Study on Gas Application in Myanmar

G I d t & V l h i i MGas Industry & Value chain in Myanmar

SummaryFebruary 2016February 2016

Ministry of Economy, Trade, and Industry, JAPANdand 

1Nippon Koei,  Mitsui & Co., Ltd.,  and Tokyo Gas

Contents1. Objective2. Gas Demand and Supply Forecast3. Needs of LNG Import4. Necessary Infrastructure for Future Gas supply5. Proposed Project for LNG Import6. Future Perspective with LNG7. Possibility of Business Participation8. Way Forward

2

1. ObjectiveTo create future gas value chain map and policy

Future

H l i d■Background • How supply gas to industry including electric power station

• Consider source of enough gas

■Background• Power demand increase• Future shortage of natural

3

Co s de sou ce o e oug gassupply (import ?)

• Renew of pipeline ?

ggas in power station

• Decline of domestic gas

2. Gas Demand and Supply Forecast  2‐1 Gas Supply

In 2014, domestic gas production was 1,909 mmscfd (Domestic: 339 mmscfd, export to Thailand: 1,180 mmscfd, export to China: 400 mmscfd) but will be gradually depleted.New gas field other than M‐3 is not expected until 2025.

2,500Export to ChinaExport to Thai

Natural Gas Production Record & Forecast in Myanmar

Record  up to 2014Forecast after 2015

mmscfd2,500

M‐3Zawtikah

Natural Gas Production Record & Forecast in Myanmar

Record  up to 2014Forecast after 2015

mmscfd

New gas field other than M 3 is not expected until 2025. 

1,500

2,000 Domestic

000

1,500

2,000 ShweYetagunYadanaOnshore

0

500

1,000

0

500

1,000

00

Off‐shore gas field

DCQExport

DCQDomestic

Export to COD Production end

New gas field

Expected production

Expectedproductigas field Export

mmscfdDomesticmmscfd

on  end

Yadana 565 225 Thai 1998 2027

Yetagun 400 0 Thai 2000 2024

field pmmscfd on start

M‐3 150 2019

A‐6 ? After 

4

Yetagun 400 0 Thai 2000 2024

Shwe 400 100 China  2013 ‐

Zawtika 240 100 Thai 2014 2029

2025

In Energy Policy (2014), gas power will cover 4,758 MW in 2030 out of 23,594 MW, and more b d l f d d l h

2‐2 Gas Demand: Power Development and Gas Power 

capacity may be required since coal fired power development has uncertainty. 

9,000 

10,000 Planned

Plan of Coal‐fired Power Plants in MyanmarMWMW

9,000 

10,000 Planned

i

Plan of Hydropower Plants in MyanmarMW

9,000 

10,000 Planned

E i ti

Plan of Gas‐fired Power Plants in MyanmarMW

4,000 

5,000 

6,000 

7,000 

8,000  Existing

3 000

4,000 

5,000 

6,000 

7,000 

8,000  On‐going

Existing

3 000

4,000 

5,000 

6,000 

7,000 

8,000  Existing

0 

1,000 

2,000 

3,000 

0 

1,000 

2,000 

3,000 

0 

1,000 

2,000 

3,000 

Coal fired power plan- Environment issue- Development possibility in new government is unclear due to

Hydropower plan- Low utilization factor in dry season- Long lead time and social issue for large scheme

Gas power Plan- Comparatively clean- Short lead time

High utilization factorgovernment is unclear due to opposition of local people

scheme- Clean, but necessity for social and natural environment consideration

- High utilization factor Most certain schedule and reliable operation

Renewa ble 2 000 In 2030Renewa 

Hydro power, 8,896

Gas, 4,758

ble, 2,000 In 2030Total 23,594 MW

Hydro power, 

Gas, 1665

ble, 0

I 2014Possibility of Coal-fire is unclear.Short lead time and small environment

5Coal‐fire, 7,940 Unit: MW

2654Coal‐fire, 

120

In 20144,449 MW

Unit: MW

Short lead time and small environment affect of gas power makes gas power more important than planned.

Current domestic gas is not sufficient to cover the demand of all  power stations. 

2‐3 Gas demand and demand/supply gap

1,600 Other sectors

Forecast of Gas Requirement in Myanmarmmscfd

Gas shortage would be 650 mmscfd in 2025 and more than 1,100 mmscfd in 2030. 

Year Power (mmscfd) Industry and other (mmscfd)

800 

1,000 

1,200 

1,400 Other sectors

Power sector

( )

2012 171 (69%) 77 (31%)

2013 161 (68%) 76 (32%)

2014 257 (78%) 72 (22%)

0 

200 

400 

600 ( ) ( )

Gas demand of power and gas power demand ratio in total gas is increasing. Assumption of gas demand

- Power : 80% of total demand

1,500 1,500 Forecast of Gas Demand‐Supply Balance in Myanmarmmscfd

Power : 80% of total demand- Industry and transportation: 20% of total demand.

500 

1,000 

500 

1,000 Gas demand Gas supply Gas shortage

new gas field ?

(500)

0 

(500)

0 

600 fd ≒ LNG 3 5 4 Mt/LNG import is necessary

6

(1,000)(1,000)600mmcfd  ≒ LNG 3.5‐4 Mt/y to cover the gap.

3. Needs for LNG ImportMore and more LNG to be imported to make up the gap between depleting domestic gas supply and increasing domestic gas demand.

2,500 

Gas demand and supply in Myanmar .

2,000 Demand in Yangon  (inc.indus)Myanmar 

i

Needs for LNG import

1,500 

MSCFD

Demand in North (inc.indus)

Demand in south subtotal

DomesticLNG import 2025～Possibility of M‐6 and other new gas field (unknown)

1,000 MM

Total Export to Thai

Total Export to China

Thailand

( )

500  Total DCQ for Domestic

Total DCQ for ThaiChina0 

14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Year  DCQ for China

China

7

4. Necessary Infrastructure for Gas Supply4 1 C i f LNG R i i T i l T

(1) LNG receiving facility (FSRU or onshore terminal)(2) Jetty and breakwater (3) Pi li d t k

4‐1 Comparison of LNG Receiving Terminal Type

(3) Pipelines and tanks

Item On‐shore Terminal FSRU

Comparison of On-shore Terminal and FSRU

Construction period

3‐5 yrs after approval 2‐3 yrs (1‐2 yrs for conversion of LNG vessel)

Location flexibility Deep sea port is required (>D13 m) Deep sea is required (D>13m)

Expansion Possible with increase of vaporizer and tank  Not realistic 

Operation stability Stable operation Operation affected by bad weather 

CAPEX  Relatively higher than FSRU in case 3 mil ton/yr and lower than FSRU in case of 6 mil ton/yr

Relatively lower than on‐shore terminal with careful study for breakwater/y

OPEX Relatively lower than FSRU Vaporization with boil‐off‐gas necessary  Relatively higher than on‐shore terminal

8

FSRU can be selected to cope with immediate demand by 2025. Phase approach is recommended according to demand increase:Phase 1: FSRU (Mid-term solution) , Phase 2: Depends on onshore gas fields

4‐2 Location of LNG Receiving Facility

Location Pros Cons

With consideration of preliminary pros and cons for possible site locations, LNG receiving terminal in South region may be the most advantageous.

Location Pros Cons

North(Kyauk Phyu)

‐Deep sea‐Possible to construct in Kyauk Phyu SEZPossible to export to China with Shwe

‐Far from Yangon demand center, and north‐south pipeline need drastic upgradeChina gas demand is edging down‐Possible to export to China with Shwe

pipeline ‐ China gas demand is edging down‐ Not possible to cope with Thai demand

West coast(Pathein

‐ Near to Yangon, compared to KyaukPhyu and Dawei

‐CAPEX for new pipeline to Yangon‐ Affected by monsoon for operation(Pathein

offshore)Phyu and Dawei Affected by monsoon for operation 

availability of FSRU

Central (Yangon )

‐ Near to Yangon demand center ‐ Shallow area, 80 km distance is necessary to connect from offshore FSRU(Yangon ) necessary to connect from offshore FSRU

South region(Mawlamyine‐Dawei)

‐Deep sea‐ No issue for right‐of‐way for new pipeline construction

‐ Relatively far from Yangon (almost same as Kyauk Phyu)

) p p‐Possible to swap Yadana gas with LNG  for Yangon‐ Close to gas demand area (Mawlamyine, Thatone) along pipeline

9

Thatone)  along pipeline‐Possible to export gas to Thailand

5. Proposed Project for LNG Import5 1 Envisaged Project Outline5‐1. Envisaged Project Outline

• Phase-1 (Upto 2025, FID2017-2018)Location: South region– Location: South region

– Type: FSRU– Capacity: 3.5-4.0 million ton per year – Related infrastructure:

Pipeline to Yangon to be upgraded Connecting pipeline from FSRU to existing pipeline Jetty and breakwater

• Phase-2 ([2025-2030], FID [2020]) ([ ], [ ])– Location: South region– Type: FSRU or On-shore terminal

Capacit [8 0] million ton pe ea– Capacity: [8.0] million ton per year(Depending on the expected gas amount from domestic gas fields)

– Related infrastructure:

10

Pipeline to Yangon to be upgraded (or bigger capacity pipeline newly constructed) Onshore tank and regasification plant Port facility

5‐2 Envisaged Project Structure MOGE imports LNG from LNG supplier. LNG Terminal SPC provides the service to convert LNG to gas and deliver to Toller

(MOGE) under tolling contract, without owning LNG nor gas. ( ) g , g g

LNG Supplier

LNG Supply

E it

JBICCommercial Bank

Debt

Tokyo GasMitsuiOther

companiesMOE/MOGE

LNG Receiving Terminal SPC

Equity Debt

Toller（MOGE）

Tolling Contract

LNG

Gas

Gas supplyEPC Contractor/FSRU Provider

EPC/FSRU

Gas users in Myanmar（Power Production

/

11

（Power Production, Industry etc.）

6. Future Perspective with LNG

SteelLNG Import

6‐1 Utilization of Domestic Gas and Imported LNGSteel

Nonferrous metal

Chemical Cold energy

d

GasGas--use Industriesuse IndustriesLNG Import

Paper, print

Glass, ceramic

Food

Cold chain

The amount ofDomestic GasGas

separation

Petrochemical

MethaneThe amount of supply gas will

increase.

Power/Fertilizer

Domestic Market

Gas separation Products

Petroleum/ 

Ethane Increase the

Revenue

Export of product

petrochemical products 

of foreign currency

Others12

6‐2 Proposed Phase‐wise Future Gas and Power Supply Plan

Area Phase‐0 (‐2020) Phase‐1 (2020‐2025)FID [2017‐18]

Phase‐2 ([2025‐2030])FID [2020]

Yangon ‐Continuing gas supply from Yadana, Zawtika

‐Gas supply from FRSU in the South region and gas from Yadana, Zawtika‐Gas power station using LNG base gas ([1000‐1500]MW)

‐Gas supply from FSRU or on shore terminal, Yadana and Zawtika (Decreasing)‐ LNG base gas power station operation ([500]MW)

NorthRegion

‐Connection and upgrade of pipeline from Shwe pipeline off take to Shwedanug on

‐Supply from Shwe （up to Shwedaung）‐ Additional on‐shore gas production

Supply from Shwe （up to Shwedaung）

off‐take to Shwedanug on‐shore pipeline‐ Construction of Myingyangas power station

SouthRegion

‐Upgrading existing pipeline between Yangon and South region‐Power grid interconnection 

‐ FSRU in the south region‐ Upgrade pipeline from the south to  Yangon ‐ Pipeline connection of FSRU to the 

‐ Upgrade capacity of LNG receiving terminal in the south region‐ Gas supply from FSRU

with south region‐Feasibility study and design for FSRU in the south region

existing pipeline‐ Gas power station in Yangon and/or in the south region (500‐1000MW)‐ Enhancement of power grid 

and/or on‐shore terminal to demand area (incl. Thailand)

‐ Plan for future expansion of the LNG receiving terminal

13

North [170]

China [400]6‐3 Future Gas Supply with LNG (‐2025) North [170]

Demand [ ] mmscfdGas flow [ ] mmscfdLNG base [ ] mmscfd

[70][500]

( )

LNG base [ ] mmscfd [500]

Enhancement of

Swap of Yadana gas to supply Yangon[47(Yadana)+ 178 (LNG swap)

[691][22]

Enhancement of South‐Yangon 

Pipeline [344 (LNG)](FID after FSRU COD)

[ ( ) ( p)+ 100 (M‐3) = 325 ]

South [180][42(Zawtika)+138

New Pipeline to D i

LNG Import 178+138 +344 =660 mmscfd

FSRU: 3.5‐4.0Mt/yr

(LNG)]

Dawei 

Installation of FSRU in South area(FID2017‐18) Thai [258]

[Zawtika 80+ Swap 178]

14

[Zawtika 80 Swap 178]

7 Possibility of Business Participation7 1 Projects and Challenges7‐1 Projects and Challenges

Challenges and risks:・Update of master plan and long term 

l

Type of Business Company

LNG receiving terminal ・Utility trading firm policy in Myanmar・Project FeasibilityBankability Legal framework for LNG import  

LNG receiving terminal planning

Utility, trading firm

Basic plan, design, and project management 

・Engineering company・ Consultant for construction and supervision

LNG procurement by Myanmar Updating gas demand and supply forecastConstruction of related infrastructure construction (pipeline, port  etc)

Construction of LNG terminal  and ship

・Engineering company・Tank and related equipment manufacturer and ship builder

・ Support from Japanese government including institutional finance・Incentives of Myanmar government for foreign investment (tax licensing)

LNG terminal operation ・Utility/ trading firm (investor)・Shipping line (Chartering FSRU)

LNG supply ・Utility/trading firmfor foreign investment (tax, licensing)LNG shipping and sale ・Utility/trading firm, shipping line

Pipeline construction ・Engineering company・Pipe manufacturer Measures:

Confirmation of Legal framework in Civil construction (port, etc)

・General contractors, marine constructor

Gas power station ・Utility/trading firm (investor)・Electric equipment manufacturer

gnew government, regulation under preparation, and project F/SEstablishment of business structureSt th i f J

15

Electric equipment manufacturer

Gas related industry ・Steel glass, ceramic, vehicle, food processing

Strengthening awareness of Japanese experience on LNG terminal construction and O&M in Myanmar

7‐2 Possible New Gas industry in South Region of MyanmarGas Power Station using LNG:• Gas Power Station using LNG:

– 1,180 MW(Gas demand 250 mmscfd) is planned in Mawlamyine, Dawei, etc in South region• Gas industry possible in South region（Dawei SEZ、Mawlamyine Industry Park, etc)

Type Characteristics Demand Gas Demand in South Region in Myanmar

SteelManagement for thermal  treatment and surfacetreatment is  necessary for thin board and wires.Large power house is  constructed.

Very largeThere are steel  mills  in Kyause, Nyaundaga, Ywama. The initial  stage ofDawei  SEZ is  mainly for l ight industry.  Demand is  possibly increasedin the later stage.

Nonferrous Copper and copper alloy, zinc alloy, aluminum, and Middle to It largely relates to construction material and automobile industry.Nonferrousmetal

Copper and copper alloy, zinc alloy, aluminum, andothers.

Middle tolarge

It largely relates to construction material  and automobile industry.Demand is  expected in later stage of Dawei  SEZ.

Petrochemistry

Fertil izer, etc. Byproduct from petrochemical  plantmay become fuel. Very large

MPE owns  factories in Minbu, Mann, and Seiktha, of which demand is3mmscfd. Currently gas is  insufficient, but it is  expected that thedemand is  increased in later phase of Dawei  SEZ after LNG import.Cons mption is increasing C rrentl main energ so rce is coal and

Food andbeverage

Cogeneration system is  possible since steamdemand is  large.

Middle 

Consumption is  increasing. Currently, main energy source is  coal  andheavy oil.  Demand is  expected from the initial  phase in Dawei  SEZ andother south area. Demand is  stable but competition with other fuel  isexpected.

Glass  bottle is  related to beverage industry near Related industry demand increase is expected in the initial stage ofGlass cities. Construction material  is  necessary for

infrastructure.Large

Related industry demand increase is  expected in the initial  stage ofDawei  SEZ and other industrial  parks.

Ceramic,cement,brick

Energy cost and transportation cost is  largecompared to product price. Coal  and heavy oil  isused.

Middle tolarge

Demand is  increasing with house, road, and infrastructure. Largedemand is  expected in Dawei  SEZ from initial  phase. Competition withother fuel  is  expected.

Paper andpulp

To utilize steam, boiler, turbine generator isinstalled. After printing, heat is  needed for dryer fornewspaper, journal, package, etc. Energy cost is  highand sensitive with fuel  price.

Middle tolarge

Related industry demand increase is  expected in the initial  stage ofDawei  SEZ and other industrial  parks, but cost competition with otherfuel  is  also expected.

16

Semiconductor and finechemical

Large amount of steam, cold energy, and power isnecessary to produce pure semiconductor, l ithiumion battery, color printing toner.

LargeIt needs to avoid instantaneous  power fl icker Special  industrial  gassuch as  l iquid N2 and Argon is  necessary. In the later stage of DaweiSEZ, gas power and cold energy utilization may be possible.

7‐3  Example of Facility of LNG Receiving Terminal and Cold Energy Utilization

Facility of LNG Receiving TerminalEnergy Utilization

Utilization of Cold EnergyOpen rack vaporizerLNG carrier Ground-based storage tank

Utilization of Cold Energy

17Air separation facilityFreezer for tuna Binary cycle generation

Production Off‐shore PL On‐shore PL Wholesale Retail

7‐4  Possibilities and Challenges of Participation in Domestic Gas Business

Current regulation (f i

‐Restricted by SEEL‐PSC ‐MIC Notification

‐FIL‐MIC Notification2014/49 (JV with 

‐FIL‐MIC Notification2014/49(JV with

‐Restricted by SEEL‐FIL‐MIC Notification

‐Restricted by SEEL‐MIC Notification2014/49(JV with 

Production Off shore PL On shore PL Wholesale Retail

(foreigninvestment, gas related law, license, 

2014/49 (JV with MOE required) ‐MIC2014/50(EIA is required)

MOE required)‐MIC notification 2014/50(EIA is required)

MOE required)‐MIC notification 2014/50(EIA is required)

2014/49(JV with domestic companyrequired)‐MIC Notification 2014/51(VAT8%)

domestic companyrequired) SDNcompany has restriction of foreign remittance, ,

approval)/ ( )

‐MIC Notification 2014/51(VAT8%)

Incentive for i t t

‐FIL (3yrs tax income exemption , exemption for reinvestment,  acceleration of depreciation, relief of income tax for export, 

‐investment p , p ,

carry‐over loss up to 3 yrs, domestic tax rate application for income tax, exemption for R&D, etc.

Possibility for Japanese

○: Bidding of gas blocks

○: Investment, installation and

△:Onshore pipeline is

△：Gaswholesale is

△：CNG supply is managed byJapanese 

company participation

gas blocks  installation, and material supply for gas pipeline

pipeline is possessed by MOGE. There is some possibility in rehabilitation and 

i k

wholesale is managed by MOGE

managed by MOGE. There is some possibility in oil and gas chemicalsexpansion works. chemicals

Challenges ‐JV is necessary with MoE‐Bankability for Myanmar ‐ Confirmation of Myanmar Investment Low under

‐Future approval‐ Insufficiency of gas for power and 

‐Future approval‐ Uncertainty of gas allocation Confirmation of Myanmar Investment Low under 

preparation for foreign investment industry amount

18SEEL: State-owned Economic Enterprises Law, PL: Pipeline, FIL: Foreign Investment Low, MIC: Myanmar Investment Committee, SDN: Specially Designated Nationals

Domestic gas

7‐5 Possibilities and Challenges of Participation in LNG Import Business

Current regulation

‐FIL company approval

‐FIL‐MIC Notification2014/49(JV ith MOE

‐FIL‐MIC Notification2014/49(JV ith

‐FIL‐MIC Notification2014/49(JV ith

‐FIL‐MIC Notification2014/49(JV ith

LNG Import LNG Terminal Pipeline Domestic gas supply Gas Export

regulation (foreigninvestment, gas related low, license, approval)

‐Import license 2014/49(JV with MOErequired)‐MIC notification 2014/50(EIA is required)

2014/49(JV with MOE required)‐MIC notification 2014/50(EIA is required)

2014/49(JV with MOE required)‐MIC Notification2014/51(VAT 8%)

2014/49(JV with MOE required)‐MIC Notification2014/51(Custom8% )

Incentive for investment

‐ FIL (3 yrs tax exemption for gas export)

‐FIL‐SEZ law, if terminal is constructed in SEZ (100% foreign 

‐FIL ‐FIL (No VAT exemption)

‐FIL (No custom exemption)

investment possible)

Possibility for Japanese company 

○:Possible as supplier and importer (depending on f t re

◎:Possible as investor/operator, and contractor

○: Possible as investor/operator(depending on appro al) and

△: It depends on approval

△:Possible, if they participate in pipeline p y

participationon future framework)

approval) and contractor

p poperation

Challenges ‐Absence of  current law to handle LNG (New Petroleum Act

‐Absence of  current law to handle LNG (New Petroleum Act is

‐ Governmentpipeline expansion plan is necessary

‐Coordination of project 

‐Coordination with country to 

(New Petroleum Act is under preparation) ‐ Financing and bankability of MOGE,affordability of LNG 

(New Petroleum Act is under preparation) ‐Type and is not determined and F/S isnecessaryB k bili f JV

plan is necessary with future demand‐ Fund procurement,  bankability for JV with MOE/MOGE

commencement of large demand user (power station, etc.)

export

procurement ‐Bankability for JVwith MOE/MOGE

‐ Confirmation of Myanmar Investment Law to be enforced is necessary. 19

8. Way Forward• Bankable project structure

Tolling scheme with take or pay concept (capacity payment), similar to international IPP scheme

• Feasibility study for LNG import Optimization of LNG receiving terminal, marine facility and pipeline Cost estimation and economic/financial analysis LNG affordability (LNG procurement) Fund sourcing (Debt and equity)

• Policy and legal/institutional frameworky g / Infrastructure Development National policy for LNG import and utilization of domestic gas Laws and regulations (New Petroleum Act) Laws and regulations (New Petroleum Act) Work (obligation) demarcation among the Ministries

• Technology transfer / Training for operation• Review of gas supply/demand forecast after 2025• Review of gas supply/demand forecast after 2025

Demand review, possible new gas field and export demand with long-term perspective

• Development of related industries• Development of related industries Gas down stream (petrochemical, gas chemical, petroleum) Cryogenic (cold) energy, cold chain, etc. 20