An Italian leader in sustainable technology has been selected to provide water purification equipment for a project to upgrade the supply in Mandalay’s Pyigyitagon Township, it said in a news release on February 6.

Milan-based De Nora Water Technologies said it will be supplying a electrochlorination system for the project, which will benefit about 60,000 households in the township on Mandalay city’s southern outskirts.

The water supply in the township is being upgraded under an agreement signed in September 2016 by Japan’s Tobishima Corporation and the government worth ¥1.797 billion, (about US$16.5 million at current exchange rates).

Work on the project, involving the installation of new pipes, wells, tanks, pumps and water meters, began in October and is due to be completed in July. The project is being supported by Japan’s overseas aid agency, JICA.

De Nora said its electrochlorination system offers a safer alternative to the traditional gas chlorination method, which involves the use of hazardous chemicals such as high-pressure chlorine.

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“De Nora has been continuously recognized for its leading industry innovation in water treatment, and being entrusted by Tobishima Corporation and the government of Myanmar to be part of this momentous project further reinforces our ability to deliver solutions for a safe and sustainable supply of clean water,” said Mr Vincenzo Palma, the company’s regional sales director, Asia Pacific.

Palma said De Nora’s electrochlorination system had been used in Japan for more than 40 years.

The release said an increasing number of countries were using electrochlorination for municipal water supply systems because of the potential health hazards and increasingly strict laws over the use of gas chlorination.

A Singapore Airlines flight made an unscheduled landing in Mandalay on Wednesday after experiencing engine failure on a flight from Dhaka to Singapore, media reported.

Flight SQ449, an Airbus 333 carrying 190 passengers, had been due to arrive at Changi Airport about 7pm local time on February 7, the Straits Times reported.

The mishap delayed the flight’s arrival in Singapore by about 11 hours.

“As engineers on ground require time to address the technical issue, a replacement aircraft will be deployed to Mandalay to transport passengers and crew to Singapore,” SIA told the Straits Times.

It quoted the carrier as saying the replacement plane was due to arrive at Singapore at 6:05am on Thursday.

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By NYAN HLAING LYNN | FRONTIER

NAY PYI TAW — The Pyithu Hluttaw has agreed to discuss a motion by Arakan National Party for increased security in Rakhine State, as delays in the return of Rohingya refugees in Bangladesh continue.

The motion urges the government to lay down plans for “the perpetuation of sovereignty” in northern Rakhine State and the “everlasting security of local ethnic people”.

Submitted by U Aung Thaung Shwe (ANP, Buthidaung) on October 27, the month before Bangladesh and Myanmar agreed to a bilateral deal for the repatriation of some 700,000 Rohingya refugees, the motion also calls on authorities to learn from “previous mistakes” of past governments.

“Because the local Rakhine ethnics’ mental and physical insecurities are at their highest, migration [from northern Rakhine State] has increased and migrants are worried about resettling at their original places,” Aung Thaung Shwe said on the Hluttaw floor Wednesday.

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Fellow ANP member Daw Khin Saw Wai (Rathedaung) spoke in support of the motion, saying that civil servants, security forces and “local ethnics” — a reference to the Rakhine and other ethnic groups formally recognised by the government — were “prey” to insurgents in northern Rakhine.

Khin Saw Wai added that Rakhine political parties and local ethnic leaders should be included in the plans formulated by the Union Enterprise for Humanitarian Assistance, Resettlement and Development in Rakhine, a government body formed last year to lead the government’s response to the Rakhine crisis and chaired by State Counsellor Daw Aung San Suu Kyi.

Pyithu Hlutaw speaker U Win Myint agreed on Wednesday to put the motion for discussion at an unconfirmed future date.

By SEAN GLEESON | FRONTIER

YANGON — Denial of access to food, abductions and threats by security forces have forced more Rohingya refugees across the border into Bangladesh, Amnesty said Thursday, as delays in a bilateral repatriation deal continue.

Based on interviews with newly arrived refugees in the Balukhali and Kutupalong refugee camps, the London-based rights organisation said fresh abuses had precipitated a new refugee exodus from northern Rakhine State in December and January.

“Shielded by official denials and lies, and a concerted effort to deny access to independent investigators, Myanmar’s military continues to get away with crimes against humanity,” said Amnesty senior crisis advisor Matthew Wells.

“Myanmar’s security forces are building on entrenched patterns of abuse to silently squeeze out of the country as many of the remaining Rohingya as possible.”

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Refugees who stayed in northern Rakhine through the worst of last year’s violence told Amnesty they had finally been forced to leave after authorities prevented them from harvesting rice in November and December.

Others reported the theft of livestock, often during or after attacks on Rohingya villages by Tatmadaw soldiers and vigilante groups.

Elsewhere, Amnesty documented three cases of the abduction and disappearance of Rohingya women and girls by soldiers in January.

Nearly 700,000 refugees have fled northern Rakhine since last August, when the Tatmadaw launched a brutal response to attacks on security posts by the Arakan Rohingya Salvation Army.

Medecins Sans Frontieres estimates that at least 6,700 Rohingya were killed in the first month of the violence alone.

Military and civilian leaders in Myanmar have trenchantly denied allegations of widespread abuses by security forces during the crackdown.

State media on Saturday carried a government denial of an Associated Press report of five Rohingya mass graves in Buthidaung Township’s Gu Dar Pyin village, saying locals had “not heard of any massacres near their village”.

Satellite imagery in December, recorded by American company Digital Globe, shows the widespread destruction of homes in the village in the aftermath of the security crackdown.

The Office of Tatmadaw chief Senior General Min Aung Hlaing admitted last month that army soldiers participated in the slaughter of 10 Rohingya villagers who had been detained in the coastal town of Inn Din.

An earlier investigation published by the Tatmadaw’s True News Information Team said the army had not used unlawful force during the crackdown.

Most recent arrivals Amnesty spoke to lived in Buthidaung, a township less severely affected by the initial violence that ravaged large stretches of Maungdaw and Rathedaung.

Nearly six months after the crackdown, restrictions on humanitarian access remain in place throughout northern Rakhine State.

Delays have halted the planned repatriation of Rohingya refugees under a bilateral deal between Myanmar and Bangladesh, which was due to commence on January 23.

Amnesty has criticised the international response to the Rakhine crisis, calling for an arms embargo and targeted sanctions against the Tatmadaw along with a full restoration of humanitarian access.

Local enthusiasts and speculators are navigating scammers and payment problems to plough their money into cryptocurrencies such as Bitcoin.

By KYAW YE LYNN | FRONTIER

MA SU MYAT THANDAR spent nine years training to be a doctor: six years of study at the University of Medicine (Mandalay), a one-year internship at Mandalay General Hospital and two years of tenure in Lashio.

And then she gave it all up.

“I realised being a doctor didn’t suit me. It’s too good for me. What I mean is, I am not that honest or patient. I’m not willing to make sacrifices for others,” said the 36-year-old mother of two.

Most would consider her crazy. Doctors are held in high esteem in Myanmar and, as in many other countries, they typically pull in above-average wages. But most are required to work at state hospitals and make their money from taking second jobs or consultancies at private hospitals and clinics.

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“When you look at them, you can tell straightaway that they don’t have much free time,” Su Myat Thandar said. “I wanted to have a good income without having to give too much time. So I started looking for a new career.”

First she ran a mini-store in Mandalay for nearly two years. The business didn’t go well, prompting criticism from friends and relatives who couldn’t understand why she’d turned her back on medicine. “Many people see being a medical doctor as one of the best careers. They wondered why I didn’t want to pursue it.”

Then she was introduced to multi-level marketing and foreign exchange trading by a friend who lived in Malaysia. Forex trading was difficult due to the slow internet speed and foreign currency restrictions under the military regime, while Su Myat Thandar shied away from MLM because she felt it was a scam that “cheated poor people”.

Then, in 2012, the same friend told her about Bitcoin. The following September, she invested when the cryptocurrency was trading at below US$150. Within four months she’d sold her Bitcoins for more than $1,000 each, booking a huge profit.

Su Myat Thandar cashed in at the right time; it would be more than three years before Bitcoin again broke the $1,000 barrier. She has continued to trade though and claims to have made “a good amount” of money. More recently, as awareness of Bitcoin has increased, she’s become an agent.

People in Myanmar who want to buy Bitcoins typically face a problem: they have no way of buying them, because most do not have a Visa or MasterCard, and local accounts are difficult to link up to an “e-wallet” – an account for cryptocurrencies.

Panelists at the "Fintech + Digital Currency" public talk at the Novotel Hotel on December 16, which attracted more than 1,000 people. (Digital Wealth Magazine | Supplied)

Panelists at the “Fintech + Digital Currency” public talk at the Novotel Hotel on December 16, which attracted more than 1,000 people. (Digital Wealth Magazine | Supplied)

Instead, they trade through people like Su Myat Thandar who have a bank account overseas. Buyers transfer money to her account, and then she puts the Bitcoins into their e-wallet. They can then buy and sell Bitcoin, or use it to trade other cryptocurrencies; if they want to sell up, they transfer Bitcoins back to Su Myat Thandar, who transfers the equivalent US dollars or kyat into their local bank account.

She makes her profit on the foreign exchange: for example, if the selling rate is K1,350 to the US dollar, she will typically charge K1,400.

“Now I have a good income and can also spend much time with family,” Su Myat Thandar said. “People here who want to invest or trade Bitcoin or other cryptocurrencies go through us.”

The birth of a currency

Bitcoin was the first of what would eventually become known as cryptocurrencies. These are virtual or digital currencies, which do not exist in a physical form. Control is decentralised – there’s no central bank or Federal Reserve – and they typically employ blockchain technology, under which all transactions are recorded on an encrypted public ledger.

The rise of the pioneering Bitcoin has been meteoric, from a starting price of about one-tenth of a US cent USD in 2009 to a record high of around $19,500 in December 2017. The massive increases over the past six months – not only for Bitcoin, but many other cryptocurrencies – have prompted bubble concerns.

Since mid-December, Bitcoin has lost about half of its value, with other cryptocurrencies experiencing similar slides. There were further falls for all major cryptocurrencies on January 26 after a major exchange, the Tokyo-based Coincheck, confirmed that hackers had stolen US$400 million of the cryptocurrency XEM.

Regulators have taken varying approaches to cryptocurrencies. Some have legalised their use and trade, while others have banned or restricted them. Myanmar, like many countries, has no mechanism or legal framework to regulate cryptocurrencies. There are also no formal exchanges, but Bitcoin and other cryptocurrencies can be bought through agents like Su Myat Thandar.

As the most popular social site in Myanmar, Facebook has served as a hub for enthusiasts, who use it to share information, and find agents to purchase and trade a range of cryptocurrencies, including Bitcoin, Ethereum and Ripple.

But the enthusiasm is clearly carrying over into the real world. Public seminars in Yangon about cryptocurrencies are regularly attracting hundreds of people; in mid-December, more than 1,000 people attended a public talk at Novotel Hotel. Promoted by magazine Digital Wealth, it was titled “Fintech + Digital Currency”; the speakers included former deputy finance minister U Maung Maung Thein and Dr Jason Corbett, managing partner at Bangkok-based law firm Silk Legal.

Corbett warned attendees to be cautious when investing in the cryptocurrencies, pointing to the volatile nature of the market and prices.

He told Frontier that Myanmar couldn’t avoid cryptocurrencies completely but could do more to regulate the trade.

“As I understand it, the cryptocurrency trade is not totally new to the country, and many people were already in the business,” he said. “The problem is, I think, that the government officials and regulators have a lack of knowledge on cryptocurrency.”

As the excitement around cryptocurrencies has grown in recent years, the field has also attracted more than its share of scammers. For every Bitcoin, there are dozens of cryptocurrencies that appear to be simply Ponzi or “pump and dump” schemes, where the price of the coin is artificially inflated.

On January 16, the crypto exchange BitConnect announced it was closing down amid growing concerns that it was operating a Ponzi scheme. Through its BitConnect Coin it had been luring investors with guaranteed returns of up to 40 percent a month; shortly before its closure the company’s coin had a market capitalization of US$2 billion. The backers have since been promoting a new currency, BitConnectX, including in Southeast Asia.

U Maung Maung Thein told Frontier last year that alt-coins were simply a scam. Speaking at the December seminar, as cryptocurrency prices hit their peak, he had apparently softened his view.

“Bitcoin and some other coins can be used in many other countries, and it will probably become the major currency,” he claimed. “So we must learn about Bitcoin. Like it or not, we have to deal with them in near future.

“But please be aware of scams, and don’t make a big investment in [cryptocurrencies] … it’s not stable. If you look at [Bitcoin’s] price over the past few months, you’ll see how volatile it is.”

The dark underbelly

Most of the attendees at cryptocurrency events in Myanmar are from the multi-level marketing field. They are known as “leaders”; they invest early and earn high commissions from the people they recruit into the schemes. MLM typically involves the selling of physical goods, but there is significant crossover with recruitment-based investment scams such as Ponzi schemes.

In the audience at the Novotel was a soft-spoken man from Mandalay named U Win Ko. A 12-year veteran of the MLM industry, he has for the past six months been promoting a “cryptocurrency” scheme named FirstCoin. On his Facebook page he claims to be making K100 million ($75,000) a month from trading cryptocurrencies and introducing new members to FirstCoin.

Investors can take part in two ways: by buying FirstCoins, which are traded on two public exchanges, or by joining the FirstCoin Club. Both are guaranteed to return a high profit, he claims.

A few days before the Novotel seminar, Frontier attended a presentation Win Ko gave at Meliá Yangon to about 15 prospective investors.

He explained the investment options, including the four FirstCoin Club packages. These range from “basic” – investing $200 to $1,999 for a guaranteed 3 percent return per month – to VIP: a $25,000-plus investment, delivering a monthly return on investment of 7.5 percent and a one-time bonus of 10 percent.

The principal is locked in the account for six months, and the returns are paid in FirstCoin. These can be changed into Bitcoin and then cash. Win Ko claimed to have purchased a VIP package in August and been paid his return each month since. He also receives a 10 percent commission for each investor he can sign up.

“In buy/sell, you need to be clever. But if you invest as a club member, you will definitely make a big profit in six months,” Win Ko told the group.

He claimed that the price of all cryptocurrencies would “definitely go up” because many organisations, including terrorist groups, were using them to bypass government controls on traditional currencies.

“Bitcoins and other coins hit their record prices in the weeks after US President Trump declared Jerusalem as Israel’s capital. Do you know why? Because there will be fighting and terrorists are buying weapons. They use coins for the payment, so the demand is rising,” Win Ko said at the meeting.

“It shows that we don’t need to look at the companies that are creating the coins. We just need to invest and make the good profit. Because coins are the future currency. The longer time you invest your money, the bigger profit you will earn.”

Warnings about FirstCoin have been circulating for some time. While FirstCoin is a real cryptocurrency, its purpose appears to be to add legitimacy to FirstCoin Club, which has some characteristics of a Ponzi scheme.

The FirstCoin Club website is registered to a Terence Andrew Tirant of Dynamic Global Marketing Ltd based in Dubai. The company seems to exist only on paper, if at all. The FirstCoin website doesn’t disclose the full names of its creators, but they appear to be from Eastern Europe.

The coin is almost completely pre-mined: 109,999,999 of the 110,000,000 FirstCoins were transferred upon its creation. This important because it means there is no incentive to “mine” FirstCoins – that is, to verify transactions through solving a mathematical problem, after which the transactions are added to the FirstCoin blockchain. With Bitcoin, mining is rewarded through the issuing of more Bitcoins. But FirstCoin has no more coins with which to reward miners.

When some attendees asked Win Ko if he knew how FirstCoin Club generated revenue to pay the returns, he gave a very confident answer.

“I don’t know, and honestly we don’t need to know what they are doing,” he said. “But I am sure they are going to pay us high returns, and more and more people are going to invest. Then the FirstCoin price will go up and we will enjoy the profit.”

‘Greater fools’

Some argue that the best way that the government can respond to cryptocurrencies like Bitcoin is to legalise and regulate them.

U Aung Bo Bo Lin, director of Blockchain Development & Research Company, said he hopes to see licensed exchanges where people can buy Bitcoin – much as they buy foreign currencies from exchange counters now.

“Then the government can regulate or tax [transactions] at the exchange,” he told Frontier. “No one or no government can control the purchase and trade of cryptocurrencies.”

Blockchain Development and Research Company director U Aung Bo Bo Lin. (Nyein Su Wai Kyaw Soe | Frontier)

Blockchain Development and Research Company director U Aung Bo Bo Lin. (Nyein Su Wai Kyaw Soe | Frontier)

He warned that if the government ignores the trade it will just take place informally instead.

“Cryptocurrency is now in the grey zone here,” he said. “This makes it easier for scammers to cheat people … That’s why we want to have an official exchange for cryptocurrencies.”

For now it seems that cryptocurrencies are still a long way from the radar of regulators, who are grappling with issues such as updating prudential rules for banks and expanding mobile money use. On December 7, Frontier emailed Daw May Toe Win, the deputy director general of the Central Bank’s Financial Institutions Regulation & Anti-Money Laundering Department, to request an interview. She eventually asked Frontier to send questions, but had not replied at deadline.

But others are sceptical that digital currencies with no physical equivalent have a value at all. U Aung Kyaw Moe, founder and CEO of Singapore-based payment service provider 2C2P, which provides electronic payment systems for Myanmar businesses, said the future of cryptocurrencies is less clear than proponents claim.

Investors in cryptocurrencies are simply hoping to find “greater fools”, he said – a reference to greater fool theory, which says that it’s justifiable to pay an inflated price for something if you can reasonably expect to sell it on later at a profit to a “greater fool”.

“When someone buys such coins, what does he know? He knows nothing, but just hopes to make profit by selling it at a higher price. So it’s a kind of gambling,” he said. “It’s all about speculating on the price.”

The December crash has burned many of these speculators. But Su Myat Thandar says she’s not concerned by the recent price drop. She’s not sure exactly why it happened – it may have been because of a proposed crackdown on trading in South Korea, she says – but she’s confident prices will soon recover.

“I’m sure Bitcoin will go up in February because a lot of overseas Chinese will buy Bitcoins during the New Year period to give as a gift,” she said. “And my customers are happy as they can buy [coins] at unexpectedly low prices.”

The decision to issue ‘notices to proceed’ to four consortia for LNG and natural gas power projects is a decisive move but some argue the government is taking on too much risk.

By THOMAS KEAN | FRONTIER

JANUARY 30 was the biggest day for Myanmar’s power sector in many years. At a ceremony in Nay Pyi Taw, the government green-lighted four private sector projects that, if implemented, would double the country’s generation capacity over the next four years.

Since taking office in March 2016, the National League for Democracy government has been accused of dragging its feet on the country’s power problem. But U Win Khaing’s ascension as minister for electricity and energy and the realisation that the next election is less than three years away appears to have focused minds in the government and NLD.

The government hopes to have at least some of the proposed plants operational by the middle of 2020, giving two developers a 28-month deadline. Three of the projects, at Kanbauk in Tanintharyi Region, Mee Laung Gyaing in Ayeyarwady Region and Ahlone in Yangon Region, are for imported liquefied natural gas. A fourth, at Kyaukphyu in Rakhine State, is for natural gas from the Shwe field.

While the announcement was a surprise, the decision to pursue an LNG solution was not. In reality, the government had few other options. There’s simply not enough domestically produced natural gas to go around, and no new fields are likely to come online within five to seven years. Hydro and coal are unpopular; dams can take up to a decade to build, even when the process is smooth.

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“The government’s making extra steps to boost exploration and production but in the timeframe that they need electricity they need a quicker solution,” said Mr Marc Howson, director for LNG market development at S&P Global Platts. “It really leaves LNG as the most viable option.”

In September 2016, the ministry sought expressions of interest for LNG projects. It received more than 100 proposals; a tender or request for proposals was expected, but never called. The four projects issued with a “notice to proceed” last week were the result of direct negotiations rather than competitive bidding.

In a long interview with state media on January 30, Win Khaing outlined the ministry’s bold plan to meet the country’s rapidly growing power needs.

“The power supply is the first question asked by foreign and local investors. Today, we can say that we can take responsibility for a reliable power supply by 2020,” he was quoted as saying. (The ministry did not respond to requests for comment following the announcement.)

The big bet on LNG has its detractors, though. One industry source described the announcement as a “disaster”, telling Frontier that the cost to the ministry of buying power from the plants could “bankrupt” the sector.

Even those who are more positive about the announcement are cautious about the chances of the consortia meeting the ministry’s very ambitious completion dates.

Mr Eric Shumway, associate director at Delphos International, a project financing advisory with experience in Myanmar and across the region, said there were some “very positive” aspects to the announcement – not least that it was “a concrete sign of action from [the ministry] after a couple of years of silence”.

But he said the Kanbauk and Mee Laung Gyaing projects were “very complicated undertakings”, and completion of the first phase would likely take at least four years rather than the three that the ministry has said. “The two large projects will require highly experienced developers.”

Shumway said the biggest risk to the government’s approach relates to the nature of the “notice to proceed”.

“It is not clear what this means in the absence of any deal documentation,” he said, adding that many of the projects appeared to be at a relatively early development stage. “I worry that [the ministry’s] rush to get a PR ‘win’ with this announcement of over 3,000 MW of capacity might close off discussions on other promising power projects … on the grounds that [the ministry’s project] pipeline is already full.”

The projects

At Kanbauk, French company Total and Germany’s Siemens will install 1,230MW of capacity in 48 months. The 615MW first phase will come online in three years.

Frontier understands that the project will redeploy some infrastructure from the Yadanar offshore field, which is operated by Total. Output from the field has plateaued and is expected to decline from 2021. Most of the gas is sold to Thailand through a pipeline that makes landfall at Kanbauk. Total declined to comment further on the project by deadline.

A ministry official said the Total/Siemens consortium would also build hundreds of kilometres of high-voltage transmission lines to connect the plant to existing high-voltage lines at Payagyi in Bago Region.

The official said the investment in infrastructure would likely be borne by the investors and recouped through power sales to the government.

“Myanmar can’t yet produce LNG on its own as it requires a huge investment and technology,” said the director, who was not authorised to speak to the media. “The agreement is likely to state that all of the investment will be covered by the consortium.”

A map of Myanmar's LNG and natural gas power projects. (Frontier)

A map of Myanmar’s LNG and natural gas power projects. (Frontier)

At Mee Laung Gyaing, China’s Zhefu and local company Supreme Group will undertake a 1,390MW LNG project, with the first phase to be completed in 36 months and full capacity ready in 42 months.

As Frontier reported on January 25, the Mee Laung Gyaing project is on a remote stretch of coast north of Chaungtha in Pathein Township. The company plans to build a floating storage regasification unit about 1.6km offshore where 80,000-tonne tankers will be able to dock and offload LNG for the plant.

Supreme Group executive director U Htu Htu Aung told Frontier that the “notice to proceed” was a “firm approval” from the government that would enable to developers to move on to implementation.

“The next steps will be to negotiate and sign project agreements with the Ministry of Electricity and Energy, complete the EIA, SIA, [achieve] financial closing, and construct the power plant, transmission lines and related facilities,” he said, adding that the target timeframe for completion was “quite realistic”.

The other two projects are much smaller and will both be implemented in 28 months, the ministry said. 

At Ahlone, Thai company TTCL – better known as Toyo-Thai – will build a 356MW LNG-to-power plant, while at Kyaukphyu China’s Sinohydro and Supreme will implement a 135MW combined-cycle gas turbine project. Kyaukphyu will almost certainly be the most straightforward of the four, as it is domestic gas rather than imported LNG, and most of the necessary supporting infrastructure is already in place.

Done and dusted? Not quite…

It’s not clear what the “notice to proceed” really means in a practical sense, except that these projects have the government’s imprimatur. While it’s a signal to other consortia not to bother proposing any new projects, it’s not a guarantee these particular projects will ever come to fruition.

The four consortia have much left to do. One of the most important documents for an independent power project (IPP) is the power purchase agreement (PPA), which states the price at which the government will buy power from the producer. None of the consortia appear to have a PPA in place.

Once the PPA is signed, they will then need to use it to attract billions of dollars in financing. Assuming the PPAs are properly negotiated, this could take up to a year, sources in the industry say. The issue of sovereign guarantee – a legal guarantee from the government that it will buy power for the term of the PPA at the specified rate – has held back private investment in the sector, and has not been publicly discussed in relation to the four projects. Under the Public Debt Management Law, a formal sovereign guarantee would require the government to seek parliamentary approval but this has not yet been tested.

With the possible exception of ToyoThai, they will also have to navigate land use issues, particularly for transmission lines. Kanbauk will require hundreds of kilometres of high-voltage power lines to connect it to Mawlamyine in Mon State or Payagyi in Bago Region, while Mee Laung Gyaing will have to overcome a similar issue. The ToyoThai project will face its own distinct challenges, particularly how to get LNG tankers through the shallow and congested Yangon River.

Kyaukphyu and Ahlone will benefit, however, from already having the land and most of the infrastructure in place.

In the state media interview, Win Khaing said discussions were already well underway on these issues with the investors. “We talked about delivery and power purchase agreement with the companies which are willing to make investment in our country,” he was quoted as saying. “We discussed transmission lines and power supply in line with the policies of our country and had chosen four LNG plants.”

A ‘slippery slope’

One critic of the government’s plan is the World Bank. Mr Sunil Kumar Khosla, the bank’s lead energy specialist, said it had been advocating for a “two-step approach” that would include a planning exercise to identify the best power generation options and then conduct a tender to ensure the government receives the best price.

“It seems both these steps were not followed while deciding these projects. We intend to do analysis to evaluate the relative merits of these project for the Myanmar system in the next few weeks,” Khosla said in an email.

In 2016, the World Bank commissioned consultants to examine Myanmar’s LNG options, including five potential sites for a floating storage regasification unit – a portable dock where LNG is unloaded and decompressed. However, none of these were “integrated solutions”, where the FSRU is linked to a power plant and the power generated transmitted to the grid. Instead, the decompressed gas would have been piped to plants around the country, with a focus on Yangon because of its high demand.

Frontier understands that based on the results of the consultancy the World Bank has advised the government against an FSRU and instead been advocating for a more modest project that would enable small tankers to deliver LNG directly to a site in Yangon. The ministry could then have conducted tenders to upgrade existing plants around Yangon, improving their efficiency three or four-fold.

An LNG tanker is towed along the Straits of Johor between Malaysia and Singapore. (AFP)

An LNG tanker is towed along the Straits of Johor between Malaysia and Singapore. (AFP)

Another industry source said the government was “playing with fire” by choosing such large projects with their own FSRU. For such LNG-to-power projects to be economic, they need to be operating at full capacity virtually all the time – regardless of whether the power is needed.

“You’re going to be paying not just for the capital cost of the power plant but also the FSRU, and then you’re going to be paying for the energy charges [of imported LNG],” he said.

“In this case, irrespective of whether you need 1000MW despatched, you have to pay for 1000MW … For 20 or 30 years, Myanmar will have to continue paying them. This is a very slippery slope.”

Having its own FSRU or onshore facility would have given the government to control over LNG supply to privately run gas-fired plants. That means it could have reduced output when production from hydro dams is high, or if more domestically produced natural gas comes online.

“Independent generation is not necessarily bad but you need to be cognisant of whether your demand will grow.”

“The big problem here is they have not done any planning around where they want to put the plants and what capacity they want the plants, and they haven’t done any comparative bidding. These consortiums have been selected on a random basis.”

‘Myanmar urgently needs new power plants’

But Shumway from Delphos said the risk of having to pay for excess power was better than not having enough.

“Sure, LNG-to-power projects are more risky than ordinary gas-fired projects on several scores,” he said. “Then again … what are the options? Myanmar urgently needs new power plants of all types.”

He also objected to the “development bank dogma” that every project should go to competitive tender, pointing out that two of the four approved projects – Kanbauk and Ahlone – are brownfield sites that rely on infrastructure already controlled by the developer.

“How does one compel a private party to offer these features to other bidders? … If these project features truly add value and bilateral negotiation is not possible, that value is lost,” he said.

“Although competitive procurement is generally the preferred way to go and can yield good outcomes – such as we saw in the International Finance Corporation-led Myingyan procurement process – the reality is that competitive procurement can take significantly longer than bilateral negotiations. Bilateral deals should never have been closed off as an option so early in the development of this market.”

Howson from Platts said that if the three projects in Myanmar were all completed as planned they would have a “fairly significant” impact on regional LNG demand. Although ASEAN is a net exporter of LNG, supply – mostly from Indonesia and Malaysia – is relatively stable at 50 million tonnes per annum while demand is rising rapidly from countries like the Philippines and Thailand.

“You’re talking a couple of million tonnes per annum of LNG demand in a region that currently has a demand total of 11 million tonnes,” he said.

He added that Myanmar was entering the LNG market at a time of rapid change. Global production is forecast to rise 50 percent from 2015 to 2020, while many buyers are increasingly choosing shorter-term contract and spot prices over long-term contracts, which were traditionally pegged to oil prices. This change is because of the increased confidence in the security of supply offered by the LNG spot market and uncertainties over demand.

“For a new importer like Myanmar it represents a nice opportunity,” Howson said. “If you buy on the spot markets you can very quickly curtail LNG imports if and when domestic gas production eventually ramps up.”

TOP PHOTO: AFP