Yesterday was one of the most brutal days in the recent history of Myanmar as police and the military cracked down on demonstrators in the cities of Yangon and Mandalay, firing into crowds with live rounds and killing least 18 people, according to the UN human rights office. Hundreds more protestors were arrested – the Reuters report and graphic video footage of the protests is here. The demonstrators were demanding the release of the country's State Counselor and Nobel peace prize laureate Aung San Suu Kyi, and a return to civilian rule after a military junta seized power on February 1 – events unwittingly captured live by an online fitness influencer in the capital Naypyitaw here.
The coup saw the Myanmar military (known as the Tatmadaw) declare a state of emergency and oust the democratically-elected government of the National League for Democracy (NLD), which had just won a landslide victory in a general election in November 2020, under the leadership of Ms Suu Kyi. Western governments promptly reacted to the military rule with measures against the Tatmadaw officers involved, and appeals for calm. On February 26, the United Kingdom announced sanctions against six of the coup leaders, including Senior General Min Aung Hlaing, for "serious human rights violations".
Yesterday's bloodshed followed weeks of mounting protests against the coup by tens of thousands of Myanmar people in major cities, widespread strikes across the country, and the mass arrest and imprisonment of opposition figures. The junta has tried to stifle dissent by cutting off internet services and mobile phone coverage, and restricting access to sites including Facebook, Twitter and Instagram when the limited telecoms systems are actually operational. The Tatmadaw also declared a ban on all international and domestic flights until May 31, to restrict access by foreign journalists and prevent opposition leaders fleeing abroad.
Over the weekend, the junta fired Myanmar's ambassador to the UN, Kyaw Moe Tun, after he gave a powerful speech demanding the UN and the international community should use "any means necessary" to reverse the coup. State television denounced the ambassador for, "betraying the country," and for, "abusing the power and responsibilities," of his position as ambassador.
The situation is fearful, with the population shocked and angry at the military's move. Foreign investors are startled.
At the centre of a tug-of-war in this political chaos sit four major gas fields, which are in production offshore Myanmar, operated by PTTEP of Thailand, Total of France, Petronas of Malaysia and Posco of South Korea. These four fields (Yadana, Yetagun, Zawtika and Shwe) supply gas to Thailand and China, export condensate, and provide the largest financial contributions to the Myanmar state's budget, generating revenue of approximately one billion US dollars annually for the Myanmar government, according to activists. Natural gas comprised 40 per cent of Myanmar's exports and 20 per cent of government revenues in fiscal year 2018-19.
Total's production from the Yadana gas field currently supplies half of Myanmar's domestic gas consumption and around 12 per cent of gas consumed by neighbouring Thailand.
A new ultra-deep water gas development is also under appraisal by Australian energy giant Woodside for development later this decade in Block A-6, whilst Posco is pushing ahead with a major investment in Shwe Phase Two. In December, Korea Shipbuilding and Offshore Engineering announced it had won a US$450 million contract from Posco to build a new offshore gas compression platform. It said the offshore facility will be completed by 2024.
Woodside's A-6 investment with partners Total and MPRL is centred on a two to three trillion cubic foot (tcf) (56.6 billion to 84.9 billion cubic metres) gas discovery in over 2,000 metres of water. Total is a 40 per cent partner in the block and was planning to take operatorship from Woodside later this year when front-end engineering and design would kick off for the development.
The production concept for the A-6 discoveries is based around a subsea development in deep water, with a pipeline to a large processing platform in around 100 metres of water. The clean gas will then be piped to Total's producing Yadana gas field and exported via the existing trunklines.
As we highlighted in December (here), Myanmar has been an important bright spot for the offshore market in the Asia-Pacific with two semi-subs and a drillship starting work there at the end of 2020 when Covid restrictions finally lifted, Hakuryo-5 for PTTEP, Ocean Monarch for Posco, and Dhirubhai Deepwater KG2 for Woodside.
Woodside had chartered Dhirubhai Deepwater KG2 from Transocean on day rate of US$250,000 to drill wildcat wells on blocks A-7, AD-1 and AD-8. The first well spudded in January, and Transocean's recent fleet status report shows the rig is firm until April this year, with options for Woodside to extend the contract for a further four months until August.
Now all those plans, and the A-6 development schedule, are called into question.
The coup in Myanmar immediately led to prevarication and confusion in the Australian company's headquarters, as Woodside faced mounting pressure in Australia to distance itself from the junta and the bloodshed. Indeed, the Australian government joined calls from Japan, the US, and India for an immediate return to democracy in Myanmar in mid-February.
First, Woodside's CEO Peter Coleman gave a train-wreck of an interview with Reuters (here) where he did his best impression of a callous and greedy CEO. He described the coup and the large demonstrations in Yangon as just "a transitionary issue."
"You've got an emerging democracy working through their processes," said Coleman. He seemed more anxious about addressing the possibility of American sanctions being applied to the A-6 development than to the Myanmar police shooting people dead on the streets outside his company's offices.
However, Coleman was immediately forced to backtrack, commenting soon after that he, "regretted some remarks in a media interview that have been interpreted as condoning what has occurred in Myanmar. This is not the case."
Woodside then confirmed that it had joined Total, Chevron, Maersk and Jotun in signing the "Statement by Concerned Businesses Operating in Myanmar" which you can read here.
This expresses the anxiety of the corporate signatories regarding the coup: "As investors, we inhabit a 'shared space' with the people of Myanmar, including civil society organisations, in which we all benefit from respect for human rights, democracy and fundamental freedoms – including freedom of expression and association – and the rule of law."
On Saturday, Woodside was reported in the Australian media as saying that it would pull its offshore drilling teams out of Myanmar and had put all business decisions in the country "under review" until "political stability has improved". It's not clear whether this means that Woodside's remaining exploration wells with Dhirubhai Deepwater KG2 will be cancelled, but it clearly stalls the A-6 gas development for now.
The company knows how bad things can get in Myanmar, and knows it risks a public relations disaster. There's a precedent.
When I write that yesterday was "one of the most brutal days in the recent history of Myanmar," I recall that there have been many. Myanmar's recent history is one of conflict, violence and repression, which started even before the country then known as Burma achieved independence from the British Empire on January 4, 1948, wrecked by four years of Japanese occupation and some of the bitterest fighting of the Second World War.
In 1947, Ms Suu Kyi's father, Bogyoke Aung San, the leader of the independence movement, was assassinated in a meeting in Yangon, along with other senior colleagues, leaving the country adrift amid insurrections by ethnic minorities. So began a dismal cycle of fifty years of ethnic conflict within the country, repression and military rule.
In 1988, pro-democracy protests attended by hundreds of thousands were suppressed by the military in a violent wave of repression, which left countless hundreds, or even thousands, dead. In 1990, the Tatmadaw held a general election that was won by the NLD by a large majority. The military refused to recognise the results, declared the election void, and placed Ms Suu Kyi under house arrest, inaugurating another wave of detentions, imprisonments and torture.
Offshore oil and gas discoveries in the early 1990s including the Yetagun and Yadana gas fields helped the country's battered economy to stabilise, but the development of these hydrocarbon discoveries was highly controversial. Activists claimed that the Tatmadaw had used slave labour to build the export pipelines, that land had been seized from local people without compensation, and that the construction of the facilities had been accompanied by widespread human rights violations.
This set some precedents that Woodside will be desperate to avoid.
In March 1997, the US District Court for the Central District of California agreed to hear the case of fourteen Burmese villagers, who had filed a complaint there under the Alien Tort Statute against Unocal (here).
According to the claim, the villagers had suffered abuses, including torture and rape, during the construction of the Yadana Pipeline. The villages claimed that Unocal was allegedly complicit in the abuses perpetrated by the military government in Rangoon, as a partner in the project and an economic beneficiary of the pipeline.
According to The Business and Human Rights Resource Centre (here), the parties eventually reached an out-of-court settlement, under which Unocal agreed to compensate the Myanmar claimants and provide funds for programmes in Myanmar to improve living conditions and protect the rights of people from the pipeline region. The exact terms of the settlement are confidential, but it was accepted by the court, and the case was closed on April 13, 2005.
But pressure by campaigners in Europe did deliver some results there, too. Britain's Premier Oil, which was the discoverer and operator of Yetagun gas field, sold its stake to Petronas in 2002 following protests outside its offices and difficult shareholder meetings.
The company's CEO attempted to claim that political pressure and protests over the company's involvement in Myanmar had nothing to do with the restructuring.
"We have had opportunities to withdraw from Myanmar over a long period, which we have resisted," the CEO said. "This is a commercial reconstruction," (here).
Nobody believed him.
Total and Petronas ignored the activists and continued their operations in Myanmar, attempting to monitor the military's behaviour, and spending money on various corporate social responsibility schemes in the country to demonstrate that they were caring investors committed to making life better for the people of Myanmar – notwithstanding the fact that there was absolutely no transparency over where the millions of dollars of revenues they paid the government actually went.
Interestingly, Total's principal marine contractor through many of the years of military rule in the early part of this century was Seacor Marine, which acquired the long-term contracts for the field support vessels for Total's Myanmar field through its purchase of Seabulk Holdings in 2005.
Seacor maintained its shallow-draught supply vessels on hire in Myanmar, even though the military regime was widely condemned internationally, and even though John Gellert, the president of Seacor Holdings, is the son of Michael E. Gellert, a wealthy investor, and a trustee of Human Rights Watch in New York, a position he held at the time and holds up to the present day (here).
Further protests showed that decades of military rule had not stabilised the country. More demonstrations, this time led by Buddhist monks in their distinct saffron-coloured robes, began in 2007, following steep fuel price increases, and a disastrous cyclone that devastated the country. The protests continued in the face of the government's efforts to crush them. The military realised that a negotiated solution was needed.
Gradually, the Tatmadaw sought to rehabilitate itself internationally, and to open up the isolated and desperately poor country. The political situation thawed and Ms Suu Kyi was released from prison in 2010. Press restrictions were loosened, political prisoners were set free, the internet was allowed, and Norway's Telenor built a functional mobile phone network. The country's economic growth shot up, inward investment boomed, and Myanmar seemed back on a positive, more prosperous path to normality.
As the country opened up, Woodside agreed to farm into Block A-6 in late 2012 and took interests in six blocks, four of which were directly awarded by the Myanmar government in 2014. The six permits comprise 47,000 square kilometres and represent 20 per cent of Woodside's global exploration acreage at the time.
The NLD won elections in 2015, only for the west of the country to erupt into violence as the military sought to drive out the Muslim Rohingya minority community, causing a refugee crisis amid what some critics have called genocide. Hundreds of thousands of Rohingya fled over the Bangladesh border. Ms Suu Kyi was condemned for complicity in the attacks, even though she had no control over the Tatmadaw, who had deliberately sought to prevent civilian oversight even under the democratic regime of 2015 onwards.
But the violence died down, the 2020 elections went ahead, and few believed that the military would try to derail the country's democracy again. Now Woodside finds itself on the horns of a dilemma.
The company is clearly vulnerable to pressure in Australia, and the violence by the junta puts Woodside in a difficult situation. There are no easy solutions as Woodside seeks to balance the interests of its shareholders with the clear desire of the Myanmar people for an end to military rule, a move backed by the Australian government itself.
"We call on the military to respect the rule of law, to resolve disputes through lawful mechanisms and to release immediately all civilian leaders and others who have been detained unlawfully," Australian Foreign Minister Marise Payne said in a statement after the coup. We all hope that these goals will be achieved and that peace and democracy will be quickly restored to Myanmar's long-suffering people.
But hope is not a strategy, and the events of the 1990s and 2000s show that the Myanmar military has been prepared to make the country an impoverished, international pariah to maintain control over it. Then, the oil and gas operators in the country faced enormous ethical, reputational and legal challenges.
It may be different this time. But probably not. Violent dictatorships and publicly listed companies in liberal democracies don't sit well together, as Mr Coleman is fast learning.
Background Reading
The Justice of Myanmar website on the importance of the oil and gas industry in Myanmar to the government is here.
The connection between Seacor Marine's now CEO and his father as a trustee of Human Rights Watch is reported by the New York Times here.
The Asian Development Bank report on the offshore oil and gas industry in Myanmar from 2016 is here – this covers the four legacy fields, Yadana, Yetagun, Zawtika and Shwe.
More on the turbulent history of Myanmar at the time of independence and the murder of Aung San Suu Kyi's father is here.
BBC coverage of the Rohingya crisis of 2015 and the associated crimes are here.
