. According to

observations of the Yangon River area by the study team, there were no signs of large fishing boats operating, or

of plants such as mangroves often found in the tropics.

The Yangon River, Yangon Port and Thilawa Port are managed by the MPA (the Myanmar Port Authority).

3 According to interviews in the local area, the water depth is 6.4m at high tide, and 0.3m at low tide at Elephant

Point (where the water depth is shallowest).

1-17

Figure1-19: Map of Yangon River and its Basin


Chapter 2 Study Methodology

2-1

(1) Scope of Works

The objective of this study is to improve energy supplies in the Republic of the Union of Myanmar as Myanmar is

considering importing liquefied natural gas to improve the current domestic energy supply situation. This will be

done by comprehensively considering their needs such as: improvement of the existing facilities at lower costs; a

speedy commencement of operations; the suitability of temporary operations; reviewing the intake of LNG off the

shore from Myanmar (The Andaman Sea); and installation of a Floating Storage and Regasification Unit

(hereinafter, FSRU) and the improvement of energy supply in the country while also linking this facility to the

onshore gasification of the Myanmar Bay facilities.

Myanmar has promoted the development of natural resources through foreign capital, as a way to obtain foreign

capital while under the economic sanctions imposed at a time Under the usual scheme for natural resources

development, the Government of Myanmar (Myanmar Oil and Gas Enterprise), authorized schemes to be

executed with capital provided by foreign sources, while controlling over the resources developed, on condition

that 10% of output be shared for domestic use. Development of natural resources has advanced in Myanmar under

this rules and ordinances, with which the most of output are exported overseas, while domestic supply has

remained tight. Suppression of public dissatisfaction by the military government collapsed after democratization,

and the quick improvement of the current energy supply situation became necessary to improve living standard of

the population. Furthermore, development of LNG sourced has become the most important issue, due to the rise of

popular movements after nationwide democratization and sentiment against building new power generating

facilities that have large environmental impact, such as hydropower and coal-fired power.

Given the situation above, Myanmar is now planning to further drive the development of domestic natural

resources to improve supply and demand balance of primary energy. However, since the development of natural

resources requires a long period of time from planning to the start of production, even in an optimistic scenario,

actual improvements in the development of domestic natural resources could only take place after 2020. For this

reason, the government of Myanmar is planning to import LNG to improve the present balance of supply and

demand, while concurrently developing resources in order to improve the mid to long-term balance of supply and

demand. As offshore gas field development in Myanmar is progressing and pipeline networks are, to a certain

extent, in place, the important factors for realizing LNG imports are functioning for the creation of new LNG

intake facilities quickly and at lower costs, as well as assisting in dealing with the temporary strain on the balance

of supply and demand (around 10 years operation could be sufficient).

Taking the above situation into consideration, this study reviews energy supply and demand balance in Myanmar

forecast (including the current shortfall), options for LNG importation and LNG receiving facilities and

operational schemes, in addition to related issues for commercialization(e.g. decision of pipeline possession).

Below is the scope of work

i. Summary of the country and sectors

ii. Understanding the priorities of the commercialization process

2-2

iii. Reviewing the sophisticated and rational use of energy

iv. Demand predictions

v. Reviewing the contents of the project and technical aspects

vi. Reviewing the environmental/social aspects

vii. Financial/economic feasibility

viii. Implementation schedule of the project

ix. Capability of the country’s implementing organizations

x. The technical superiority of Japanese companies

xi. Project fund securing forecasts

xii. Action plans and issues for implementation

2-3

(2) Study Methodology and Structure

1. Study Methodology

Below are the methods used for the study:

• Collecting information through the Internet (desk research in Japan)

• Collecting information and data from companies and related Ministries in Japan

• Collecting information and data from counterparts in Myanmar such as the Ministry of Energy (hereinafter,

MOE), Myanmar Oil and Gas Enterprise (hereinafter, MOGE) and Myanmar Electric Power Enterprise

(hereinafter, MEPE).

• Collecting information and data by Field Research in Myanmar

• Collecting information and data from Hearing Sessions and Discussions with counterparts in Myanmar

Figure2-1: Flow Chart of Study Methodology


2. Structure of the Team

The Structure of the Study Team and Myanmar Counterparts are as below.

2-4

Table2-1: Members of the Survey Team and Areas in Charge

Company Name Role Department / Position

The Japan Research

Institute, Ltd

Koichiro Danno Project Manager Society & Industry Design

Senior Manager

Yutaka Miki

Analysis of

Environmental/Social

Aspects

Society & Industry Design

Senior Manager

Yasuhiro Yamamoto Survey Team Society & Industry Design

Consultant

Yuko Kinoshita Survey Team Society & Industry Design

Researcher

Mitsui O. S. K.

Lines, Ltd.

Yasushi Noma Survey Team

General Manager, Offshore

Business Office, LNG Carrier

Division

Kazuya Sasaki Survey Team

Deputy General Manager, Offshore


Division

Shinsuke Umada Survey Team

Assistant Manager, Offshore


Division

JGC Corporation

Toru Itabashi Survey Team

Senior Manager, Business

Development Department, Business

Promotion & Execution Division

Hiroaki Nakamura Survey Team

Group Leader, Business



Tomohito Moteki Survey Team

Project Engineer, Business



Yoshio Yatsuhashi Analysis of Technical

aspects

Technical Adviser, LNG & Offshore

Strategy Department Division

Sumitomo Mitsui

Banking

Corporation

Noboru Kato Analysis of Economic/

Financial aspects

General Manager,

Investment Banking Asia

Takehisa Manabe Analysis of Economic/

Financial aspects

First Vice President, Project Finance


Wijnand Van Eck

Analysis of Economic/

Financial aspects


Head of Oil & Gas, Project Finance


2-5

Sumitomo Mitsui

Banking

Corporation

Akira Hiyama Analysis of Economic/

Financial aspects


Vice president, Project Finance


Teiko Kudo Analysis of Economic/

Financial aspects

Project & Export Finance

Department (Tokyo)

Kenji Baba Analysis of Economic/

Financial aspects

Head of Group, Growth Industry

Cluster Department, Project &

Export Finance Department

Shinji Isono Analysis of Economic/

Financial aspects

Vice President, Growth Industry

Cluster Department, Project &

Export Finance Department

Yoshiyuki Morii Analysis of Economic/

Financial aspects

Chief Representative, Yangon

Representative Office

Wint Sandar Analysis of Economic/

Financial aspects Yangon Representative Office


2-6

Table2-2: Counterpart in Myanmar (Members who Participated in this Survey and Discussions)

(Pre-Field Survey)

Date Organization/ Company Department / Position

11 September Yangon Electricity Supply Board

(YESB)

Chief Engineer

Executive Engineer, Chairman Office

12 September

Ministry of Energy

(MOE)

Director, EPD

Deputy, Director, EPD

General Manager (Pipeline), MOGE

Director(Planning), MPE

Ministry of Electric Power (MOEP)

Deputy Director General

Power System Department,

Myanmar Electric Power Enterprise

Director(finance),


Myanmar Oil and Gas Enterprise

(MOGE)

Director (Planning)

General Manager (Pipeline)

Myanmar Petrochemical Enterprise

(MPE) Director (Planning)

13 September

Ministry of Finance (MOF) Deputy Director General, Budget Dept.

Central Statistical

Organization(CSO)


Director

Deputy Director


2-7


(First Field Survey)


30 October


(MOGE)

Director (Planning)

Director (Engineering)

Director (Production)

Director (Finance)


(MEPE)

Managing Director

Executive Engineer

Deputy Chief Engineer

Myanmar Environmental

Conversation and Forestry (MECF)

Deputy Director, Environmental Conservation Dept.

Director (Policy and Planning), Environmental

Conservation Dept.

1 November Myanmar Port Authority (MPA)

Master Attendant, MOT & MPA

Chief Civil Engineer, MPA

Deputy Chief Civil Engineer

Chief Engineer



(Second Field Survey)


3 December

Ministry of Electric Power (MOEP)


Chief Engineer Thermal Power Plant Department

Deputy Director DEP

Executive Engineer Thermal Power Plant

Department

Ministry of Energy

(MOE)

Deputy Minister

Director General, Energy Planning Department

Managing Director for MOGE

Managing Director for MPE


(MOGE)

General Manager(Pipeline)

Planning

Department of Meteorology and

Hydrology (DMH)


Director

Deputy Director

4 December MPA (Myanmar Port Authority) Master Attendant, MOT & MPA


2-8


(Third Field Survey)

Date Organization/ Company Department/ Position

16 January

Myanmar Petrochemical Enterprise

(MPE)

Managing Director

Director

Assistant Director

Assistant Director

Energy Planning Department (EPD)

Staff Officer

Staff Officer

Director (Planning)


(MOGE) Director (Planning)


(MOGE)

Director (Production)

Assistant Ex. Engineer (Production)

Assistant. Ex. Engineer ( Production)

General Manager (Pipeline)

Executive Engineer (Mechanical)

Assistant Ex. Engineer (Transport)

Department of Electric Power

(DEP)

Deputy Director

Assistant Director

Staff Officer


(MEPE)

Deputy Chief Engineer

Executive Engineer

Assistant Engineer

Assistant Engineer

Assistant Engineer

Assistant Engineer

Yangon City Electric Supply Board

(YESB)

Executive Engineer (Chairman’s office)

Executive Engineer

Junior Engineer

Staff Officer

Staff

Staff

Foreign Economic Relation

Department (FERD) Advisor for Aid Coordination

Directorate of Investment & Co.,

Administration (DICA) Deputy Director General

Directorate of Industry Deputy Director

2-9

Assistant Director

Ministry of Environmental

Conservation and Forestry

Director

Staff Officer

Ministry of Science and

Technology

Deputy Director

Deputy Director

Ministry of Finance and Revenue Deputy Director, Budget Department


(3) Study Schedule

This study was conducted from September 27th in FY 2013 to February 21st in FY 2014.

Table2-6: Study Schedule


Table2-7: Schedule for Pre-Field Survey

Date City Visiting place

10 September (Tue) Japan→Yangon Time for traveling

11 September (Wed) Yangon→Naypyidaw

YESB, Japan Embassy, JETRO

Time for traveling

12 September (Thu) Naypyidaw MOE, MOEP, MOGE, MPE

13 September (Fri) Naypyidaw MOF, CSO

14 September (Sat) Naypyidaw→Yangon→Japan Time for traveling


September October November December January February

Preparation for the field survey/

Information gathering

Pre-field survey

Preparation for the field survey/

Information gathering

The first field survey

Analysis of the result of the survey/

Preparation of the draft report

Mid-term reporting session

The second field survey

Analysis of the result of the survey/

Preparation of the draft report

Submission of the draft report

Preparation of the final report

The third field survey

Submission of the final report

Final reporting session

2013 2014





2-10

Table2-8: Schedule for the First Field Survey


29 October (Tue) Japan→Yangon Time for traveling

30 October (Wed) Yangon→Naypyidaw

MOGE, MEPE, MECF

Time for traveling

31 October (Thu) Naypyidaw→Yangon JICA, JETRO

Time for traveling

1 November (Fri) Yangon→Japan MPA

Time for traveling


Table2-9: Schedule for the Second Field Survey


2 December (Mon) Japan→Yangon Time for traveling

3 December (Tue) Yangon→Naypyidaw→Yangon

MOEP, MOE, MOGE, DMH

Time for traveling

4 December (Wed) Yangon

JETRO, MPA

Time for traveling

5 December (Thu) Yangon→Japan

MPA (Site visit)

Time for traveling


Table2-10: Schedule for the Third Field Survey


15 January (Wed) Japan→Yangon Time for traveling

16 January (Thu) Yangon→Naypyidaw→Yangon

MOE, MOGE, MPE, MOEP, MEPE,

YESB, MST, MECF, MOF

Time for traveling

17 January (Fri) Yangon→Japan Time for traveling






Chapter 3 Justification, Objectives and Technical

Feasibility of the Project

3-1

(1) Project Background: Why the Project Is Needed

1. The Myanmar Government’s Development Programs in the Gas and Electricity Sectors; Priorities of

Projects Based on Future Prospects

a. Ministry of Energy’s gas production and supply plans

As stated in Chapter 1 herein this document, Myanmar produces natural gas. Most of the produced gas within

Myanmar, however, is exported to China and Thailand, so the domestic gas demand cannot be sufficiently

satisfied. The MOE, which is responsible for oil and gas sector from gas exploration and production to

distribution, been promoting the development of offshore gas fields; Zawtika and Shwe fields are expected to start

gas production in 2014, and M3 field in 2020 (see the demand forecasts for specific production volumes). Since

the country’s economic growth is anticipated to increase the demand for gas, the development of additional gas

fields is currently underway. The MOE has divided onshore and offshore fields into blocks, and selected a

developer for each of the blocks through a bidding process.

Figure3-1: Gas Fields Field Development Zones in Myanmar

Source: Publicly available information from the MOGE (2012)

3-2

b. Ministry of Electric Power’s power source development plans

The Ministry of Electric Power (“MOEP”) has drawn up power development plan that covers years up to 2030.

The Ministry plans to increase power capacity in tandem with the demand growth. The MOEP plans to boost

power source capacity in tandem with an increase in demand, assuming that the demand for electricity will

continue to grow. As stated in Chapter 1, the MOEP plans to build more gas-fired power plants to secure

short-term power sources for the dry season, especially in Yangon where electricity is in great demand. These

plants are scheduled to start operating sometime between 2013 and February 2016, with their planned capacity up

to about 4.2 GW (see the table below).

Table3-1: Gas-Fired Power Plants Being Built or to be Built in Myanmar

Source: Prepared by Study Team based on information provided by the MEPE and the NEWJEC

Although the MOEP and IPP projects have been proceeding with the construction of additional gas-fired power

generation facilities, they have been unable to boost the natural gas supply for power generation, owing to the

tight gas supply-and-demand situation in the country.

start yearCapacity

(MW)

2014 26

2014 28.55

2014 243

2016 243

MSP 2013 52

EGAT 2014 240

2014 82

2015 39

CIC 2013 53.6

2015 167

2016 336

2014 127

2016 386

2016 500

2016 50

2021 500

2015 98

2016 132

Kyaukphyu/Rak

hine StateMOEP 2014 50

2015 175

2016 350

Myin Gyan Myin Gyan 2016 250

Kyause Rental 2013 100

Yangon

Other area

in Myanmar

Name

Hlawga

Zeya

Hydrolanchang

（IPP,China)

Ywama

Myanmar Lighting

Dawei Power

UtilitiesKanpouk

Mawlamyaing

Ahlone Toyo-Thai

Thaketa

BKB

(IPP,Korea)

UREC

(IPP,China)

Hlaingtharyar

Thilawa

Ayeyarwaddy

3-3

Under these circumstances, the MOEP asked for a public bidding for importing LNG for gas-fired power

generation in July 2013. The team interviewed the MEPE and found out that this was to obtain gas for IPPs that

are supposed to newly engage in gas-fired power generation mainly in the Yangon area. Applications are received

and reviewed by the Yangon Electricity Supply Board (YESB), which is a Yangon-based government entity

owned by the MOEP.

2. Project Scope and Expected Users

This study firstly examined the LNG supply chain from the LNG purchase to its consumption, and then clarified

certain project to be developed using expertise of private sector, in which Japanese enterprises will support to

install storage and regasification facilities (i.e., facilities for receiving LNG) and facilities for gas transport to the

point of demand or the point of delivery designated by gas users.

It is difficult to analyze future national gas demand with limited research period, which is acceptable for the

investment decision of LNG import facility,. Therefore, this research assumes that imported gas is used to meet

the demand only for gas-fired power generation based on the master plan developed by MEPE

The MEPE owned by the MOEP purchases from the MOE home produced gas supplied to existing gas-fired

power plants. Through the interview with the MEPE and other relevant entities The study team concludes that

MEPE will be able to play the same role for not only domestic gas produced but also imported LNG. Namely,

MEPE becomes the purchaser from LNG supplier and distributor to IPPs. Since MEPE is the sole entity to import

LNG in Myanmar, it is expected to have bargaining power to negotiate the LNG price with suppliers.

3. Issues Expected in Case of Absence of the Project

Should LNG cannot be imported, or is imported with significant delay, the following problems could take place:

• A drop in the operating rates of gas-fired power plants, which eventually lead to frequent power failures

and longer outages

• An increase in hydropower and coal-fired power generation as long-term alternatives

a. A drop in the operating rates of gas-fired power plants, which then lead to frequent power failure and

longer outages

In Myanmar, the MOE allocates a supply of domestically produced gas to each sector for domestic consumption.

In recent years, 60 to 65 percent of the gas is allocated, and practically there is no policy or plan intending to cut

the gas supply to other sectors for increasing the percentage of gas for electric power generation. This is likely to

lead to a shortage of gas for gas-fired power plants, and eventually to severe electricity shortages.

In Myanmar, power supplies to plants and offices are opt to be cut if electricity for households is in short supply.

During the serious power shortages that were caused by lengthy outages in the dry season in 2012, industrial parks

had no electricity supply for the entire month of May. If power fails frequently for a prolonged period, Japanese

3-4

companies currently operating or planning to operate in Myanmar will not be able to launch and continue their

economic activities.

b. An increase in hydropower and coal-fired power generation as long-term alternatives

As stated in Chapter 1, there is a development plan for hydropower generation expected to begin in 2016. If LNG

cannot be imported and power shortages continue even longer than expected, it is likely that the required power

for hydropower generation will increase and more coal-fired power generation plants will be built. As details are

mentioned in Chapter 4, the development of hydropower generation may cause such problems as eviction of

residents in the mountainous regions and the destruction of the environment, and the development of coal-fired

power generation may trigger air pollution and coal ash disposal.

4. Effects and Impacts of the Project

As stated above, domestic demand for natural gas has not been met in Myanmar. Natural gas is used not only for

power generation, but also for petroleum refinery, fertilizer production, iron and steel manufacturing, utility gas,

and other purposes. The natural gas supply is vital for Myanmar, in order to accelerate the economic development.

Adopting an FSRU will enable Myanmar to receive LNG with a relatively short lead time (two to three years).

This will contribute to balancing natural gas supply-demand, hopefully bringing the following effects:

• The operating rates of gas-fired power plants will rise and more electricity will be generated, which

will make outages shorter and less frequent.

• Increased electricity supply will enlarge the national industrial platform increasing manufacturing and

production capacity of the country that will lead to improve standard of living of the population.

• There will be larger domestic supplies of gas for petroleum refining, fertilizer production, iron

manufacturing and utility gas, which will strengthen cost competitiveness and increase industrial

production volumes.

5. Alternatives to the Import of LNG

There are three alternatives to importing LNG using the FSRU: buying back exported gas, building onshore

facilities for receiving LNG and adopting a Shuttle Regasification Vessel (SRV).

To buy back exported gas, changes must be made to the sales contract signed with the importer country. The

contract is basically of long-term nature, so making changes to it may require the Myanmar government to make

bilateral compensation. Additionally, it requires time and money to build long-distance gas pipelines between gas

fields and Yangon, although the Myanmar government has already invested in to export gas to China and

Thailand. If this alternative is chosen, the government will be unable to recover part of the construction costs, or

will have to shift the unrecovered costs to domestic users because it is assumed the pipeline construction cost is

recovered from gas sales revenue.

Building onshore facilities for receiving LNG offers advantages over using an FSRU as onshore facilities can

be expanded without much trouble whilst being operated much stably than floating vessel operation off the shore

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As stated above, however, the Myanmar government hopes to import gas for gas-fired power plants as soon as

possible to meet the greatly increasing demand for electricity, and so installing an FSRU is an even more

attractive option, in light of time for completion for a vessel installation. Also, there is still a possibility that

LNG imports will not be needed if the development of new gas fields leads demand for imported gas fluctuate,

and more gas is domestically produced than planned. For example, two FSRUs (Golar Winter and Golar Spirit) in

Golar LNG’s project in Brazil are designed to be used at both the Pecém terminal and Guanabara Bay in Brazil.

Once installed, an installed FSRU can be relocated for a different project, so the government may sign a contract

for a fixed-term charter with a termination clause specified, assuming that there will be no more demand for

imported gas. In terms of cash flow, operating an FSRU is lower in capital expenditure (capex) and higher in

operating expenses (opex) than running onshore facilities.

To compare an SRV with an FRSU, the partner government’s requests, as well as the depth of water in the area

must be considered as physical constraints. The followings are findings of the team.

As the figure below shows, shallow waters extend from the shore of Yangon. They are 10m deep about 40 km

offshore, and 15m deep about 80 km offshore. To receive LNG, the water around the port needs to be at least 13m

deep, so that an average LNG carrier can enter safely. An SRV, on the other hand, moors at a floating structure

called a turret buoy as the regasification facility. The SRV and the buoy are connected offshore to regasify LNG

onsite (see the figure below). To moor the buoy, the water needs to be at least 100m deep. This means that an

SRV needs to travel 100 km from Yangon, so using the regasification facility in the Andaman Sea is not a realistic

option for Myanmar. Besides, building onshore facilities on the Yangon River is impossible because the water is

not deep enough, so LNG needs to be received at a location far from Yangon, and transported to the places of

consumption in the form of gas or electricity.

Figure3-2: Image of Turret Buoy Connected to an LNG Carrier

Source: Research on Offshore Bases for Receiving Natural Gas through an LNG Carrier with Regasification

Equipment, The Cooperative Association of Japan Shipbuilders; Japan Ship Technology Research Association,

2010

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It is worthy of note that an SRV should be one of the likely options for waters with adequate depths, as the vessel

requires less equipment, time and money to be adopted than an FSRU.

Figure3-3: Options for Receiving LNG


(2) Upgrading and Streamlining Energy Use

A steady supply of natural gas leads to the construction of natural gas-fired power plants, which will contribute to

meeting an ever-increasing demand for electricity. The adoption of natural gas-fired power generation also means

departure from that of coal-fired power generation, which will help reduce CO2 emissions.

As previously stated, there has not been a sufficient supply of electricity to meet demand in Myanmar. The

country developed mainly hydropower generation and coal-fired power generation, which caused serious damage

to the environment. Thus these power sources met opposition from the public, especially the communities of

ethnic minorities that suffered directly, and the development efforts have not made any progress since. So the

government of Myanmar is trying to shift its focus to conserving the environment, and it is likely that natural

gas-fired power generation will be adopted as an option that will enable the government to meet electricity

demand and protect the environment.

(3) Factors to Examine for Determining Project Contents

1. Demand Forecast

Demand estimation for LNG gas using the formula below:

Demand for LNG import = Quantity of gas needed for gas-fired power generation – Domestic gas

production x Percentage of gas distributed to electric sector

a. Quantity of gas needed for gas-fired power generation

As mentioned earlier, the MOEP has drawn up power source development plans that cover years up to 2030.

This study assumes that additional gas-fired power plants will be built according to the plans. The current plans

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demonstrate that additional power plants will be completed by 2016 or 2017, and that the government will

ensure steady electricity supplies mainly through hydropower generation plants that require some development

period.

The team calculated the volume of gas needed until 2017 in accordance with the planned capacity of power

generation above. The calculations are based on information provided by the MOEP, and findings by NEWJEC

and the Kansai Electric Power Company, which have been entrusted by JICA with “The Preparatory Study for

Electricity Development Program in Myanmar.” it is assumed that gas-fired power generation plants will stay at

high operation rates (75%), meaning that gas demand will remain the same from 2017 onward (see the figure

below).

Figure3-4: Forecast of Gas-Fired Power Plants’ Capacity and Demand for Gas for Power Plants

Source: Prepared by Study Team based on information provided by the MOEP (2013) and research findings by

NEWJEC

With regard to the domestic gas production, many onshore and offshore projects are underway as mentioned

above, although many of them have not specified when production will begin and how much gas they aim to

produce except for certain gas fields.

This study assumes only the production volumes from the Zawtika, Shwe, and M3 gas fields, for which the

MOE is scheduled to launch development projects, as additional domestic gas production volumes. The supply

from domestic gas fields will be 290 BBtud between 2013 and 2014, and then 476 BBtud between 2020 and

2021. If no more new gas fields will be developed thereafter, the supply may drop as production volumes from

existing gas fields decrease (see the chard below).

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Figure3-5: Domestic Gas Supplies in Myanmar

Source: Prepared by Study Team based on information provided by NEWJEC

According to the MOE, how much domestic gas production will be distributed for electricity has not yet been

planned, while 60 to 80 percent of the gas production has always been reserved for electricity purposes. This

study assumed that the 65 percent of to be supplied by the MOE will be distributed to electricity during 2013

and 2014. Besides, although specific LNG supply sources have yet to be determined at this point, the team

envisaged that the calorific value of LNG will be 1,040 Btu/cf.

Given these assumptions, LNG demand for gas-fired power generation is expected to rise to 72 mmscfd

between 2013 and 2014, and then to 354 mmscfd between 2016 and 2017. From 2020 onward, the demand will

depend on trends in the development of new domestic gas fields, while it is expected to be around 350 to 450

mmscfd.

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Figure3-6: Demand for Imported LNG in Myanmar


2. Identifying and Analyzing Issues before Exploring and Determining Project Details

This section shows what needs to be examined prior to implementation of the project.

a. Where to install an FSRU

The waters where an FSRU is installed need to be at least 13m deep, so that a regular LNG carrier can make safe

entry and leave. Additionally, as the FSRU and an LNG carrier that comes alongside the FSRU need to berth

safely, it is desirable that the waters do not have much traffic, including fishing boats. For stable regasification

operations, the climate should be calm and the water should have as little floating sludge as possible, so that the

mud will not clog the equipment (e.g., seawater pumps). Also, it would be ideal for the location to be close to an

existing industrial port, and that, considering costs for building a pipeline, it is close to the place where there is a

demand for gas consumption.

b. Finalizing FSRU specifications

A FSRU’s tank capacity, capability and specifications of regasification equipment, and a cost estimate will be

finalized in accordance with the volume of LNG to be received, and of the regasified LNG to be delivered. The

exact volume have yet to be determined, so the team will need to work closely with our counterparts to set out

more detailed specifications.

c. Options for holding an FSRU

To opt for a form of holding an FSRU desirable for the counterpart in terms of costs (i.e., cash flow), the

prospective user of the FSRU needs to consider whether they will own the vessel, or charter it from the owner.

Options for holding an FSRU need to be carefully considered in terms of costs. The user of the FSRU has an

option of owing it or chartering it.

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d. Options for introducing an FSRU

Another economic issue to examine the adoption of an FSRU is whether to have a new FSRU built, or to convert

an old LNG carrier as an FSRU with refurbishment and retrofit of regasification equipment and extra plumbing on

board.

e. Jetty design

To determine how to moor an FSRU by a jetty, the flexibility, stability, safety and the size of LNG vessel must be

considered, in addition to the conditions of contract for LNG and the marine meteorology.

f. Pipeline construction route and specifications

The construction route is determined in accordance with where the FSRU is installed, where regasified LNG is

delivered, and geographical and social conditions between the location of the FSRU and the point of delivery. The

pressure applied at the place of delivery, required components and heat value, and whether or not the pipeline will

be shared with the MOGE (i.e., whether it will be used for different purposes) are also factors determining

required facilities and equipment, a construction period and costs. Whether the pipeline route to the place of gas

supplying can be selected, designed, permitted and built at the right time is the major challenge.

g. Financing pipeline construction

This project estimates USD514 million for adopting the provision of an FSRU, building a jetty and constructing a

pipeline. How to secure the fund needs to be carefully examined. Chapter 9 deals with this issue.

h. How to obtain LNG

As stated in the section relevant to the project scope, sale and procurement of LNG is outside the scope of this

project. However, since whether or not LNG can be secured has a major impact on the feasibility of this project, it

should be examined.

3. Examination of the Proposed Project Site: Conclusion

To determine the site of an FSRU installation, the team examined the distance to the pipeline connection point

(i.e., the place for delivering regasified LNG), while exploring the possibility of installing the unit offshore or at

the Yangon estuary. As previously stated, the waters need to be at least 13 m deep for a regular LNG carrier to

safely enter and leave. However, detailed data on the depth of water from recent years is unavailable, so the

team used a nautical chart to pick areas about 15 m deep just to be on the safer side. To determine the location

for installation, one must set out a detailed chart that shows the depth of waters in the proposed site before

detailed designing.

The team have selected the area 80 km off the Yangon estuary as the proposed site (see the figure below), after

examining the required water depth, the pipeline connection point the restrictions on pipeline routes to the point

(details will be provided later), and port facilities in the Yangon area now and in the immediate future. The area

is at the exterior of port area under the jurisdiction of the MPA, and is controlled by the government and the

military.

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Figure3-7: Depth of Water in and off the Yangon Estuary and Site for the FSRU


To supply regasified LNG to the gas-fired power plant in Yangon, the MOGE has requested that the pipeline

route be connected to S. Dagon in the Yangon region’s gas pipeline network that the MOGE plans to develop as

the owner (see the figure below).

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Figure3-8: Flow of Gas Supply in Yangon

Source: Prepared by Study Team based on information provided by the YANGON Electricity Supply Board

(YESB)

The project also needs to be consistent with the future expansion plans for the pipelines that the MOGE owns

and manages. The MOGE currently plans to construct pipelines from S. Dagon to Syrium, and then down to

Thilawa. This project prefers to transport gas via the same route from Thilawa to S. Dagon, the connection point,

so some adjustment will be needed during the planning phase. Currently, there is no pipeline expansion plan

below Thilawa, yet the team needs to check for any plans to build a domestic gas pipeline network associated

with the development project in Dawei, a city in the south of Myanmar.

With regard to pipeline, the team analyzed the three cases, considering location of FSRU, the distance and route

to the land, ensuring that the route between S. Dagon and Thilawa is in line with the Myanmar government’s

expansion plan. The required length of the onshore pipeline on the route will be 50 km (see the figure below).

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Figure3-9: Proposed Site for FSRU and Pipeline Routes


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Figure3-10: Details of Proposed Pipeline Routes


The Myanmar Port Authority (MPA) in charge of the Yangon River requested that the offshore gas pipeline

route bypass the Yangon River (i.e., the pipeline should not run across the riverbed)), if possible.

In addition, with the support by the Japanese government, Myanmar is exploring the possibility of building a

large deep-water port with good water depth just outside of the Yangon estuary4. One of the ideas relevant to a

berthing facilities is to build a jetty 35km off the coast, and to ensure that the water be maintained at least 14m

deep by dredging; the other is to dredge mud to lay a 40km waterway to the area, with the depth of 11m. Both

ideas envisage road construction as transport infrastructure between the large deep-water port and the land, and

set pipeline routes that bypass the road.

With the request from the MPA in mind, the team has adopted the third suggestion as the proposed idea. The

team will need to make adjustments to the onshore pipeline network in accordance with the pipeline network

planned by the MOGE, and to conduct detailed study on the routes below Thilawa considering the progress of

the development of the surrounding areas. With regard to the offshore pipeline, the team examined on the parts

immune from the plan for building the large deep-water port and other plans. If there is any possibility that a

4 Research on the Possibilities of Port-Related Projects in Myanmar, the Ministry of Land, Infrastructure,

Transport and Tourism, February 2013

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new waterway will run across the pipeline, one must consider burying part of the pipeline to a depth that will

not hamper the plan.

4. How to Source LNG

To carry out this project, the feasibility of importing LNG along with installing LNG supply facilities must be

examined.

a. Potential LNG Sellers

Given that LNG should be sourced promptly, potential sellers are countries/regions that already serve as major

LNG exporters. Most LNG purchase agreements are long-term ones, which mean that, even if the

country/region exports a large quantity of LNG, Myanmar cannot buy the portions secured for other importers

with long-term contracts. Therefore, the most likely candidates will be countries/regions that will agree a certain

number of short-term and/or spot sale contracts. The figure below shows the countries’ LNG exports, and how

much of the exports were sold in accordance with long-term, short-term, or spot agreements in 2012. As can be

seen, Qatar sold the largest quantity of LNG under short-term and spot agreements, with the amount being

almost triple Nigeria’s that is the second-largest. Myanmar needs 1 to 3 Mtpa25, and Qatar sells up to 21 Mtpa

based on short-term and spot agreements. Besides, Nigeria has 9 Mtpa and Trinidad and Tobago 5 Mtpa

(third-largest) saved for meeting expected demand based on short-term and spot agreements, and these countries

might be able to afford to sell some of the LNG to Myanmar (how to buy the LNG will be examined later in this

document).

The distance over which the tanker transports LNG also influences the procurement cost, although the cost is

not correlated with the final gas price. Of these three likely candidates, Qatar is the prime candidate, with its

geographical proximity to Myanmar and its capability to become the largest supplier.

5 Calculated on the assumption that the operating rate of the FSRU is 70 percent for 150 and 500 mmscfd.

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Figure3-11: LNG Exports by Country in 2012

* A short-term agreement refers to a contract for a period of up to four years.

Source: Prepared by Study Team based on The LNG Industry by GIIGNL

Qatar enters into many short-term and spot agreements for sale of LNG as she made a huge investment in

liquefaction plants to export LNG to the United Kingdom and the United States (see the figure below) until

2011, and today Qatar has to review its plans to sell the gas to the United States, that has begun to produce shale

gas. If Qatar finds another customer who will buy a large quantity of LNG, it may agree on sale that includes

long-term fixed contracts.

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Figure3-12: Capacities of Gas-Liquefying Facilities in Major LNG Exporter Countries

Source: Created by the research team based on The Multi-polarization of the Asia-Pacific LNG Market and the

Evolution of Business Models by Japan Oil, Gas and Metals National Corporation (JOGMEC)

In the mid- and long-term, the capacity of Australia’s liquefying facilities will increase, so LNG imports from

Australia will rise; the import of LNG from the Island of Mozambique in East Africa will also begin; and so will

the export of shale gas from North America to East Asia. If these lead to a situation where there is extra gas

produced in Australia and East Africa, Myanmar may switch over to purchasing gas from these regions.

Nevertheless, in the short-term, it is unlikely that Australia will become a source of imported LNG for Myanmar

because the gas that Australia exports is mostly tied to long-term agreements. Besides, the development of the

liquefying facilities may be delayed, so it is difficult to predict extra gas and sales prices. Hence, if LNG is to be

bought directly from a party with interests in a gas field, Qatar is the prime candidate at the moment.

b. LNG procurement

There are three major means to buy LNG:

• Gaining interests in a specific gas field, or establishing a long-term contract with a party that has

interests in the field

• On the spot deal

• Purchasing through the source from more than one gas field/region through a portfolio supplier

Gaining interests in a specific gas fields or signing a long-term contract with a party that has interests in the

field is more likely to promise a steady gas supply at a fixed rate than the other options, while it requires that the

volume to purchase be determined several years before the supply begins when the contract is signed. Since

demand may fluctuate as the construction of power plants proceeds during this project, a gap may appear

between LNG supply and demand. Besides, the demand that this project deals with is relatively low, so

investment for gaining interests may not be accepted.

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India and South American countries obtain LNG through spot deals. They often have to buy the energy source

at high prices as LNG demand that tends to increase followed with risk of fluctuated price. Also, depending on

the trend in supply and demand shifts, there may be no bidders and the amount of gas needed may not be

secured. Certain know-how is required to watch shifts in supply of and demand for gas and alternative energy

sources around the world, so that advantageous bids will be received regularly. Given that the government of

Myanmar has never imported LNG, spot bidding is too risky for the government to opt for at this time.

Singapore and other countries source LNG from more than one gas field/region through a portfolio supplier. In

this approach, the business that has interests in the gas fields/regions or liquefaction facilities obtains the

amount of gas needed in accordance with the supply-demand balance and prices at a time. The buyer can hedge

to the portfolio supplier the risks involved in obtaining the amount of gas needed. The buying price may be

higher than that offered through a long-term contract with a specific gas field/country, because this particular

mode of business takes the risks of sourcing LNG, whereas this strategy allows the purchaser to arrange the

volume of purchase more flexibly than they can through a long-term contract, when the buyer is not certain

about his requirement in quantity.

If LNG is sourced through a portfolio supplier, the gas obtained may vary in component and caloric value. This

study foresees that such variation is unlikely to cause operational problems because this project is for providing

gas for gas-fired power plants.

Table3-2: Means of Sourcing LNG by Comparison


“Big Oil” that refers to BP, BG, Shell, and other oil and gas companies in the West are major portfolio suppliers.

For example, BP is capable of providing at least 10 Mtpa. Some leading Japanese electricity and gas enterprises

also have track records as portfolio suppliers.

If LNG is purchased through a portfolio supplier, gas purchased through long-term agreements that the portfolio

supplier has already established, and gas purchased through short-term and spot agreements are consolidated for

sale. Shipping costs do not always correlate with gas prices, depending on individual interests in gas and market

conditions; to hold down shipping costs, each supplier’s interests in gas fields and liquefying facilities, along

with geographical relationships between the fields and/or facilities and Myanmar, are vital. Japanese utility

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companies also have built purchase portfolios that center on the Middle East and Southeast Asia to source LNG

for their Japanese customers, so they have geographical advantages in shipping LNG to Myanmar6.

In this project, the scale of demand is not very substantial. When the supplier purchases gas from a new seller

like Qatar, making a joint purchase of gas to meet demand from somewhere else will also help save the

supplier’s hardship that accompanies buying gas from a new seller, and boosting the capacity of sourcing LNG

will help hold down Myanmar’s LNG procurement costs. These are likely to become major options that will

bring advantages to both parties. In this light, suppliers with customers in Japan, the Middle East, and other

Asian regions are prime candidates.

Bearing all these factors in mind, purchasing gas from the portfolio suppliers’ existing supply sources, and from

Qatar as necessary, to supply it to the counterpart as a one-stop service is a realistic choice for the Myanmar

government that has not imported LNG when required time and effort along with risks involved in purchasing

are considered, even as the particular approach is likely to cost somewhat more than other options. Therefore,

suppliers capable of providing gas from regions geographically close to Myanmar are likely candidate sellers.

5. Technical Approaches (compared to alternatives)

The team examined technical approaches to adopt the installation of an FSRU. The table below shows the

details and alternatives.

Table3-3: Technical Approaches (Compared to Alternatives)

Item to Examine Suggestion Alternative Advantage of Suggestion

Site for FSRU and

Pipeline Route

East side of the

estuary

West side of the

estuary

The pipeline will not run across the Yangon River,

which the MPA prefers.

Options for FSRU

Facilities

A newly-built

FSRU

An old LNG

carrier converted

to an FSRU

The specifications are highly flexible; the use of the

vessel can be ensured for a given period at a certain

price; opex can be held down, and the vessel is

fuel-efficient.

Design of Jetty Cross-jetty Side-by-side Since the FSRU will be installed off the coast, the

suggested design offers safety when help from tug

boats cannot be received immediately.

Size of Pipeline 24 inches 30 inches Tailoring the size to demand helps hold down costs.


6 For example, Osaka Gas had bought LNG from Qatar, Oman, Malaysia, Indonesia, Australia, and Papua New

Guinea by 2011.

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a. Options for using an FSRU

A Converted FSRU, which is an old LNG carrier refurbished and retrofitted as an FSRU will constitute one of the

options. Costs of used and not-so-old LNG carriers in good condition, however, are on the rise as the LNG market

is bullish, and is likely to be on the same trend. Considering the following factors, the cost merit that a converted

FSRU offers is not much greater than that of a newly-built FSRU:

• The engineering work for conversion needs to be customized to the LNG carrier.

• If the carrier is an old vessel, extensive repairs and life extension work, such as mounting durable

outer panels, will be needed in addition to works for conversion.

• Additionally, using newly-built FSRUs has become mainstream in recent years, owing to the

following disadvantages of an FSRU converted from an LNG carrier:

• There are some constraints on the selection of specifications of a converted FSRU.

• An FSRU converted from an LNG carrier requires higher maintenance and fuel costs than a new

FSRU when operation begins.

• There will be some restrictions on receiving LNG carriers that have become increasingly larger in

recent years.

The chart below shows the qualitative analyses of new and converted FSRUs:

Table3-4: Features of New and Converted FSRU

Items New FSRU Remodeled FSRU

Service Life Long Medium

Flexibility of Specifications Customized Constrained

Maintenance Cost Low High

Capital Expenditure High/Middle Middle

Fuel Efficiency Low Middle/High

Flexibility of Size of LNG Carrier to Receive High Middle/Low


b. FSRU specifications

The team assumed a newly-built FSRU with the tank capacity of 173,000 m3, which is close to the capacity of

150,000 – 160,000 m3, which represents the most popular case in capacity so far exercised.

As mentioned above, FSRU, having tank capacities of 130,000 to 150,000 m3 have been mostly in use, while the

173,000 m3 capacity tanks have become a standard size that has been ordered frequently in recent years. Also,

given that no engineering work is necessary, that the building time is short, and that costs can be bottom lined,

using a newly-built FSRU can therefore be the most desirable selection (see the table below).

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Table3-5: Materialized FSRU Projects

Launched in Project Tank Capacity

2007 Teesside Gasport (UK) 135,000 m3

2008 Northeast Gateway (USA) 145,000 m3

2008 Bahia Blanca Gasport (Argentina) 151,000 m3

2009 Mina Al-Ahmadi Gasport (Kwait) 151,000 m3

2009 Petrobras VT1 (Pecem, Brazil) 128,000 m3

2009 Petrobras VT2 (Guanabara, Brazil) 138,000 m3

2009-10 Neptune (USA) 145,000 m3

2010 Dubai LNG (UAE) 125,000 m3

2011 GNL Escobar (Argentina) 151,000 m3

2012 West Java (Indonesia) 125,000 m3


Table3-6: Ordered FSRU Projects

Year of

Completion Project Location Tank Capacity

2013 Italy 138,000 m3

2014 Petrobras VT3 (Guanabara, Brazil) 173,000 m3

2014 Puerto Rico 170,000 m3

2014 Jordan 160,000 m3

2014 Lithuania 170,000 m3

2014 Indonesia 170,000 m3

2014 Chile 170,000 m3

2015 TBD 170,000 m3

2015 TBD 170,000 m3

2015 TBD 170,000 m3


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For your information, the following are examples of FSRU projects.

Figure3-13: FSRU Project 1: “Side-by-Side” Approach (Escobar, Argentina)

Source: Mitsui O.S.K. Lines

Figure3-14: FSRU Project 2: “Cross Jetty” Approach (Pecem, Brazil)

Source: Golar

As for the capability of regasification equipment, team will consider how much gas the equipment can process to

meet the projected demand mentioned above. From the expected demand up to 2025, three pieces of the

regasification equipment in operation should be capable of supplying 360 mmscfd. Besides, since the demand is

projected to increase up to around 440 mmscfd, supplying up to 480 mmscfd should be possible at peak hours

when the fourth piece is put into operation. The regasification equipment on an FSRU is designed on the

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assumption that an extra piece is put on standby to ensure certain operating rates, to fill demand at its provisional

peak, and to keep the regasification process running while maintenance is done for the main equipment. This

project also adopts this assumption for the design of suitable equipment.

An FSRU may or may not have an engine capable of navigation. The FSRU adopted in this project will have an

engine, so that it has a capability to be used as an LNG tanker in the future, if it is desired.

c. Jetty design

The study team will further need to conduct detailed research on the submarine geology, the hydrographic

conditions, and the weather around the proposed site for FSRU installation. The team has so far learned through

an interview with the meteorological bureau that one or two typhoons hit the waters annually where the site is

located, yet these typhoons pass the continent to the east of the Andaman Sea before they reach the waters, and

thus they are relatively weak and predictable. With this information in mind, the jetty design is carried out on the

assumption that the hydrographic conditions are mild, and the FSRU will be moored by the jetty.

To boost the FSRU’s operating rates, the hydrographic conditions need to be mild. Provision of breakwaters may

have to be considered depending on the hydrographic conditions. If the conditions are harsh, the tower yoke

mooring system will be used instead of jetty mooring,; although the tower yoke system will lift up the cost.

Suitable mooring system will be designed after collecting and examining specific information in relevance.

There are two types of jetty mooring systems. One is called “side-by-side” in which an LNG carrier as a shuttle is

moored alongside the FSRU anchored by the jetty; the other is called “cross-jetty” in which the FSRU and an

LNG carrier as a shuttle are moored on either side of the jetty. The side-by-side system has a clear cost advantage,

while the cross- jetty system offers the following advantages:

• It can receive LNG carriers of any size, regardless of the size of the FSRU.

• It offers greater stability of moored ships during loading and unloading than the side-by-side system.

• It allows moored vessels to leave swiftly in an emergency.

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Figure3-15: FSRU Mooring Systems (Top: Side-by-Side; Bottom: Cross-Jetty)


The location of FSRU will be as far away as 80 km from the port, which makes it difficult for tugboats to quickly

come to the rescue should the FSRU has to leave the jetty in an emergency. Therefore, the study team will assume

the design based on the cross-jetty system.

Besides, a piled structure can be considered to build the jetty. The team assumed the loading arms which can stand

against wave heights and tides.

d. Size of pipelines

As previously stated, the MOGE plans to extend the pipeline from S. Dagon to Thilawa. The right size of the

pipeline that this study assumes depends on whether the team considers only the use of gas regasified from

imported LNG on the FSRU, or the team also considers the use of gas from a different source transported through

the existing pipeline connected to the extension. When the team considers only transporting gas through the

pipeline to S. Dagon, 24 inches can be an option to have a good balance with pressure and boost-up. On the other

hand, the MOGE currently plans to develop a pipeline network along the existing one in Yangon to supply gas to

IPPs newly engaging in gas-fired power generation, and the size of the pipelines for the network is 30 inches. A

larger size means higher operational flexibility and scalability, and greater costs. Despite the MOGE’s choice to

use 30-inch pipelines for the network, the team has adopted 24 inch pipelines because, as supply lines for

3-25

regasified LNG, they do not require much initial cost, and they have an extra transport capacity that can be tapped

into when gas will be carried for different purposes (e.g., consumer use) sometime in the future.

(4) Project Plan Outline

1. Basic Policies for Determining Project Details

To solve electricity shortages as soon as possible, MOEP is considering LNG import for electric power

generation. As the demand forecast shows, the amount of gas needed is meant to fill the gap between a domestic

gas supply and gas demand based on the capacity of gas-fired power plants in the power source development

plan.

Given this background, MOEP has intention to realize quick start of LNG import. However, further discussion

on the detail including cost needs to be held through an organization with decision-making authority. In this

study, the team determined project details in accordance with the physical and financial restrictions mentioned

previously, and also with the needs of the various Myanmar government organizations which the team had

learned of through interviews.

2. Conceptual Design and Specifications of Applied Facilities and Equipment

Facilities and equipment that this project uses are broadly classified into the following:

a. a. FSRU

b. b. Jetty

c. c. Pipelines

a. FSRU

The figure below is the schematic diagram of FSRU processes.

3-26

Figure3-16: Schematic Diagram of FSRU Processes


The table below shows the specifications of the FSRU based on the technical approaches to be adopted:

Table3-7: Main FSRU Specifications

Length Overall 294.5 m

Breadth Molded 46.4 m

Depth Molded 26.5 m

Scantling Draft 12.8 m

Dead Weight About 83,200 metric tons

Tank Capacity 173,000 m3

Service Speed 18.0 Knots (21% sea margin)

Boil-off Rate 0.15%

Propulsion Engine DFDE (Dual Fuel Diesel Electric)

Fuel Boil off gas, HFO, MDO


3-27

Table3-8: Specifications of Regasification System

Regasification Technology Sea Water heating with shell & tube vaporizer

Regasification Capacity 120 mmscfd x 4 machines

Maximum send-out amount: 480 mmscfd (4 machines

combined)

Regular send-put amount: 360 mmscfd (3 machines, 1 on

standby)

Gas Discharge Pressure Minimum: 40 barg; Maximum: 100 barg.

LNG Cargo Loading Rate 8,000 m3/ hour

Gas Send-Out Temperature 5.0 degrees celsius


b. Jetty

The team examined the technical approach and put together the following as summaries of required equipment.

The jetty is designed to receive an LNG tanker from which LNG is transferred to the moored FSRU, so that the

regasification equipment on the FSRU generates gas with the required pressure in accordance with demand at the

time, and the high-pressure loading arm sends out the gas into the pipeline. The following are the pieces of

equipment used in the process:

• Imported LNG receiving loading arms (LNG: 2 sets; vapor: 1 set; common spare: 1 set)

• LNG transfer loading arms (LNG: 2 sets; vapor: 1 set; common spare: 1 set)

• High pressure natural gas send-out loading arm(s) (1 set if can possible to be produce)

• Valve manifold related to the above

• Emergency shutdown system

• Nitrogen connection and piping

• Loading arm operation system

• Knock-out drums for vapor

• Drain pump

• Electric power distribution panel and system (utilities and power source will be received from the

FSRU)

The following pieces of equipment will be in place as part of the jetty facilities:

• Breasting dolphins

• Mooring dolphins

• Navigation aid

• Radio communications, etc.

3-28

As stated in the section that explores the capacity of an FSRU, the size of the LNG tanker receiver is unidentified

at this point, because the seller from which Myanmar will buy LNG has not been selected. Hence, the team

considered the size that ranges between 125,000 m3 and 160,000 m

3 to envisage the structures of the jetty and the

dolphins.

The system flow of the equipment and the schematic diagram are as shown below:

3-29

Figure3-17: System Flow of Jetty Equipment


3-30

c. Pipelines

The pipelines will be laid offshore (subsea) and onshore.

The onshore pipeline will have a shutdown valve, and a valve station for connecting branched parts in accordance

with the design specifications defined by relevant codes and regulations. The onshore pipeline route that this

project plans crosses the large river at two points, so the pipeline will need to be buried at an adequate depth.

The right size of pipeline may vary depending on the use, so the team will need to discuss it with the MOGE. For

the purpose of examination in this study, the team envisaged that it will be 24 inches, which is the same as the

pipeline circling through the Yangon Region planned by the MOGE. There are pipelines that the MOGE has

already installed in accordance with its specifications. The team will need to keep checking with the MOGE to

ensure that the pipeline that this project builds is consistent with the specifications. At this moment, the team

envisages that the MOGE’s pipelines follow international standards. The figure below is the schematic diagram of

the pipeline.

Figure3-18: FSRU – Pipeline System Schematic Diagram


3. Proposed Project Details (Site and Investment Cost for the Project)

a. Project site

An FSRU should be installed80km offshore from the Yangon River, and a gas pipeline route will be laid up to

South Dagon in the existing pipeline network in Yangon. Please see Chapter 4 (3) 3 for details.

3-31

b. Investment cost

The initial investment cost is approximately US$624 million, and the annual running cost say US$2.57 million.

The project cost does not include the costs for the construction and operation of the onshore pipelines, assuming

that the MOGE will bear these costs. The team also estimated that the initial expenses would be US$66 million if

the project was to be launched in Japan.

Please see Chapter 5 for details.

4. Issues on Proposed Technologies and System; Solutions

a. Project site and specifications

The project site and the specifications are set out in accordance with the followings:

• Details stated in the MOEP’s public offering for LNG imports asked in July 2013 and the needs behind

the call

• Requests from concerned organizations based on the call

• Technical and system reviewed basing on the physical constraints shown in existing literature

The Myanmar government’s needs may change as the development of domestic gas fields and of power sources

goes on, and detailed research on hydrographic conditions and other physical constraints may locate something

new, which may suggest a better place for installing the FSRU, and/or better technologies to apply. The study

must continue to find out with eye for wider range of subjects. In any case, this study at this junction of time will

serve as a benchmark for future discussions.

Besides, the study further needs detailed information about the water depths, the hydrographic conditions and the

climate in the area for more detailed consideration of the location for installing the FSRU, project expenses, and

running costs. And the team presume that earth and sand from the Yangon River are floating in the stretch of

shallow water. If the FSRU was to be installed in a dredged area with shallow water, the team would need to take

technical measures to prevent the plumbing in the FSRU from becoming clogged with the floating earth and sand.

b. LNG berthing operation

A large vessel like an LNG shuttle tanker becomes difficult to steer and cannot easily change direction on its own

when it slows down, so tugboats will help LNG carriers to steer and control their speeds as they arrive at, and

leave the jetty. In general, four 3,000 to 4,000 h.p. tugboats will help an LNG carrier as it arrives at, and leaves the

jetty. Through an interview with the Yangon Port Authority, the team discovered that tugboats at Yangon Port,

which is a river port, have only 1,500 horsepower each, that is, the port does not have any tugboats with engines

powerful enough to navigate the ocean. For the new jetty to receive LNG carriers, new tugboats and crews of the

boats must be arranged, and where to anchor the boats and how to operate them around the jetty must be

determined. As the offshore location is fairly far away from land, further study must be done to locate reliable

sources of weather forecasts, and predictions of hydrographic conditions.

Chapter 4 Evaluation of Environmental and Social Impacts

4-1

(1) Analysis of Environmental/ Social Aspects

1. Project Areas

The Andaman Sea and the Gulf of Martaban where the construction of the FSRU is planned alongside Yangon

and Thilawa Ports are particularly important areas. One of the key characteristics of the Gulf of Martaban is the

significant fluctuation of the sea level. The sea level varies from 4m to 7m at its highest. Tidal range at the time of

spring tide is 6.6 m, and the size of the areas affected is 45,000 km2. Even at the time of the neap tide, the tidal

range is about 3m and the size of the areas affected is 15,000 m2.

The FSRU must be constructed where there is a certain water depth level (15 m), and for areas with shallow-water

such as Yangon Port (9 m) and Thilawa Port (10 m), it will be impossible to construct. The MPA is in charge of a

fixed distance offshore of the Gulf of Martaban. This is a shallow-water area with 1m deep tidal flats at the

estuary of the Yangon River. It will be necessary to identify the appropriate spots from the marine area, which is

under the jurisdiction of the Navy, outside the areas of MPA jurisdiction in order to secure appropriate water

depth for the FSRU. The Gulf of Martaban is a maritime area with shoals, and its water depth is 5 m at 10 km

from the shore and 8 m at 25 km from the shore. It is currently assumed that 15m water depths can be secured 80

km offshore. The Andaman Sea provides good fishing grounds, and fishing and marine product processing

industries have developed in the South of Myanmar, including the Tanintharyi Division and Mon State. It is

assumed that there are rich marine resources and precious marine ecosystems such as coral reefs in the area where

the FSRU will be constructed. It is therefore necessary to further investigate the effect on the natural environment

in the project site, in order to make appropriate arrangements as necessary.

The use of the marine area under the Navy’s jurisdiction is strictly limited. It is necessary to exclusively own the

marine area under the jurisdiction of the navy to construct the FSRU while consulting with the Ministry of

Transport: MOT and the Navy, as it is the case with existing offshore gas fields. The Ministry of Livestock,

Fisheries and Rural Development is in charge of the fisheries industry, and issues three types of licenses for

coastal fishing, inshore and deep-sea fisheries. It is not known yet whether there are fishermen, who operate in the

FSRU construction marine area, but it will be confirmed and the impact on fishermen will be assessed in the

process of creating an Environmental Impact Assessment.

4-2

Figure4-1: Plan of the Constructions of FSRU and Pipelines

Source: Prepared by Study Team based on the materials provided by the MOGE and interviews of the MOGE and

MPA

2. Future Forecast

The government of Myanmar is conducting early research into construction of a large deep-water port to be built

downstream of the Yangon River, although the concrete plan is yet to be concrete. There is a possibility that the

pipeline that connects FSRU with the existing pipeline network may interfere with the deep-water port project

depending on its location. Currently, the proposed plans include creating it by constructing an artificial island

offshore of the east of the estuary of the Yangon River, and creating it in the area of the Western channel (water

route used by ships to and from the Yangon Port). In case it is created by constructing an artificial island on the

east side, it is assumed that both will be affected, depending on the route of the pipeline.

(2) Environmental Improvement Achieved through Project Implementation

FSRU is one of the fastest methods to achieve LNG imports from overseas. The imported LNG will be used

mainly for power generation. Therefore, it is not expected that in comparison to the current situation, there will be

direct improvements in environmental measures such as emissions of pollutants or greenhouse gases. On the other

hand, if importing LNG is not possible or delayed considerably, it is anticipated that there will be an increase in

the construction of hydropower and coal-fired thermal power plants as alternative options to cover power supply

4-3

shortages. Hydropower has the advantage of reducing emissions of pollutants and greenhouse gases, compared to

thermal power. On the other hand, it will mainly be constructed in the mountainous regions, it is expected that

there will be destruction of the natural environment through development, as well as the eviction of residents from

the region. This has been the case with hydropower plants constructed in the past, where many residents were

forced to relocate.

With coal-fired thermal power plants, it is expected that air pollution and greenhouse gas emissions will be

reduced to some degree, if Advanced Ultra-Supercritical (A-USC) coal fired plants (the use of which is

increasingly supported in Japan) are chosen, and various measures for contamination control are implemented.

However, considering how it tends to be applied in ASEAN countries, contamination control is unlikely to be

sufficient and there is a high possibility that a Supercritical (SC) coal fired plant could be selected as the most

efficient of this type of plant, though it is less efficient compared to A-USC. There will also be an issue of coal

ash disposal with the use of a coal-fired power plant.

If natural gas-fired plants cannot be developed, hydropower and coal-fired thermal plants are likely to be

promoted, and the associated risks of environmental pollution and destruction will be counted for. The

environmental improvement associated with this project will be environmental conservation, where hydropower is

the baseline scenario, and the reduction in emissions of pollutants and greenhouse gas where coal-fired power is

the baseline. In terms of qualifying environmental improvements, taking the increased construction of coal-fired

thermal power plants as the baseline, quantifying the reduction in greenhouse gas emissions by applying CDM is

possible. Below are the methodologies applied to this study:

・ AM0029 Baseline methodology for grid connected electricity generation plants using natural gas

・ AM0087 Construction of a new natural gas power plant supplying electricity to the grid or a single

consumer

(3) Environmental and Social Impacts Associated with the Project

1. Reviewing Environmental and Social Considerations

In order to assess the environmental and social impact of the project, and clarify the environmental and social

considerations required at the next stage of this research, we have evaluated items following a “List of

Environmental Checklists” of the “JBIC Guidelines for Confirmation of Environmental and Social

Considerations”, and the “JICA Guidelines for Environmental and Social Considerations”. The following tables

are the result of the evaluations.

4-4

Table4-1: Evaluations by “List of Environmental Checklists” for “Other Infrastructure Projects” in the “JICA

Guidelines for Environmental and Social Considerations”

Category Environmental

Item Main Check Items

Confirmation of Environmental

Considerations

(Reasons, Mitigation Measures)

1 Permits

and

Explanati

on

(1) EIA and

Environmental

Permits

(a) Have EIA reports been already

prepared in official process?

(b) Have EIA reports been approved by

authorities of the host country's

government?

(c) Have EIA reports been

unconditionally approved? If conditions

are imposed on the approval of EIA

reports, are the conditions satisfied?

(d) In addition to the above approvals,

have other required environmental

permits been obtained from the

appropriate regulatory authorities of the

host country's government?

(a), (b), (c): An EIA has not been

prepared for the project.

(d): Legal systems related to the

environment, including EIAs are

being developed, and it is anticipated

that obtaining permits will become

necessary.

(2) Explanation

to the Local

Stakeholders

(a) Have contents of the project and the

potential impacts been adequately

explained to the Local stakeholders

based on appropriate procedures,

including information disclosure? Is

understanding obtained from the Local

stakeholders?

(b) Have the comment from the

stakeholders (such as local residents)

been reflected to the project design?

(a), (b): Information disclosure and

consultation with residents and

stakeholders has not been conducted,

as the project is still at the planning

stage.

(3)

Examination of

Alternatives

(a) Have alternative plans of the project

been examined with social and

environmental considerations?

(a): The project is one of several

being planned including onshore LNG

construction.

2

Pollution

Control

(1) Air Quality

(a) Do air pollutants, (such as sulfur

oxides (SOx), nitrogen oxides (NOx),

and soot and dust) emitted from the

proposed infrastructure facilities and

ancillary facilities comply with the

country's emission standards and

ambient air quality standards? Are any

(a), (b): It is expected that mainly

natural gas will be used for FSRU

operation, and emission of polluted

materials and greenhouse gases are

expected to be limited. The emissions

and environmental standards have not

been established at this stage.

4-5

mitigating measures taken?

(b) Are electric and heat source at

accommodation used fuel which

emission factor is low?

(2) Water

Quality

(a) Do effluents or leachates from

various facilities, such as infrastructure

facilities and the ancillary facilities

comply with the country's effluent

standards and ambient water quality

standards?

(a): Cold water emitted from FSRU

operation could result in lowered

water temperatures. The degree of

impact and measures to reduce impact

will be reviewed in an impact

evaluation, which will be carried out

through an EIA at a later stage and in

discussion with stakeholders,

including fishermen. The emissions

and environmental standards have not

been established.

(3) Wastes

(a) Are wastes from the infrastructure

facilities and ancillary facilities properly

treated and disposed of in accordance

with the country's regulations?

(a): The amount of waste materials

emitted by FSRU operation will be

minor, and likely to be disposed of

appropriately.

(4) Soil

Contamination

(a) Are adequate measures taken to

prevent contamination of soil and

groundwater by the effluents or

leachates from the infrastructure

facilities and the ancillary facilities?

(a): Not applicable as FSRU is an

offshore facility.

(5) Noise and

Vibration

(a) Do noise and vibrations comply

with the country's standards?

(a): Noise and vibrations are expected

to be generated by FSRU operation.

The country in question does not have

fixed standards. It is assumed that

impact will be relatively small as the

facility is offshore.

(6) Subsidence

(a) In the case of extraction of a large

volume of groundwater, is there a

possibility that the extraction of

groundwater will cause subsidence?


offshore facility.

(7) Odor

(a) Are there any odor sources? Are

adequate odor control measures taken?

(a): Not applicable as no odor is

expected through LNG receipt with

the use of vaporization equipment.

4-6

3 Natural

Environ

ment

(1) Protected

Areas

(a) Is the project site or discharge area

located in protected areas designated by

the country's laws or international

treaties and conventions? Is there a

possibility that the project will affect the

protected areas?

(a): There are no protected areas near

or within the project areas.

(2) Ecosystem

(a) Does the project site encompass

primeval forests, tropical rain forests,

ecologically valuable habitats (e.g., coral

reefs, mangroves, or tidal flats)?

(b) Does the project site encompass the

protected habitats of endangered species

designated by the country's laws or

international treaties and conventions?

(c) Is there a possibility that changes in

localized micro-meteorological

conditions, such as solar radiation,

temperature, and humidity due to a

large-scale timber harvesting will affect

the surrounding vegetation?

(d) Is there a possibility that the amount

of water (e.g., surface water,

groundwater) used by the project will

adversely affect aquatic environments,

such as rivers? Are adequate measures

taken to reduce the impacts on aquatic

environments, such as aquatic

organisms?

(a), (b), (c), (d): As FSRU is an

offshore facility, it is possible to

construct and operate the facility

while avoiding primeval forests,

tropical rain forests and ecologically

valuable habitats. However, it is

possible that such areas could be

affected by construction of the marine

pipeline and land facility. The impact,

and measures to reduce impact, will

be clarified in an impact evaluation

which will be carried out through an

EIA at a later stage.

(3) Hydrology

(a) Is there a possibility that hydrologic

changes due to the project will adversely

affect surface water and groundwater

flows?


offshore facility.

(4) Topography

and Geology

(a) Is there a possibility the project will

cause large-scale alteration of the

topographic features and geologic

structures in the project site and

surrounding areas?


offshore facility.

4-7

4 Social

Environ

ment

(1)

Resettlement

(a) Is involuntary resettlement caused by

project implementation? If involuntary

resettlement is caused, are efforts made

to minimize the impacts caused by the

resettlement?

(b) Is adequate explanation on

compensation and resettlement

assistance given to affected people prior

to resettlement?

(c) Is the resettlement plan, including

compensation with full replacement

costs, restoration of livelihoods and

living standards developed based on

socioeconomic studies on resettlement?

(d) Is the compensations going to be

paid prior to the resettlement?

(e) Is the compensation policies

prepared in document?

(f) Does the resettlement plan pay

particular attention to vulnerable groups

or people, including women, children,

the elderly, people below the poverty

line, ethnic minorities, and indigenous

peoples?

(g) Are agreements with the affected

people obtained prior to resettlement?

(h) Is the organizational framework

established to properly implement

resettlement? Are the capacity and

budget secured to implement the plan?

(i) Are any plans developed to monitor

the impacts of resettlement?

(j) Is the grievance redress mechanism

established?

(a), (b), (c), (d), (e), (f), (g), (h), (i),

(j): Not applicable as FSRU is an

offshore facility.

4 Social

Environ

ment

(2) Living and

Livelihood

(a) Is there a possibility that the project

will adversely affect the living

conditions of inhabitants? Are adequate

measures considered to reduce the

impacts, if necessary?

(a): As FSRU is an offshore LNG

receiving facility, it could have an

impact on fishermen operating in the

area, by causing changes to fish

catches. It is possible to reduce the

4-8

negative impact by clarifying the

causes of the impact on fish catches,

such as lowered water temperatures

from cold water emissions, and

putting forward measures to reduce

such impacts.

(3) Heritage


will damage the local archeological,

historical, cultural, and religious

heritage? Are adequate measures

considered to protect these sites in

accordance with the country's laws?

(a): Detailed research has not yet been

conducted as the project is still at the

planning stage.

(4) Landscape


will adversely affect the local

landscape? Are necessary measures

taken?

(b) Is there a possibility that landscape is

spoiled by construction of high-rise

buildings such as huge hotels?

(a), (b): FSRU will be constructed in a

relatively distant offshore area, and

the effect on the local landscape is

considered to be minor.

(5) Ethnic

Minorities and

Indigenous

Peoples

(a) Are considerations given to reduce

impacts on the culture and lifestyle of

ethnic minorities and indigenous

peoples?

(b) Are all of the rights of ethnic

minorities and indigenous peoples in

relation to land and resources respected?

(a), (b): There are no ethnic minorities

or indigenous peoples nearby, or in

the subject project areas.

(6) Working

Conditions

(a) Is the project proponent not violating

any laws and ordinances associated with

the working conditions of the country

which the project proponent should

observe in the project?

(b) Are tangible safety considerations in

place for individuals involved in the

project, such as the installation of safety

equipment which prevents industrial

accidents, and management of hazardous

materials?

(c) Are intangible measures being

planned and implemented for

(a), (b), (c), (d): Working conditions,

safety considerations and safety and

health training will be clarified in an

impact evaluation that will be

conducted through an EIA at a later

stage.

4-9

individuals involved in the project, such

as the establishment of a safety and

health program, and safety training

(including traffic safety and public

health) for workers etc.?

(d) Are appropriate measures taken to

ensure that security guards involved in

the project not to violate safety of other

individuals involved, or local residents?

5 Others

(1) Impacts

during

Construction

(a) Are adequate measures considered to

reduce impacts during construction (e.g.,

noise, vibrations, turbid water, dust,

exhaust gases, and wastes)?(b) If

construction activities adversely affect

the natural environment (ecosystem), are

adequate measures considered to reduce

impacts?(c) If construction activities

adversely affect the social environment,

are adequate measures considered to

reduce impacts?

(a), (b), (c): The impact during the

construction period will be clarified in

an impact evaluation which will be


stage.

(2) Monitoring

(a) Does the proponent develop and

implement monitoring program for the

environmental items that are considered

to have potential impacts?

(b) What are the items, methods and

frequencies of the monitoring program?

(c) Does the proponent establish an

adequate monitoring framework

(organization, personnel, equipment, and

adequate budget to sustain the

monitoring framework)?

(d) Are any regulatory requirements

pertaining to the monitoring report

system identified, such as the format and

frequency of reports from the proponent

to the regulatory authorities?

(a), (b), (c): An EIA has not been

conducted for this project.

(d): There are no legally binding rules

on the methods and frequency of

reporting monitoring results.

4-10

6 Note

Reference to

Checklist of

Other Sectors

(a) Where necessary, pertinent items

described in the Roads, Railways and

Bridges checklist should also be checked

(e.g., projects including access roads to

the infrastructure facilities).

(b) For projects, such as installation of

telecommunication cables, power line

towers, and submarine cables, where

necessary, pertinent items described in

the Power Transmission and

Distribution Lines checklists should also

be checked.

(a), (b): Not applicable

Note on Using

Environmental

Checklist

(a) If necessary, the impacts to

transboundary or global issues should be

confirmed (e.g., the project includes

factors that may cause problems, such as

transboundary waste treatment, acid

rain, destruction of the ozone layer, or

global warming).

(a): Not applicable

Sources: “List of Environmental Checklists” for “Other Infrastructure Projects” in the “JICA Guidelines for

Environmental and Social Considerations” with added comments by Study Team

4-11

Table4-2: Evaluation by “List of Environmental Checklists” for Other Infrastructure Projects in the “JBIC

Guidelines for Confirmation of Environmental and Social Considerations”

Category Environmental

Item Main Check Items

Confirmation of Environmental

Considerations

1 Permits

and

Explanation

(1) EIA and

Environmental

Permits

(i) Have EIA reports been officially

completed?

(ii) Have EIA reports been approved

by authorities of the host country’s

government?

(iii) Have EIA reports been

unconditionally approved? If

conditions are imposed on the

approval of EIA reports, are the

conditions satisfied?

(iv) In addition to the above

approvals, have other required

environmental permits been

obtained from the appropriate

regulatory authorities of the host

country’s government?

(i), (ii), (iii) An EIA has not been

prepared for the project.

(iv): Legal systems related to the

environment, including EIAs are

being developed, and it is anticipated

that obtaining permits will become

necessary.

(2) Explanation

to the Public

(i) Are contents of the project and

the potential impacts adequately

explained to the public based on

appropriate procedures, including

information disclosure? Is

understanding obtained from the

public?

(ii) Are proper responses made to

comments from the public and

regulatory authorities?

(i), (ii): Information disclosure and

consultation with the residents and

stakeholders has not been conducted,

as the project is still at the planning

stage.

2 Mitigation

Measures (1) Air Quality

(i) Do air pollutants, (such as sulfur

oxides (SOx), nitrogen oxides

(NOx), and soot and dust) emitted

from the proposed infrastructure

facilities and ancillary facilities

comply with the country’s emission

standards and ambient air quality

standards?

(i): It is planned that mainly natural

gas will be used for FSRU operation,

with emissions of polluted materials

and greenhouse gases expected to be

limited. The emissions and

environmental standards have not yet

been established.

4-12

(2) Water

Quality

(i) Do effluents or leachates from

various facilities, such as

infrastructure facilities and the

ancillary facilities comply with the

country’s effluent standards and

ambient water quality standards?

(i): Cold water emitted from FSRU

operation could result in lowered

water temperatures. The degree of

impact and measures to reduce these

impacts will be reviewed in an

impact evaluation which will be

carried out through an EIA at a later

stage, and in discussion with

stakeholders, including fishermen.

The emissions and environmental

standards have not yet been

established.

(3) Wastes

(i) Are wastes from the

infrastructure facilities and ancillary

facilities properly treated and

disposed of in accordance with the

country’s standards?

(i): The amount of waste materials

emitted by FSRU operation will be

minor and likely to be disposed of

appropriately.

(4) Soil

Contamination

(i) Are adequate measures taken to

prevent contamination of soil and

groundwater by the effluents or

leachates from the infrastructure

facilities and the ancillary facilities?

(i): Not applicable as FSRU is an

offshore facility.

(5) Noise and

Vibration

(i) Do noise and vibrations comply

with the country’s standards?

(i): Noise and vibrations are expected

to be generated by FSRU operation.

The country in question doesn’t have

fixed standards. It is assumed that

impact will be relatively small as the

facility is offshore.

(6) Subsidence

(i) In the case of extraction of a

large volume of groundwater, is

there a possibility that the extraction

of groundwater will cause

subsidence?


offshore facility.

(7) Odor

(i) Are there any odor sources?

Are adequate odor control measures

taken?

(i): Not applicable as no odor is

expected with LNG receipt and with

the use of vaporization equipment.

3 Natural

Environmen

t

(1) Protected

Areas

(i) Is the project site located in

protected areas designated by the

country’s laws or international

(i): There are no protected areas

within or near the project areas.

4-13

treaties and conventions? Is there a

possibility that the project will

affect the protected areas?

3 Natural

Environmen

t

(2) Ecosystem

and biota

(i) Does the project site encompass

primeval forests, tropical rain

forests, ecologically valuable

habitats (e.g., coral reefs,

mangroves, or tidal flats)?

(ii) Does the project site encompass

the protected habitats of endangered

species designated by the country’s

laws or international treaties and

conventions?

(iii) If significant ecological impacts

are anticipated, are adequate

protection measures taken to reduce

the impacts on the ecosystem?

(iv) Is there a possibility that the

amount of water (e.g., surface water,

groundwater) used by the project

will adversely affect aquatic

environments, such as rivers? Are

adequate measures taken to reduce

the impacts on aquatic

environments, such as aquatic

organisms?

(i), (ii), (iii), (iv): As FSRU is an

offshore facility, it is possible to

construct and operate the facility

while avoiding primeval forests,

tropical rain forests and ecologically

valuable habitats. However, such

areas could be included in the land

facility. The impact, and measures to

reduce impact, will be clarified in an

impact evaluation which will be

carried out through an EIA at a later

stage.

(3) Hydrology

(i) Is there a possibility that

hydrologic changes due to the

project will adversely affect surface

water and groundwater flows?


offshore facility.

(4) Topography

and Geology

(i) Is there a possibility the project

will cause large-scale alteration of

the topographic features and

geologic structures in the project

site and surrounding areas?


offshore facility

4-14

4 Social

Environmen

t

(1) Resettlement

(i) Is involuntary resettlement

caused by project implementation?

If involuntary resettlement is

caused, are efforts made to

minimize the impacts caused by the

resettlement?

(ii) Is adequate explanation on

relocation and compensation given

to affected persons prior to

resettlement?

(iii) Is the resettlement plan,

including proper compensation,

restoration of livelihoods and living

standards developed based on

socioeconomic studies on

resettlement?

(iv) Does the resettlement plan pay

particular attention to vulnerable

groups or persons, including

women, children, the elderly, people

below the poverty line, ethnic

minorities, and indigenous peoples?

(v) Are agreements with the affected

persons obtained prior to

resettlement?

(vi) Is the organizational framework

established to properly implement

resettlement? Are the capacity and

budget secured to implement the

plan?

(vii) Is a plan developed to monitor

the impacts of resettlement?

(i), (ii), (iii), (iv), (v), (vi), (vii): Not

applicable as FSRU is an offshore

facility.

(2) Living and

Livelihood

(i) Is there a possibility that the

project will adversely affect the

living conditions of inhabitants?

Are adequate measures considered

to reduce the impacts, if necessary?

(i): As FSRU is an offshore LNG

receiving facility, it could have an

impact on fishermen operating in the

area by causing changes to fish

catches. It is possible to reduce these

possible negative impacts by

clarifying the causes of the impact on

4-15

fish catches, such as lowered water

temperatures from cold water

emissions, and putting forward

measures to reduce such impacts.

(3) Heritage


project will damage the local

archeological, historical, cultural,

and religious heritage sites? Are

adequate measures considered to

protect these sites in accordance

with the country’s laws?

(i): Detailed research has not yet been

conducted as the project is still at the

planning stage.

(4) Landscape


project will adversely affect the

local landscape? Are necessary

measures taken?

(i): FSRU will be constructed in a

relatively distant offshore area, and

the effect on the local landscape is

considered to be minor.

4 Social

Environmen

t

(5) Ethnic

Minorities and

Indigenous

Peoples

(i) Does the project comply with the

country’s laws for rights of ethnic

minorities and indigenous peoples?

(ii) Are considerations given to

reduce the impacts on culture and

lifestyle of ethnic minorities and

indigenous peoples?

(i), (ii): There are no ethnic

minorities or indigenous peoples

nearby or in the subject project areas.

(6) Working

conditions

(i) Is the project proponent not

violating any laws and ordinances

associated with the working

conditions of the country which the

project proponent should observe in

the project?

(ii) Are tangible safety

considerations in place for

individuals involved in the project,

such as the installation of safety

equipment which prevents industrial

accidents, and management of

hazardous materials?

(iii) Are intangible measures being

planned and implemented for

individuals involved in the project,

such as the establishment of a safety

(i), (ii), (iii), (iv): Working

conditions, safety considerations and

safety and health training will be

clarified in an impact evaluation that

will be conducted through an EIA at

a later stage.

4-16

and health program, and safety

training (including traffic safety and

public sanitation) for workers etc.?

(iv) Are appropriate measures being

taken to ensure that security guards

involved in the project do not

violate safety of other individuals

involved, or local residents?

5 Others

(1) Impacts

during

Construction

(i) Are adequate measures

considered to reduce impacts during

construction (e.g., noise, vibrations,

turbid water, dust, exhaust gases,

and wastes)?

(ii) If construction activities

adversely affect the natural

environment (ecosystem), are

adequate measures considered to

reduce impacts?

(iii) If construction activities

adversely affect the social

environment, are adequate measures

considered to reduce impacts?

(i), (ii), (iii): Impact during the

construction period will be clarified

in an impact evaluation which will be


stage.

(2) Monitoring

(i) Does the proponent develop and

implement monitoring program for

the environmental items that are

considered to have potential

impacts?

(ii) Are the items, methods and

frequencies included in the

monitoring program judged to be

appropriate?

(iii) Does the proponent establish an

adequate monitoring framework

(organization, personnel, equipment,

and adequate budget to sustain the

monitoring framework)?

(iv) Are any regulatory requirements

pertaining to the monitoring report

system identified, such as the format

(i), (ii), (iii): An EIA has not been

conducted for this project.

(iv): There are no legally binding

rules on the methods and frequency

of reporting monitoring results.

4-17

and frequency of reports from the

proponent to the regulatory

authorities?

6 Note

Reference to

Checklist of

Other Sectors

(i) Where necessary, pertinent items

described in the Roads, Railways

and Bridges checklist should also be

checked (e.g., projects including

access roads to the infrastructure

facilities).

(ii) For projects, such as installation

of telecommunication cables, power

line towers, and submarine cables,

where necessary, pertinent items

described in the Power

Transmission and Distribution

Lines, and Pipelines checklists

should also be checked.

(i), (ii): Not applicable

Note on Using

Environmental

Checklist

(i) If necessary, the impacts to

transboundary or global issues

should be confirmed (e.g., the

project includes factors that may

cause problems, such as

transboundary waste treatment, acid

rain, destruction of the ozone layer,

or global warming).

(i): Not applicable

Sources: “List of Environmental Checklists” for “Other Infrastructure Projects” in the “JBIC Guidelines for

Confirmation of Environmental and Social Considerations” with added comments by Study Team

4-18

2. The Environmental Impacts of the Alternative Proposals

We have presented three proposals in Chapter 3 as alternatives to LNG import using FSRU: buying back exported

gas; building onshore facilities for receiving LNG; adopting a Shuttle Regasification Vessel (SRV). Below are the

expected possible environmental impacts of each proposal.

Table4-3: The Environmental Impacts of the Alternative Proposals

Alternative Proposals Possible Environmental Impacts

Buying back exported gas Currently, the only gas pipeline available is used for export purposes, and it would

be necessary to lay a long distance gas pipeline from the gas field to Yangon. It is

possible that constructing the pipeline could cause mid to long term impact on the

environment through causing a disturbance to the ocean bed, depending on the

pipeline route.

Building onshore facilities

for receiving LNG

Environmental impacts could include an impact on the landscape, involuntary

relocation of the residents and groundwater pumping, all caused by the construction

of major facilities on the ground.

Adopting SRV It is necessary to construct a Turret Buoy regasification facility in the marine area at

depths of more than 100m to use a SRV, which will have to be constructed 100km

offshore in the case of the Andaman sea marine area. It is technically and

financially difficult to send natural gas from turret buoy facilities and even if

possible, a long distance gas pipeline would have to be laid -possibly causing mid to

long term environmental impacts, through construction disturbances to the ocean

bed.


It is necessary to carry out a detailed investigation of each alternative plan through concrete research. Given the

conditions of the marine area of the Yangon River and the Andaman Sea, it is anticipated that the facilities will

have to be constructed farther away from the area where the FSRU is expected to be constructed, and also from

Yangon, whichever alternative plan were to be realized. In this case, it could be the case that the environmental

impact will be larger compared to the construction of the FSRU.

3. Result of Information Collected on Environmental and Social Impacts

According to an interview with the Myanmar Environmental Conservation and Forestry Ministry (MECF) which

is responsible for environmental administration in Myanmar, projects that are expected to conduct an EIA

(Environmental Impact Assessment) are those that exceed a project size, determined according to types of projects.

Those projects smaller than a certain size, are expected to be followed with an IEE only (Initial Environmental

Examination). It is anticipated that even for those operations taking place on the shore, the same EIA process of

MECF will be applied. Below are the details of the types and sizes of projects, accordingly.

・ For gas-fired power generation, an IEE is required for 5-50 MW plants, and an EIA is required for those

over 50 MW.

・ For gas pipelines, an IEE for under 10km and an EIA for over 10 km.

4-19

With regard to FSRU, there is no criterion at present. Like for instance, for an oil storage facility, the IEE process

is required for sizes from 100,000 to 1,000,000 liters, and the EIA process is required for sizes over 1,000,000

liters.

The MECF will review and make decisions as to whether the EIA process is required, or not, on currently running

projects. This project consists of 3 components that are, FSRU, underwater gas pipelines and above ground

pipelines, and MECF’s view is that these can be addressed together in one EIA report.

Apart from MECF’s regulations, MIC (Myanmar Investment Commission) Law and MIC regulations require

submission of a report during the business approval process of large scale operations, such as oil and gas

businesses, hydropower generation business and electricity transmission business. Therefore, an EIA has already

been partly applied in certain businesses. Currently, EIA consultants who conduct EIA internationally, and are

registered with EIA consultants agencies etc. are asked to submit reports to the government, though MECF does

not have registered EIA consultants. For example, the offshore gas production business which is already in

operation in Yadana has submitted an EIA report. MECF uses the report of this business operation as a good

example. As for examples of projects cancelled due to rejected EIAs, one project was cancelled, as there was a

possible risk of destruction of national cultural heritage by its hydropower generation business.

4-20

(4) Overview of the Country’s Environmental and Social Related

Regulations and Necessary Measures

1. Overview of Regulations and Schemes Related to the Environment

MECF, which is responsible for administration of environmental matters, was established in 2011. The

Environmental Conservation Law was established in 2012 in order to deliver sustainable development and

conservation of the environment. The Government of Myanmar has shown a proactive approach, partially revising

the law after its introduction.

Myanmar’s environmental conservation rules are currently under development and the EIA process is being

reviewed during this process. The EIA process is being drawn up with support from JICA and ADB, referring to

international regulations laid by the ADB and the IFC.

2. EIA Related Matters

It is likely that the EIA process will need to be checked by third party environment consultants who have been

approved and registered by MECF. However, the criteria for approval of environmental consultants are currently

being discussed and the detailed list of consultants is yet to be compiled.

Since no standard has currently been issued related to EIA by MECF, each business operator selects its own

standard when submitting EIA reports to MIC. Therefore, some business operators use IFC standard to compile

EIA reports or use their countries’ standards when submitting EIA reports.

The EIA process will be the same regardless of the types of owners of businesses, whether it’s governmental

organizations or private businesses. However, specific operations such as nuclear power generation are an

exception and the parliament will make the decision on approval.

It is assumed that the EIA admission process will be completed within 90 days of MECF receiving EIA reports.

The 90 days include public hearing process. It is assumed that IEE admission process will be completed within 60

days.

4-21

(5) Requirements to Deliver Projects in This Country (by Implementing

Organizations and Related Organizations)

To construct FSRU and start the receiving of LNG in Myanmar, it is necessary to get permission and

authorization from the related ministries including MIC, which requires submission of EIA reports. Also, although

the EIA-related process and liability are yet to be confirmed, it is currently under discussion and it is assumed that

the legal system will be developed in a few years. Below is the list of items that are the necessary course of

actions to be taken by the Myanmar side as to the execution of the project, from an environmental and social point

of view.

・ Development of EIA and IEE, as well as other emission standards and environmental standards

・ Registration and training of EIA consultants

・ Implementation of EIA and IEE (based on the above legal development)

・ Collaboration and promotion of agreement with project related groups (energy related organizations and

managers of harbors), local governments.

・ Provide thorough explanations and occasions to discuss for stakeholders such as fishermen.

Chapter 5 Financial and Economic Evaluation

5-1

(1) Estimated Project Costs

1. Cost Estimate Breakdown

The costs of project include the following cost elements:

a. Production and Construction Costs

1) Equipment costs

Equipment costs include design/production/material purchases/inspection and transport. The main cost

components of costs includes FSRU, jetty and sea pipelines. See Chapter 3 (4) for detailed specifications of

equipment.

2) Construction work costs

Construction work costs for the above equipment and buildings

b. Consulting services and fee

c. Operating costs

This cost includes the operational costs of the FSRU, jetty and pipeline including labor, utilities, repair, insurance

and general management costs.

d. Other costs and expenses (interest and taxes)

Taxes and financial levies, such as interest, corporation, and commercial taxes, as well as custom duties have been

included. Inflation has also been factored in. However, such costs should be verified during an upcoming

examination, as they may be subject to further taxation.

2. Project Costs

a. Production and construction costs

Illustrated below is the brief breakdown of the project cost assuming that each equipment/construction project

includes construction at site for a certain period of time, the cost is partly shown in the local currency. The costs

below include a contingency. Costs for constructing and operating land pipelines are not included in the

operational costs by assuming they will be paid by MOGE. However, just in case that our side has to assume these

costs, the initial cost was estimated at US$ 66 million.

5-2

Table5-1:Plan of the Constructions of FSRU and Pipelines

Expense Items

Cost

(converted

USD$1 million)

Foreign

Currency

(USD$1 million)

Local Currency

（1 million Kyat）

Construction/Equipment Cost Total 514 460 52,503

FSRU 278 264 13,622

Jetty 82 57 23,936

Pipeline (offshore) 154 138 14,945

1USD =973MMK


b. Consulting services costs/fee

Mentioned below is the consulting service cost/ fee.

Table5-2: Consulting Cost

Expense Items

Cost

(converted USD$1

million)

Foreign Currency

(USD$1 million)

Local Currency

（1 million Kyat）

Consulting Cost/fee

in total

15 12 3,748

1USD =973MMK

Sources: Prepared by Study Team

c. Operating costs

The cost given hereunder below includes those cost elements needed for a trial operation period, during which

time, a trial will be conducted on the condition that one regasification facility runs for a month including spare

facilities. The cost below is based on operating three regasification facilities after the operation has started. Utility

costs include the cost of fuel for FSRU operation, and are subject to change according to the number of

regasification facilities in operation.

5-3

Table5-3: Operational Costs

Trial Operation Period

(USD$1 million)

Operating Period

(USD$1 million/year)

Labor Costs 0.6 6.8

Utility Costs 0.3 10.8

Repair Costs 0.3 3.6

General Management

Costs/Expenses

0.2 2.2

Insurance Premium 0.1 0.7

1USD =973MMK


Table5-4: Utility Costs according to the Number of Regasification Facilities in Operation

Number of regasification facilities in

operation (per plant)

Regasification Capacity

(mmscfd)

Utility Cost

(USD$1

million/year)

1 120 7.3

2 240 9.0

3 360 10.8

1USD =973MMK, Fuel price assumption: LNG Price at $14/mmbtu


The above operating costs are subject to the LNG purchase contract, and are based on the assumption that the

contract is to purchase LNG at the CIF price, and does not include costs related to the handling of jetty

docking/undocking of LNG tankers (tug boats chartering costs, etc.). The Myanmar Port Authority does not own

enough tug boats to handle LNG tankers, and the cost of purchasing 4 tug boats is presumed to be around 32.0

MMUSD in total, in the case that a new business operator makes the purchase.

d. Taxes and financial levies

• Borrowing rate

Set the beginning rate at 13% (including ECAs guarantee charge and banking establishment handling fee),

and 3% during the loan period.

• Corporate tax

Set at 25% on assumption that a corporation will be set up under the foreign investment law.

• Commercial tax (value-added tax)

The tax rate differs according to the items. While daily commodities are non-taxable, tax for items for

personal consumption (cigarettes) is 8-100%. It is assumed that the project falls under other items, and the

assumed tax rate is 5%.

• Custom duties

5-4

All imported goods are subject to custom duties. A rate of 0.5% of the import price, which is the basic rate of

assessment for imported goods, has been applied.

• Inflation rate

The team have applied the average 2011, 2012 figure of 2.8% from the IMF statistics.

3. Disbursing Plan of Project Costs

Below is the plan of the costs disbursement until the commencement of the project.

Table5-5: Project Cost Contribution Plan

Unit：MMUSD

Business year -5 -4 -3 -2 -1

Construction/Equipment costs 0.0 0.0 205.4 154.1 154.1

Consulting fees 4.6 4.6 3.1 1.5 1.5

Commercial taxes 0.2 0.2 9.3 7.0 7.0

Custom duties 0.0 0.0 0.9 0.4 0.4

Handling Fee of Interest 0.0 0.0 39.7 0.0 0.0

Interest during construction 0.0 0.0 6 10 14

Total 5 5 264 173 177

1USD =973MMK


5-5

(2) Summary of the Result of Preliminary Financial/ Economic Analysis

1. Financial Analysis

The feasibility of the business under the project, which is to construct and operate the FSRU/pipeline and

transport the supplied LNG to the spots designated by the consumers, has been identified. The cash flow was

developed under certain preconditions to work out the NPV, B/C and FIRR.

a. Preconditions of financial analysis


Table5-6: Financial Analysis Preconditions







approx. $14/mmbtu)：$135 million/year



Capital ration 25%



Depreciation period FSRU, jetty：20 years, Pipeline: 10 years




Commercial tax 5%

Custom duties 0.5%


Sensitivity analysis Case1: The location of the FSRU is 100 km offshore (80 km for the base

case)



5-6

b. Result of evaluation


Table5-7: Result of Calculation of Performance Indicators



IRR 11.5


Case1:IRR_offshore100km 10.5%

Case2:IRR_operation period is 10

years

6.9%


This study has revealed that the project has good viability in terms of financial aspect even if a chartering cost per

year is USD 165 million and even if the FSRU is installed 100km offshore, reaching the level of the long-term

interest of 10% in Myanmar. If the duration of operations is cut by 50% to 10 years with the chartering cost

unchanged, IRR will remain at 6.9%. If the chartering cost is changed to USD 200 million per year, the IRR will

be 10.0%. (Refer to the table below.)

Table5-8: IRR Analysis for Several Chartering Cost（Case2: The Operational Period is 10 years）

chartering cost

(USD$1 million) IRR

135 6.9%

145 8.3%

155 9.6%

160 10.3%


5-7

The tables below show the project cash flow.

Table5-9: FIRR Calculation Cash Flow (Base case)


Table5-10: FIRR Calculation Cash Flow (Case1: The Location of the FSRU is 100 km)


-4 -3 -2 -1 0 1 2 3 4 5 6 7 8

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Sales Amount MMUSD 11 135 135 135 135 135 135 135 135

Operation Management Maintenance Cost MMUSD 1 58 58 58 59 59 59 59 60

Depreciation cost MMUSD 0 33 33 33 33 33 33 33 33

Income MMUSD 10 77 77 77 76 76 76 76 75

Repayment of Interest MMUSD 0 -14 -13 -12 -11 -10 -10 -9 -8

Profit for the Quarter before Tax MMUSD 10 63 64 64 65 66 66 67 68

Corporation Tax MMUSD 0 16 16 16 16 16 17 17 17

Profit for the Quarter after Tax MMUSD 10 47 48 48 49 49 50 50 51

Cash Inflow MMUSD 10 81 81 82 82 83 83 84 84

Cash Outflow MMUSD 0 0 67 41 49 32 32 32 32 32 32 32 32

DSCR - 2.06 2.10 2.14 2.17 2.21 2.25 2.29 2.34

Fixed Property MMUSD 0 0 205 360 514 480 447 414 380 347 313 280 247

% 11.5%IRR

9 10 11 12 13 14 15 16 17 18 19 20

2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038

Sales Amount MMUSD 135 135 135 135 135 135 135 135 135 135 135 135

Operation Management Maintenance Cost MMUSD 60 60 45 46 46 46 47 47 47 48 48 48

Depreciation cost MMUSD 33 33 18 18 18 18 18 18 18 18 18 18

Income MMUSD 75 75 90 89 89 89 88 88 88 87 87 87

Repayment of Interest MMUSD -7 -6 -5 -4 -3 -2 -1 0 0 0 0 0

Profit for the Quarter before Tax MMUSD 68 69 85 86 86 87 87 88 88 87 87 87

Corporation Tax MMUSD 17 17 21 21 22 22 22 22 22 22 22 22

Profit for the Quarter after Tax MMUSD 51 52 64 64 65 65 66 66 66 65 65 65

Cash Inflow MMUSD 85 85 82 82 83 83 84 84 84 83 83 83

Cash Outflow MMUSD 32 32 32 32 32 32 32 0 0 0 0 0

DSCR - 2.38 2.43 2.37 2.42 2.48 2.53 2.59

Fixed Property MMUSD 213 180 162 144 126 108 90 72 54 36 18 -0

-4 -3 -2 -1 0 1 2 3 4 5 6 7 8

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026




Income MMUSD 10 73 73 73 72 72 72 71 71







DSCR - 1.92 1.95 1.99 2.02 2.06 2.09 2.13 2.17


% 10.5%IRR

9 10 11 12 13 14 15 16 17 18 19 20

2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038




Income MMUSD 71 70 89 89 89 88 88 87 87 87 86 86







DSCR - 2.21 2.26 2.18 2.23 2.27 2.32 2.38

Fixed Property MMUSD 217 180 162 144 126 108 90 72 54 36 18 0

5-8

Table5-11: FIRR Calculation Cash Flow (Case2: The Operational Period is 10 years)


2. Economic Analysis

a. Potential profit generated by the project


benefit delivered through increased electricity supply and avoidance of power outage. To calculate the economic

effect, it is necessary to evaluate the difference by comparing the effect of the project taking place by setting the

case that the project does not happen as a baseline case. This study made rather conservative assumption that in

the case where the project did not materialize, the hydropower generation plants would be developed strongly,

generating the equivalent amount of electricity per year. However, as described in Chapter 1, Myanmar has a dry

season for 3 months, and therefore it was also presumed that there will be rolling power cuts caused by electricity

shortages, deriving from the inability of hydropower generation especially in the last half of the dry season. The

difference in economic effect between the baseline case and the case the project is implemented can be the

difference created by avoiding power failures during the dry season, as well as the difference between the

construction and operational costs of hydropower plants and the operational costs of gas-fired power plants.


not by the project.

b. Evaluation of economic feasibility

On the basis of the above, the preconditions for economic analysis are set as below.

-4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Sales Amount MMUSD 11 135 135 135 135 135 135 135 135 135 135

Operation Management Maintenance Cost MMUSD 1 58 58 58 59 59 59 59 60 60 60

Depreciation cost MMUSD 0 33 33 33 33 33 33 33 33 33 33

Income MMUSD 10 77 77 77 76 76 76 76 75 75 75

Repayment of Interest MMUSD 0 -14 -13 -11 -10 -8 -7 -6 -4 -3 -1

Profit for the Quarter before Tax MMUSD 10 63 64 66 67 68 69 70 71 72 73

Corporation Tax MMUSD 0 16 16 16 17 17 17 17 18 18 18

Profit for the Quarter after Tax MMUSD 10 47 48 49 50 51 52 52 53 54 55

Cash Inflow MMUSD 10 81 82 83 83 84 85 86 87 87 88

Cash Outflow MMUSD 0 0 65 41 48 47 47 47 47 47 47 47 47 47 47

DSCR - 1.56 1.59 1.62 1.65 1.68 1.71 1.75

Fixed Property MMUSD 0 0 205 360 514 480 447 414 380 347 313 280 247 213 180

% 6.9%IRR

5-9

Table5-12: Preconditions for Economic Analysis






months) (Power shortage amount in the dry season 1,555

GWh×$1/kWh7)-（New land gas pipeline costs + operational costs of

gas-fired power plant – construction/operational costs of a

hydropower plant）



Hurdle rate of FIRR 12% (Average figure of opportunity cost in developing countries8)


base case)







(ii) transmission (21%)1.

The operating cost of a gas-fired power plant (excluding fuel costs), construction/operating costs of hydropower

plant are adapted from the average operating cost in China (gas fired: USD10.88/kWh, hydropower: USD

36/kWh) in the “Projected Costs of Generating Electricity 2010 Edition” by the OECD. For the fuel cost of a

gas-fired power plant, this study team used the price deducing USD 0.5/mmbtu (=equivalent of the transport cost


described in the “New Policies Scenario” in the IEA’s “World Energy Outlook 2012”. The price varies at USD

14/mmbtu during the operational period.

c. Evaluation results

The profitability of the project is as given below.

7Source: FY 2011 Infrastructure System Export Promotion Investigations (Project formation of yen loan/ private


Myanmar (November, 2012) 8 Guidelines for Preparing Performance Evaluation Reports for Public Sector Operations, ADB (2006)

5-10

Table5-13: Result of Calculation of Performance Indicator

NPV（discount rate 12%） 632 MMUSD

B/C (discount rate 12%) 503 %

IRR 28.0 %


Case1:IRR_100 km

offshore

26.2 %

Case2:IRR_operational

period is 10 years

26.6%


As shown in the above table, the result exceeds the above 12% opportunity cost under the both cases where we

assume FSRU is located 100km offshore and project period of 10 years. However, the calculation of the above

performance indicators are mostly based on various assumptions, as including matters and elements outside the

scope of the study and therefore contains some uncertain elements in its result. It is necessary to conduct further

detailed study in the future.

The cash flow of the project is shown as below.

Table5-14: EIRR Calculation Cash Flow (Base Case)


-4 -3 -2 -1 0 1 2 3 4 5 6 7 8

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Profit from Avoidance of Power Failure MMUSD 1,555 1,555 1,555 1,555 1,555 1,555 1,555 1,555

Profit from Ggas-fired Power Generation MMUSD 632 632 632 632 632 632 632 632

Cost of Ggas-fired Power Generation MMUSD 1,844 1,829 1,834 1,838 1,842 1,847 1,851 1,856

Cost of gas MMUSD 1,538 1,523 1,527 1,532 1,536 1,541 1,545 1,550

Cost of Hydropower Generation MMUSD 498 498 498 498 498 498 498 498

Profit from Hydropower Generation MMUSD 553 553 553 553 553 553 553 553

Benefit Total MMUSD 287 302 298 293 289 284 280 276

Initial Investment Cost MMUSD 5 5 291 193 187

Operational Cost MMUSD 0 0 0 0 1 24 24 24 25 25 25 25 26

EIRR % 28.0%

9 10 11 12 13 14 15 16 17 18 19 20

2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038

Profit from Avoidance of Power Failure MMUSD 1,555 1,555 1,555 1,555 1,555 1,555 1,555 1,555 1,555 1,555 1,555 1,555

Profit from Ggas-fired Power Generation MMUSD 632 632 632 632 632 632 632 632 632 632 632 632

Cost of Ggas-fired Power Generation MMUSD 1,860 1,865 1,869 1,874 1,876 1,878 1,880 1,883 1,885 1,885 1,885 1,885

Cost of gas MMUSD 1,554 1,558 1,563 1,567 1,570 1,572 1,574 1,576 1,579 1,579 1,579 1,579

Cost of Hydropower Generation MMUSD 498 498 498 498 498 498 498 498 498 498 498 498

Profit from Hydropower Generation MMUSD 553 553 553 553 553 553 553 553 553 553 553 553

Benefit Total MMUSD 271 267 262 258 255 253 251 249 246 246 246 246

Initial Investment Cost MMUSD

Operational Cost MMUSD 26 26 27 27 27 28 28 28 29 29 29 30

5-11

Table5-15: EIRR Calculation Cash Flow (Case1: The Location of the FSRU is 100 km)


Table5-16: EIRR Calculation Cash Flow (Case2: The operational period is 10 years)


-4 -3 -2 -1 0 1 2 3 4 5 6 7 8

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026




Cost of gas MMUSD 1,538 1,523 1,527 1,532 1,536 1,541 1,545 1,550






EIRR % 26.2%

9 10 11 12 13 14 15 16 17 18 19 20

2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038




Cost of gas MMUSD 1,554 1,558 1,563 1,567 1,570 1,572 1,574 1,576 1,579 1,579 1,579 1,579






-4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Profit from Avoidance of Power Failure MMUSD 1,555 1,555 1,555 1,555 1,555 1,555 1,555 1,555 1,555 1,555

Profit from Ggas-fired Power Generation MMUSD 632 632 632 632 632 632 632 632 632 632

Cost of Ggas-fired Power Generation MMUSD 1,844 1,829 1,834 1,838 1,842 1,847 1,851 1,856 1,860 1,865

Cost of gas MMUSD 1,538 1,523 1,527 1,532 1,536 1,541 1,545 1,550 1,554 1,558

Cost of Hydropower Generation MMUSD 498 498 498 498 498 498 498 498 498 498

Profit from Hydropower Generation MMUSD 553 553 553 553 553 553 553 553 553 553

Benefit Total MMUSD 287 302 298 293 289 284 280 276 271 267


Operational Cost MMUSD 0 0 0 0 1 24 24 24 25 25 25 25 26 26 26

EIRR % 26.6%

Chapter 6 Planned Project Schedule

6-1

(6) Project Implementation Schedule

1. Preconditions for Project Implementation

For the successful completion of the project, the following preconditions need to be decided by the relevant

companies/entities or by the discussion among them.

The determination of these preconditions will expedite the project.

• Appointment for the responsible entity of the project, and the main body of the counterpart governments for

charter ship contract

• Decisions of basic conditions of fuel gas procurement (quantity/gas components etc.)

• Decision of gas delivery point

Change of the gas delivery point influences on the whole project design of gas pipeline including project

schedule, etc.

• Policy on fund sourcing

Affected by developing situation trends of appropriate financing plan related FSRU/pipeline

introduction, the LNG purchase

• Schedule of legislation for EIA

Affected by preparation of the EIA process and progress of parliamentary approval

2. Project Schedule(Proposed)

From basic development plan to gas delivery, the project is composed of three stages:

1. From making basic development plan to final investment decision (FID)

2. From FID to installation of FSRU, jetty facilities and pipelines

3. Connecting the facilities to the existing gas pipeline network

The schedule in this study is made based on the assumptions that the above preconditions have been appropriately

satisfied at each stage, and that the schedule of one stage does not influence on that of other stages each other.

It is assumed that after the completion of this study, while firming up the basic conditions with counterpart

organizations, it will take less than 18 months for the final investment decision. The required tasks are the

development of the basic project design, EIA approval, and so on. This will, then, be followed by the confirmation

of implementation, namely the project will be ready for commencement. In parallel, after order placement of EPC

of FSRU, jetty facilities and offshore pipeline, it will take about 33 months for the commencement of FSRU

operation after the construction begins. It is now assumed that pipelines for the project will be connected to the

existing pipeline network at the S. Dagon Station owned by the MOGE. As described above, if the receiving

facility is made ready through this process, after the installation of FSRU, jetty facilities and pipelines, it will

require additional two months to be connected to the network. Overall, the period from the launch of the basic

plan to the completion of the gas supply system is about 53 months in total.

6-2

In addition, climate at the project site and hydrographic and geological conditions will influence on the project

development schedule. Additional study will be required in this respect.

If the favorable research results are obtained, it will potentially contribute to shorten the project development

period.

The project development period can be shortened by several factors

1. If it is counted from the start of the basic development plan until its implementation, given the necessary

information or agreement related to providing information for the design, 6months

2. If the existing FSRU design, which is previously made by other project, is ready-to-use, 2 months9

It is possible to shorten the process by 8 months overall, and to achieve gas delivery within 45 months from the

basic development plan implementation.

Figure6-1: Detailed Schedule for Project Implementation


Followings are the estimated duration of the main tasks:

• Basic Plan: 3 months

• Basic Design/Ministries approval: 12 months

9 However, possibility that the existing FSRU design is ready-to-use is not high. It is more probably to need to

redesign.

LINE DESCRIPTION

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

1

2 Basic planning

3

4 Basic plan

5 Basic design

6 Comfirmation of project base

7 Collect additional data and survey marine data

8 Write EIA report

9 Environmental approval received work10 Inquiry plan

11 Inquiry・Select sub-constructor12

13 14 Detailed design 15 16 Final Investment Decision17

18 Order sub-constructor 19 20 Lower side of jetty21 Contract

22 Detailed design・Construction design

23 Site work

24

25 ipper side of jetty26 Detailed design

27 Equipment purchase

28 Equipment carried

29 Installation and piping, electrical

30 and instrumentation work

31 Offshore Pipeline Contract

32 Material purchase /on-site installation

33

34 FSRU35 Contract

36 basic design

37 detailed design

38 Production design

39 Construction and manufacturing

40 Transport and installation to the site

41 Preparation for operation

42

42 Whole system inspection43 Ready　For　LNG　Receiving

Main MilestoneBasic

planning

Complete

of basic

design

Start of the

ProjectStart of the

Construction

LNG

Receiving

6-3

• Detailed Design: 6 months (part of this work can begin earlier)

• FSRU: LNG reception can begin 33 months after order placement

• Jetty Facilities: complete in 31 months after order placement, in 23 months after the start of construction

• Setting up of Pipeline and Valve Station: complete in 30 months after order placement

Chapter 7 Implementing Organization

7-1

(1) Relevant Ministries Agencies and Their Roles

The entity mainly controlling the energy sector in Myanmar is the Ministry of Energy (hereinafter, MOE). The

MOE has four organizations, namely the Energy Planning Department (hereinafter, EPD), Myanmar Oil and Gas

Enterprise (hereinafter, MOGE), Myanmar Petrochemical Enterprise (hereinafter, MPE) and Myanmar Petroleum

Products Enterprise (hereinafter, MPPE). Relevant Ministries/Agencies for this project are the MOE, which is in a

position to supervise the entire energy sector including natural gas, the MOGE that constructs and operates the

pipeline to transport gas and the MPE that could be the major LNG consumer in the future.

Electric Power generation and transmission/distributions are supervised by the Ministry of Electric Power

(hereinafter, MOEP), which owns two enterprises, that is, Hydropower Generation Enterprise (hereinafter, HPGE)

which is in charge of hydraulic and coal-fired power generation, and the Myanmar Electric Power Enterprise

(hereinafter, MEPE), responsible for development and operation of gas-fired power plants and supply of gas to

IPPs. The transmission part is undertaken exclusively by the MEPE, which also supplies electricity to the Yangon

City Electricity Supply Board (hereinafter, YESB) that manages the power distribution network in the Yangon

Region and the Electricity Supply Enterprise (hereinafter, ESE), an electric distribution public corporation that

manages the power distribution outside Yangon. The YESB is in charge of a public offering process of the LNG

import described before.

Figure7-1: MOE Organization Chart and Major Roles of Each Division

Source: Prepared by Study Team based on MOE materials

Ministry of Energy

(MOE)

Myanmar Oil and Gas

Enterprise

(MOGE)

Energy Planning

Department

(EPD)

Myanmar

Petrochemical

Enterprise

(MPE)

Myanmar Petroleum

Products Enterprise

(MPPE)

• Gas development

and production

• Pipeline

construction and

operation

• CNG production

• Regulation

• Adjustment of plans

• Gas production and

distribution

management

• Petroleum refinery

• Production of

fertilizer, LPG,

CO2 and methane

• Marketing and sale

of petroleum

products

7-2

Figure7-2: MOEP’s Structure

Source: Prepared by Study Team based on MOEP materials

(2) Required Capabilities for the Project Implementation

Myanmar does not have experience in the LNG import yet. However, each of the related ministries and agencies

would partly have the capabilities of supporting this project.

The MOE/MOGE has several experiences to develop offshore gas fields such as Yadana, and build and operate

gas supply infrastructure for export to Thailand etc. These experiences will be able to contribute to this project

and LNG import. Specifically, the MOGE has designed and built the on-shore gas pipeline by itself, thus it would

be technically not so difficult for it to construct the onshore pipeline of this project, though the size of the pipeline

would be bigger than that of MOGE has experienced before.

In addition, the MEPE is also experienced entity to procure natural gas from the MOE and receive gas through the

pipeline owned and operated by the MOGE for gas-fired power business. This experience would be able to assist

LNG import using FSRU as well.

This study suggests project implementation formation, considering to the roles and capabilities of the related

ministries and agencies.

Firstly, of course, it is suggested that the MOEP/MEPE/YESB and the MOE/MOGE need to collaborate each

other.

However, based on the fact that the MOEP requires immediate import of LNG to overcome the domestic energy

shortages mainly due to the rapid increase of electricity consumption, it would be beneficial to unify the business

HPGE

(Hydraulic and coal-fired)

MEPE

(Gas/oil thermal) IPPs

MEPE

YESB

(Yangon)

ESE

(Outside Yangon)

Consumers

Public corporations under the umbrella of MOEP

Electricity generation

Electricity transmission

Electricity distribution

7-3

contact window of the government, to promote this project quickly. Currently, since the LNG import is mainly for

gas-fired power plant, it is suggested MOEP should be the primal contact window for project

participants/stakeholders.

Although the MOEP has appointed the YESB as the managing body of a public bidding for LNG import, it would

be very challenging for YESB because it is an unprecedented project in Myanmar, thus YESB does not have any

past experiences. This may become one of the obstacles for companies to enter into this market. In addition,

inadequacy of transmission and the distribution network also will be an obstacle in electricity supply, which

generates another risk to newcomers. Therefore, to enhance the feasibility of the project, well-organized

development plan and project management for not only power generation plants but also transmission/distribution

grid expansion are critical.

Considering the abovementioned aspects, new organization under MOEP would be required, whose missions are

to become the supervisory agency for firepower sector and LNG import, to manage this project and relevant

agencies such as the transmission sector of the MEPE and YESB. MEPE is an organization with an

implementation capability and robust operating competency for the plan. Furthermore the firepower sector of the

MEPE has signed a memorandum of understanding about the gas-fired power generation plan with South Korean

and Chinese companies, so it would be suitable for MEPE supervisees the IPP players’ power plant developing

plans. So, MOEP can control the power generation plan by supervising the MEPE to the implementation of the

IPP business as planned.

This research suggests that the MEPE should be the purchaser of the LNG, which has the contract directly with

LNG supplier because of the two main reasons. First, MEPE is already the purchaser for domestically produced

natural gas to fuel gas-fired power plants. Therefore, MEPE would be able to play the role in adjusting domestic

demand and supply gap for the consumption of gas-fired power plants. Second, sole entity to purchase the natural

gas from overseas can be expected to have a bargaining power to acquire the lower LNG price, contributing to

supply cheaper electricity price to consumers.

About the chartered ship to the FSRU and also the pipeline transportation service, the MEPE would favorably be a

contract entity, in terms of consistency of the contract, as well as the unification of the business access posts.

Furthermore, capacity developing would be necessary for the MOEP/MEPE, to manage and supervise IPP players,

realize the electric power development as planned, and enable the operators to carry on business in a stable

manner because the delay of the construction and/or the critical problems of the operation would adversely affect

the FSRU project as well.

In addition, for the success of the power plant development, financial assistance would be vital. Especially, it is

necessary to complement the revenue shortages for purchasing gas, in order to make it cover costs. Financial

enhancement by the government guarantee, secured by the MOF, is needed.

7-4

Lastly, to involvement of the MOE/MOGE, would be important because of their expertise of the development,

and provision of on-shore pipeline to support the MOEP/MEPE. Though this project assumes that the imported

LNG is utilized only for gas-fired power plant, LNG would be supplied to other consumers such as petrochemical

industry in the future. Considering this, MOE/MOGE should be involved at the early stage of this project to

understand the logistics of imported gas and to get the know-how to handle the gas, because the role of these

entities will be very important to distribute natural gas to such different users in the future.

Based on the above, the chart below shows the suggestion of role sharing in the LNG import & transport project

(refer to Chapter 8 for a SPC’s detail role).

Figure7-3: The Suggestion of Role Sharing in the LNG Import & Transport Project


Chapter 8 Technical Advantages of Japanese Company

8-1

(1) Assumable Forms of Participation by Japanese Enterprises

Japan’s enterprise will participate in the following fields:

• Procurement of major plant equipment

• Design and construction of plants

• Launch, operation and maintenance of plants

• Technology transfer to local workers

• Fund securing

There will be two ways for how to cover the costs: possessing the FSRU and the pipeline on its own, chartering a

ship from the owner of the FSRU and requesting wheeling through the pipeline.

The advantage of the owning FSRU is that the possessor can fully customize and upgrade the specifications

during the period of operation as per the requirement of the terminal. This allows for the configuration flexibility

with respect to regasification capacity, layout, shore integration and any future enhancements. While this case has

the disadvantage in increased work burden including higher initial investment, and all ship management tasks to

be conducted by the possessor, such as the arrangement and administration of crew (refer to the following table).

Table8-1: Comparison Result by Type of FSRU/PL Possession

Items Owned FSRU Chartered FSRU

Customization High Middle/low

Amount of Initial Investment High Low

Work Burden High Middle/low


Based on the above study, this project adopts the charter model, which holds down initial investment for the

counterpart in the case of FSRU, and has low work burden to the counterpart when initially installing FSRU.

On the other hand, as to the land pipeline as mentioned in Chapter 7, it will be effective to construct a state-run

grid because in most cases, grids are not built by private companies for their inherent purposes, but are built as

national common-use infrastructure in nature, when building pipelines in terms of responding to wide-ranging gas

demand not only for this electricity generating purposes, but also for commercial use except electricity generation

in the medium and long run.

In addition, it will be desirable for private operators and the entire economy in Myanmar for MOGE with a track

record of construction and operation to own a pipeline for constructing and operating it, though the initial costs

are higher, considering that the compulsory purchase of land will become an issue for private operators in building

8-2

pipelines. MOGE will be incentivized with increased profit through wheeling and an increase in the utility value

of the entired related infrastructure, with the extended pipeline networks and capacity.

Regarding offshore pipelines, which are different from land pipelines in nature, it is difficult to plan their

diversification and development except their main purpose, and exiting sea pipelines were commissioned to

foreign private companies. Considering that MOGE has no experience of constructing them, it will be desirable

for the counterpart to use wheeling in view of the work and initial investment burdens, as in the case of FSRU.

An unit of SPC in which Japanese companies invest is considered to have a possession and operation of the FSRU

and offshore pipeline. The SPC receives LNG from tankers, does regasification of the LNG and transports gas to

such points of delivery as designated by users.

Furthermore, concerning the scheme of the FSRU chartering contract between SPC and the counterpart, there will

be two scheme: merchant and tolling agreements. Merchant agreement is a scheme for providing gas procurement

and sales, combined with chartering FSRUs. It is a one-stop solution for the counterpart to realize LNG

importation. This scheme is adopted by land re-gasification facilities and equipment. However, there are a limited

number of business operators (or consortiums) that can carry out LNG procurement, FSRU procurement and

operation at the same time. Further, no FSRU chartering business has adopted this scheme to our knowledge,

which may increase the risk in financing arrangements or become costly business.

On the other hand, tolling agreement consists of chartering FSRUs, re-gasifying the LNG that the counterpart

procured, and supplying the gas to the counterpart. This scheme has been often taken up by FSRU projects in

other countries. It will realize the business in tandem with LNG procurement from an LNG portfolio supplier that

has a low procurement risk.

Please note the buyer of gas from an LNG portfolio supplier will be MEPE, which has operated gas-fired power

plants, in addition to procuring gas domestically. (Refer to Chapter 7 for details)

Based on the above, the table below shows a plan of introduced equipment and player make-up, assumed by this

study team.

8-3

Figure8-1: Introduced Equipment and Player Make-up (Planned)


Regarding financing, it is necessary for FSRUs, the pipeline and the SPC to secure funds as the initial investment

for the project. The SPC is assumed to raise funds from Japanese financial institutions, including Export Credit

Agencies and commercial banks, as well as investment from Japanese and foreign companies.

In addition, it is assumed that MEPE as the off-taker or its upper organization MOEP will supply equity in the

SPC because such financing may help enhance the prospect for realizing this business from the viewpoints of

easing the investment burden and risk that foreign companies may face, as well as lowering the risk bar for the off

taker arising out of cancelation of the project. However, in general, under this arrangement, conflict may occur

about how to handle the assets for liquidation after the project is over, or the realistic and best structure in terms of

tax cannot be made because of government involvement. (For instance, there may be restrictions which do not

allow establishment of an SPC in low-tax countries like Singapore, making the requirement that it must be a

Myanmar’s corporation possible.) Also, quick decision-making can be compromised by governmental influence

over operating the SPC. The above can be disadvantageous to this arrangement. As after all, this is only one

option of schemes. Therefore, it is necessary first to judge whether MOEP intends to invest in this project or not,

from the viewpoint of acquiring technology/know-how for similar projects in the future. If so, it will be necessary

to investigate the ratio of ownership, roles, rights, obligations, etc., of each partiers. If MOEP invests in the SPC,

utilizing the back finance of the funds by ODA to secure financing, will be useful bringing down the initial costs

of the Myanmar side, and in reducing the risk of investors (a risk of investment shortage).

Furthermore, it is necessary to study how to procure LNG and finance FSRU chartering. As mentioned in Chapter

7, it will be desirable to enter a contract with MEPE in consideration of integrating the contacts for actual work of

procuring LNG, chartering FSRU, and pipeline wheeling.

MEPE will be able to reduce the initial investment in equipment and facilities related to receiving LNG, by

chartering FSRUs under the scheme that was proposed by this study. Also, as the imported LNG through this

project will be eventually used for generating electricity, fees for use of FSRU and the pipeline should be paid

8-4

basically by government subsidies. However, given that it is not easy to raise electricity rates due to objection

among the population, and that government finances are tight, there is a possibility that this project cannot secure

enough profits to be viable only with additional funds from the Myanmar side (a possible gap between costs and

profits). Viability gap funding, as a measure to help fill the gaps, the back financing of this fund by ODAs can be

utilized.

With the above issues sorted out, the table below shows a project scheme

Figure8-2: Project Scheme (Planned)


8-5

(2) Superiority of Japanese Enterprises in Implementing this Project

(Technologically and Economically)

Japanese enterprises have the following superiority:

a. Provision of highly reliable long-term operation services for the FSRU

Since the contract period of providing ship chartering and operation services persists over a long period of time,

ranging from a few years to 20 years, stability and reliability in every aspects of business are required to

continuously provide services during the contract period.

As the world’s largest LNG carrier, Mitsui O.S.K. Lines has top-level know-how of NG transport, handling

technologies and vessel management know-how all essential for the operation of the FSRU.

While there are currently only a few companies that enjoy a track record of offering operation services of

regasification through FSRU on a global basis, Mitsui O.S.K. Lines has accumulated unique know-how on FSRU

since participating jointly in the shipboard LNG regasification project on the east coast of North America

(“Neptune project”) with a partner shipping company in Norway from 2006, and independently signed a

long-term charter party for FSRU with GDF Suez S.A., a French company, in October 2013, to make a full-scale

entry into the FSRU business. Among FSRU operators, Mitsui O.S.K. Lines has more stable financial grounds

compared with other providers, and high reliability in provision of extended services.

b. Support in fund securing

To implement the project, fund arrangement of finance costs of the project is necessary, and more importantly,

such funds can be invested to the SPC.

SMBC, a Japanese financial institution, has a strong track record in LNG-related project finance including FSRU,

and may possibly take part in this project as a financial advisory, or in form of lending.

Having a record of participation in the investment in two LNG ships with shipboard regasifiers (FSRU)

(investment ratio: 48.5%) in the Neptune project described above, Mitsui O.S.K. Lines may have a possibility of

investment in this project as well.

In addition, as an advantage to Japanese enterprises consideration of using ODA by the Japanese government and

Japanese Export Credit Agencies as a fund source for the SPC in terms of businesses that benefit Japan..

Such experience enables to offer services to solve operational issues for the entire LNG supply chain, including

financing.

8-6

(3) Measures Necessary to Help Japanese Enterprises Win Contracts

As mentioned in Chapter 7, it is necessary to establish a system for managing the procurement of LNG in all

stages to plan electricity generation for enhancing the feasibility of realizing this business. Japan’s proactive

support to the counterpart through enterprises that are technologically, economically versed in operations from

LNG procurement, to electricity generation planning will lead to swiftly and properly assess and identify the

entire project, matching with the request to promptly introduce LNG imports. Specifically, such support includes

assistance in collaboration among ministries and agencies on cross-sectional examination issues, building relevant

bidding processes and a study of the evaluation items and criteria.

This support will lead Japanese companies to secure contract by incorporating their superior specifications and

scope of works into bid documents and conditions to reasonable extent that can eventually demonstrate a greater

advantages and competitiveness.

Chapter 9: Potential Funding Source for the Project

9-1

(1) Reviewing Fund Sources and Financing Plans

In implementing this project, funds for investment for FSRU and construction of pipelines as well as for operation

and maintenance of such equipment are required. However, a specific funding source and financing plan have not

so far been confirmed through interviews with governmental agencies of Myanmar. As for the bids for the import

of LNG, invited by YESB, the study team learned that no concrete proposal on financing source has been made.

Because substantial amount of costs will be incurred for introduction of the project and purchase of LNG in the

early stages and during the operation period, securing appropriate funding sources is a highly crutial factor to

materialize the import of LNG.

Given that FSRU and associated equipment in this project are necessary for natural gas used for gas-fired power

generation, costs and expenses related to the project are assumed to be covered primarily by (1) increase in

electric tariff and (2) an increase in government subsidies. However, in light of the fact that a hike in electricity

rates announced in October 2013 was temporarily suspended due to protests from the people, it is not considered

easy to increase electric tariff. Furthermore, it would be also difficult to significantly raise government subsidies

in view of the fiscal status of Myanmar.

Therefore, utilization of loans and investments from foreign governments and companies is expected to play an

important role in fund-raising. Specifically, three means can be deemed as potential sources: A. Official

Development Assistance (ODA) by foreign governments, B. investments and loans from foreign companies, and

C. finance utilizing investments and loans and guarantees from export credit agencies and international

organizations such as the World Bank.

A. ODA by foreign governments

Myanmar government has received ODA from multiple foreign governments, and such assistances

contribute to a wide range of sectors including infrastructure development and education. The Japanese

government has also provided ODA totaling of approximately 600 billion yen in the form of past yen loans

and free financial aids. In addition, the Japanese government takes a positive attitude about ODA for

Myanmar, as the government confirmed a commitment to the provision of ODA totaling 91 billion yen by

the end of fiscal year 2013 in the Japan-Myanmar summit in May 2013.

B. Investments from foreign companies

As Myanmar and its neighboring countries utilize business scheme called IPP, in certain infrastructure

projects, private sector owns/operates infrastructure using their investment funds without a government

doing business by itself nor holding assets. In many cases, foreign companies establish special purpose

companies and invest in these companies to set up and operate projects over a given period of time.

9-2

C. Loans and guarantees from export credit agencies and international organizations

Governments provide funds through direct finance and/or guarantees to loans from private financial

institutions through export credit agencies and international organizations.

(2) Feasibility of Fund-Raising

Although it seems that a financing plan for this project has not been decided as described above, the following

shows possibilities and challenges of fund-securing by the Japanese government/organizations/companies in terms

of the fund sources presented in Section (1).

This section is based on the assumption that Japanese companies execute projects related to FSRU and associated

equipment, assuming the figure of business scheme in Chapter 8.

1. ODA by the Japanese Government

The following two structures can be assumed as a fund-raising mechanism utilizing ODA by the Japanese

government.

a. Equity back financing

When MOEP intends to make investment into a SPC, the investment funds would be required as initial investment

cost. ODA loans can be utilized as back finance for these investment funds.

Detailed schemes including setting of the borrower are yet to be studied. For example, as a possible scheme,

Ministry of Finance and Revenue (“MOF”) can be the borrower of loans from the Japanese government and

on-lends the funds to MOEP (or a government-run company including MEPE) (the same shall apply to the

following “Viability Gap Fund” explained below).

Figure 9-1: Equity Back Financing Scheme

Source: Prepared by the Study Team

9-3

b. Back finance of Viability Gap Funding (VGF)

Generally, VGF is a subsidy provided by government to make an unprofitable project commercially viable. This

scheme is to provide back finance for such VGF through ODA loans.

Since LNG imported under the project is eventually used to generate electricity, expenses for using FSRU and

pipelines should be primarily covered by an increase in electricity rates and government subsidies. However, it

may be possible that the sustainable level of revenue cannot be obtained (there will be a gap between costs and

income) because of difficulty of an increase in electric tariff and restriction in Myanmar government’s fiscal

budget. This scheme can be used to fill part or full of the gap.

Although a specific lending scheme needs to be further studied, a mechanism with certain realities to provide

finance for the part of the cost increase due to the introduction of this project, which cannot be passed on to

electricity price or subsidy, in the form of covering the price of electricity. Nevertheless, in the case where the

loan is made available to fill such gap, it will be necessary to establish a system in MOEP and/ or MEPE to

precisely recognize the gap between costs and income by taking into account the cost with relation to the project

as a part of electric-generating cost.

This also needs to be studied in the light of the Japanese government’s applicable criteria in implementing ODA.

In addition, it should be considered whether the finance can be linked to payment of ship charter and usage fees.

Even if it were possible, it would be necessary to implement a transparent structure which can secure clear linkage

(e.g., by use of an account used exclusively for loans for this project and payment of the costs and expenses from

the account).

Figure 9-2: VGF Scheme


In either scheme, there will be two merits from the viewpoint of Myanmar government.

9-4

First, the cost of loan interest can be minimal since interest rates of ODA loans are usually set at a low level. For

ODA loans extended by the Japanese government for which the agreement was signed with Myanmar government

in January 2013, the lending rate is extremely low at 0.01%.

Second, cash requirement in a short run will be reduced by setting a grace period in the repayment schedule to

ease the immediate cash requirement on Myanmar’s government and defer the financing burden on repayment of

the loans to the future. The above-mentioned ODA extends the grace period of 10 years and the repayment period

of 40 years. Some comments by Myanmar government in the interview under this study indicate that this feature

would be effective for Myanmar.

The selection of the scheme needs to be considered in light of the intention of the MOEP to invest in an SPC, a

level of gap between an increase in costs with relation to LNG import and increase of electricity tariff. Yet, back

finance of VGF seems to be the more advantageous option because (a) in equity back financing, the use is limited

to certain portion of investment by Myanmar’s government (If MOEP makes a 25% investment in the SPC on the

assumption described in (3) below, the amount is approximately 50 million U.S. dollars at most.) and (b) in VGF,

conditions which would be acceptable for investors in terms of payment of ship charter and usage fees for pipeline

during the entire term can possibly be established, which can make the project feasible and bankable to investors

and loan providers for the entire project period. However, further analysis is required after clarifying the roles of

ministries and agencies in Myanmar government to see whether the government can establish a scheme that can

meet VGF’s applicable requirements as stated above.

Moreover, since ODA is a form of financing provided to help developing countries grow their society and

economy and improve their welfare, it will be important to formulate a highly feasible implementation plan of the

entire value chain including import of LNG through generation and transmission of electricity, so that the

realization of this project does contribute to improvement of the nation’s economy and welfare of the population.

2. Investments by Japanese Companies

Japanese enterprises will set up special purpose companies, to own, maintain, operate FSRU and associated

equipment, and lease the FSRU and the pipeline to MEPE. The cash required for Myanmar government on initial

capital expenditure can be reduced by inviting investments from Japanese companies.

9-5

Figure 9-3: Investments by Japanese Companies


In order for foreign companies including Japanese companies to make investments, the following requirements

need to be satisfied.

a. Development of a framework for charter contract that meets international standards.

In order for Japanese companies to carry out investments, a framework with Myanmar’s government needs to be

built in terms of appropriate risk sharing in charter contract that meets international standards.

b. Credit enhancement by Myanmar government including MOF

If a state owned entity is an off-taker, credit enhancement may be required to attract foreign financial institutions,

including guarantees provided by the MOF for performance of contractual obligations of such state owned entity.

c. Appropriate level of investment income

In order for Japanese companies to carry out investments, it is required to set charter fees and pipeline usage fees

that ensure appropriate returns on investments taking the country risk of Myanmar into account.

3. Loans/ Guarantees from Japanese Export Credit Agencies

Loans and guarantees by Japanese export credit agencies (Japan Bank for International Cooperation/Nippon

Export and Investment Insurance) enables investors to secure funding required to implement the project and an

improvement in the rate of return on investments for investors described in B. above. From Myanmar’s point of

view, initial cash required to implement the project can be reduced.

9-6

Figure 9-4: Loans/ Guarantees from Export Credit Agencies


It is expected that credit enhancement by MOF and other agencies of the Myanmar government as described in B

above may be required in order for Japanese export credit agencies to provide loan and/or guarantee. However,

according to Myanmar’s MOF, Myanmar has not yet offered a guarantee which covers contractual obligations of

state owned entities or a debt guarantee.

In view that such mechanism can be extended to other infrastructure development in the future, it is also desirable

to establish an appropriate framework. In addition, it will be necessary to build an appropriate legal framework

including enforceability of security.

The above issues are related to raising funds necessary for FSRU and associated equipment. It is important to also

consider financing for purchase of LNG, which requires a larger amount of funds than those funds.

(3) Cash Flow Analysis

1. Financial Analysis

The feasibility of the business under the project, which is to construct and operate the FSRU/pipeline and

transport the supplied LNG to the spots designated by the consumers, has been identified. The cash flow was

developed under certain preconditions to work out the NPV, B/C and FIRR.

a. Preconditions of Financial Analysis


9-7

Table 9-1: Financial Analysis Preconditions







approx. $14/mmbtu)：$135 million/year



Capital ration 25%



Depreciation period FSRU, jetty：20 years, Pipeline: 10 years




Commercial tax 5%

Custom duties 0.5%


Sensitivity analysis Case1:The location of the FSRU is 100 km offshore (80 km for the base

case)

Case2:The operational period is 10 years.


b. Result of evaluation


Table 9-2: Result of Calculation of Performance Indicators



IRR 11.5


Case1:IRR_offshore100km 10.5%

Case2:IRR_operation period is 10

years

6.9%


9-8

This study has revealed that the project has good viability in terms of financial aspect even if a chartering cost per

year is USD 165 million and even if the FSRU is installed 100km offshore, reaching the level of the long-term

interest of 10% in Myanmar. If the duration of operations is cut by 50% to 10 years with the chartering cost

unchanged, IRR will remain at 6.9%. If the chartering cost is changed to USD 200 million per year, the IRR will

be 10.0%. (Refer to the table below.)

Table 9-3: IRR Analysis for Several Chartering Cost (Case2: The Operational Period is 10 years）

chartering cost

(USD$1 million) IRR

135 6.9%

145 8.3%

155 9.6%

160 10.3%


The tables below show the project cash flow.

Table 9-4: FIRR Calculation Cash Flow (Base Case)


-4 -3 -2 -1 0 1 2 3 4 5 6 7 8

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026




Income MMUSD 10 77 77 77 76 76 76 76 75







DSCR - 2.06 2.10 2.14 2.17 2.21 2.25 2.29 2.34


% 11.5%IRR

9 10 11 12 13 14 15 16 17 18 19 20

2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038




Income MMUSD 75 75 90 89 89 89 88 88 88 87 87 87







DSCR - 2.38 2.43 2.37 2.42 2.48 2.53 2.59

Fixed Property MMUSD 213 180 162 144 126 108 90 72 54 36 18 -0

9-9

Table 9-5: FIRR Calculation Cash Flow (Case1: The Location of the FSRU is 100 km)


Table 9-6: FIRR Calculation Cash Flow (Case2: The Operational Period is 10 years)


2. Economic Analysis

a. Potential profit generated by the project


benefit generated through increased electricity supply and avoidance of power outage. To calculate the economic

benefit, it is necessary to evaluate the difference by comparing the effect of the project taking place by setting the

case that the project does not happen as a baseline case. This study made rather conservative assumption that in

the case where the project did not materialize, there will be emphasis on the promotion for additional provision of

hydropower generation plants, generating the equivalent amount of electricity per year. However, as described in

Chapter 1, Myanmar has a dry season for 3 months, and therefore it was also presumed that there will be rolling

power cuts caused by electricity shortages, deriving from the inability of hydropower generation especially in the

-4 -3 -2 -1 0 1 2 3 4 5 6 7 8

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026




Income MMUSD 10 73 73 73 72 72 72 71 71







DSCR - 1.92 1.95 1.99 2.02 2.06 2.09 2.13 2.17


% 10.5%IRR

9 10 11 12 13 14 15 16 17 18 19 20

2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038




Income MMUSD 71 70 89 89 89 88 88 87 87 87 86 86







DSCR - 2.21 2.26 2.18 2.23 2.27 2.32 2.38

Fixed Property MMUSD 217 180 162 144 126 108 90 72 54 36 18 0

-4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Sales Amount MMUSD 11 135 135 135 135 135 135 135 135 135 135

Operation Management Maintenance Cost MMUSD 1 58 58 58 59 59 59 59 60 60 60

Depreciation cost MMUSD 0 33 33 33 33 33 33 33 33 33 33

Income MMUSD 10 77 77 77 76 76 76 76 75 75 75

Repayment of Interest MMUSD 0 -14 -13 -11 -10 -8 -7 -6 -4 -3 -1

Profit for the Quarter before Tax MMUSD 10 63 64 66 67 68 69 70 71 72 73

Corporation Tax MMUSD 0 16 16 16 17 17 17 17 18 18 18

Profit for the Quarter after Tax MMUSD 10 47 48 49 50 51 52 52 53 54 55

Cash Inflow MMUSD 10 81 82 83 83 84 85 86 87 87 88

Cash Outflow MMUSD 0 0 65 41 48 47 47 47 47 47 47 47 47 47 47

DSCR - 1.56 1.59 1.62 1.65 1.68 1.71 1.75

Fixed Property MMUSD 0 0 205 360 514 480 447 414 380 347 313 280 247 213 180

% 6.9%IRR

9-10

last half of the dry season. The difference in economic effect between the baseline case and the case the project is

implemented can be the difference created by avoiding power failures during the dry season, as well as the

difference between the construction and operational costs of hydropower plants and the operational costs of

gas-fired power plants.


not by the project.

b. Evaluation of economic feasibility

On the basis of the above, the preconditions for economic analysis are set as below.

Table 9-7: Preconditions for Economic Analysis






months) (Power shortage amount in the dry season 1,555

GWh×$1/kWh10

)-（New land gas pipeline costs + operating costs of

gas-fired power plant – construction/operating costs of a hydropower

plant）



Hurdle rate of FIRR 12% (Average figure of opportunity cost in developing countries11

)


base case)







(ii) transmission (21%)1.

10Source: FY 2011 Infrastructure System Export Promotion Investigations (Project formation of yen loan/private


Myanmar (November, 2012) 11

Guidelines for Preparing Performance Evaluation Reports for Public Sector Operations, ADB (2006)

9-11

The operating cost of a gas-fired power plant (excluding fuel costs), construction/operating costs of hydropower

plant are adapted from the average operating cost in China (gas fired: USD10.88/kWh, hydropower: USD

36/kWh) in the “Projected Costs of Generating Electricity 2010 Edition” by the OECD. For the fuel cost of a

gas-fired power plant, this study team used the price deducing USD 0.5/mmbtu (=equivalent of the transport cost


described in the “New Policies Scenario” in the IEA’s “World Energy Outlook 2012”. The price varies at USD

14/mmbtu during the operational period.

c. Evaluation results

The profitability of the project is as given below.

Table 9-8: Result of Calculation of Performance Indicator

NPV（discount rate 12%） 632 MMUSD

B/C (discount rate 12%) 503 %

IRR 28.0 %


Case1:IRR_100 km

offshore

26.2 %

Case2:IRR_operational

period is 10 years

26.6%


As shown in the above table, the result exceeds the above 12% opportunity cost under the both cases where we

assume FSRU is located 100km offshore and project period of 10 years. However, the calculation of the above

performance indicators are mostly based on various assumptions, as including matters and elements outside the

scope of the study and therefore contains some uncertain elements in its result. It is necessary to conduct further

detailed study in the future.

The cash flow of the project is shown as below.

9-12

Table 9-9: EIRR Calculation Cash Flow (Base Case)


Table 9-10: EIRR Calculation Cash Flow (Case1: The Location of the FSRU is 100 km )


Table 9-11: EIRR Calculation Cash Flow (Case2: The Operational Period is 10 years)


-4 -3 -2 -1 0 1 2 3 4 5 6 7 8

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026




Cost of gas MMUSD 1,538 1,523 1,527 1,532 1,536 1,541 1,545 1,550






EIRR % 28.0%

9 10 11 12 13 14 15 16 17 18 19 20

2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038




Cost of gas MMUSD 1,554 1,558 1,563 1,567 1,570 1,572 1,574 1,576 1,579 1,579 1,579 1,579






-4 -3 -2 -1 0 1 2 3 4 5 6 7 8

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026




Cost of gas MMUSD 1,538 1,523 1,527 1,532 1,536 1,541 1,545 1,550






EIRR % 26.2%

9 10 11 12 13 14 15 16 17 18 19 20

2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038




Cost of gas MMUSD 1,554 1,558 1,563 1,567 1,570 1,572 1,574 1,576 1,579 1,579 1,579 1,579






-4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Profit from Avoidance of Power Failure MMUSD 1,555 1,555 1,555 1,555 1,555 1,555 1,555 1,555 1,555 1,555

Profit from Ggas-fired Power Generation MMUSD 632 632 632 632 632 632 632 632 632 632

Cost of Ggas-fired Power Generation MMUSD 1,844 1,829 1,834 1,838 1,842 1,847 1,851 1,856 1,860 1,865

Cost of gas MMUSD 1,538 1,523 1,527 1,532 1,536 1,541 1,545 1,550 1,554 1,558

Cost of Hydropower Generation MMUSD 498 498 498 498 498 498 498 498 498 498

Profit from Hydropower Generation MMUSD 553 553 553 553 553 553 553 553 553 553

Benefit Total MMUSD 287 302 298 293 289 284 280 276 271 267


Operational Cost MMUSD 0 0 0 0 1 24 24 24 25 25 25 25 26 26 26

EIRR % 26.6%

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