Even as other international companies pull out of Myanmar in the wake of a coup that has thrown the country into turmoil, South Korea’s POSCO continues its investment in a major offshore natural gas project that provides the ruling regime with an important source of revenue, Myanmar Now has found.
POSCO International, which owns a 51% share in the Shwe natural gas project, based off the coast of Rakhine State, is expected to invest $473m in phase 2 of the project and $315m in phase 3, according to the company’s report for the second quarter of the current fiscal year.
Phase 2, which involves drilling a total of eight wells in the Shwe and Shwe Phyu gas fields, which are both part of the project, is due to be completed next year. Phase 3, the construction and installation of a gas compression platform, is projected to take until the first half of 2024 to complete.
According to Kyaw Nyan Tun, an advisor to the state-owned Myanmar Oil and Gas Enterprise (MOGE), work on the project is likely to go ahead as planned, despite setbacks resulting from the Covid-19 pandemic.
“There have been some losses due to reduced production. We are merely working to cover those losses. This is not new investment, by any means,” he said, speaking to Myanmar Now on October 21.
MOGE has a 15% stake in the project as part of a consortium that includes POSCO, the Korea Gas Corporation, and two Indian companies, ONGC Videsh and GAIL.
In late May, POSCO said that it was reviewing whether to continue sharing profits from the project with MOGE after France’s Total and US-based Chevron announced that they had suspended some payments from a similar joint-venture project.
That followed a decision three months earlier by Australian energy giant Woodside to withdraw from Myanmar over reports of widespread violence against anti-coup protesters.
A spokesperson for POSCO told Reuters in May that the company was still considering its response to calls to withhold funds from the regime.
“We are reviewing what has been demanded for us to do from the international community, and that includes suspending dividend payout. This internal discussion is taking place from various angles,” the spokesperson said at the time.
Since then, however, the company—which last year discovered another gas field in a block under its development—has been careful not to say anything that might jeopardize its investment in the project, which has so far amounted to about $1.5bn.
A source close to the company has told Myanmar Now that far from scaling down its operations, it is planning to increase its South Korean workforce in Myanmar, with additional staff expected to arrive over the next two months.
Kinam Kim, a lawyer with the rights group Korean Civil Society in Support of Democracy in Myanmar, called POSCO’s plans to go ahead with phase 3 of the Shwe project a violation of international human rights standards.
“POSCO’s focus on expanding its business, rather than on upholding human rights, blatantly ignores the request of the people of Myanmar to cut off all funds to the military council,” he said.
Several South Korean civil society organizations have been calling on five companies from the country, including POSCO and multinational conglomerate Lotte, to cut their ties with Myanmar’s junta.
About 80% of the gas from the Shwe gas project, which went into production in 2013, is exported to China through pipelines that cut across northern Myanmar.
In the first three months of 2021, the project sold 570 million cubic feet of natural gas, earning a profit of more than $25m. Due to rising energy costs, it made more than $30m from 520 cubic feet of gas sold in the second quarter, the company said in its quarterly report.
Meanwhile, Indian media reported in late June that ONGC Videsh had been granted approval by the Indian government to invest an additional $121.27 in the Shwe project.
All of this has prompted human rights advocates to step up their calls to impose sanctions on MOGE and state banks in Myanmar in order to prevent the country’s energy revenues from finding their way into the hands of the ruling generals.
In a letter urging the EU to stem the flow of oil and gas profits to the regime, Daniel Eriksson, CEO of global anti-corruption organization Transparency International, wrote that the junta would likely use this money “to sustain its control of the government apparatus, finance atrocities against the local population, purchase arms and seize portions for private gain.”
According to a pre-coup forecast by Myanmar’s ousted civilian government, the country’s oil and gas industry was expected to generate more than 2.3 trillion kyat ($1.2bn) in earnings in the fiscal year that ended in March.
