MYANMAR: REPORT No
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MYANMAR: REPORT No. 10394-BA ENERGYSECTOR INVESTMENT Public Disclosure Authorized AND POLICYREVIEW STUDY March 16, 1992 Industry and Energy Division Country Department II Asia Region FOROFFICIAL USE ONLY Public Disclosure Authorized MICROFICHE COPY Report No. 1 0 3 94-BA Type: MALHATRA,A/ X82874 / F10033 /(SEC) ASTEG Public Disclosure Authorized Document of the World Bank Public Disclosure Authorized Thisdocument, prepared for UNDPunder a WorldBank executed project, has a restricted distribution andmay be usedby reciplentsonly In the performanceof their official duties. Its contents maynot be disclosedwithout authorization from the UNDPor the WorldBank. FOR OFFICIAL USE ONLY MYANMAR ENERGYSECTGR INVESTMENT AND POLICY REVIEW Table of Contents Executive Summary .... i I. THE ECONOMYAND ENERGYDEMAND .. 1 A. Introduction . 1 B. Energy Resources and Production . 4 C. Energy Consumption . 6 D. Forecasts of Energy Demand . 9 II. ENERGY RESOURCES ....................... 14 A. Introduction . 14 B. Oil and Gas . 14 C. Coal ........................ 18 D. Geothermal ....................... 22 E. Hydro. ...................... 22 F. Traditional Energy ........... .... ... 23 G. Conclusions . 23 III. OIL AND GAS SECTOR . 25 A. Introduction..................... 25 B. Onshore Oil and Gas Reserves . 25 C. Oil and Gas Field Development . 27 D. Oil ProductionForecasts ............... 30 E. Onshore Gas ProductionForecasts . 32 F. Noattama Offshore Gas Development . 33 G. Major Issues in Oil and Gas Sector . 36 H. Conclusionsand Recommendations. 37 IV. THE REFINERY SECTOR ........... ....... 39 A. Introduction ........ ......... 39 B. Petroleum Products Consumption . 40 C. Supply and Demand ................. 41 D. Issues in the Refinery Sector . 42 E. InvestmentProfile ............... 44 F. Conclusionsand Recommendations. 45 V. THE POWER SECTOR . ...... ....... 48 A. Introduction . 48 B. Generation, Transmissionand DistributionSystem . 48 C. Demand Forecast.. ................ 52 D. Generation Investment Plan . 53 E. Transmissionand DistributionDevelopment . 58 F. Investment Profile ................. 60 G. Marginal Costs of Supply . 60 H. Issues in the Power Sector . 61 I. Conclusionsand Recommendations. 63 Thisdocument has a restricteddistribution and may be usedby recipientsonly in theperformance |of their official duties. Its contents may not otherwise be disclosedwithout World Bank authorization.| VI. TRADITIaL BNOWGYSICTOR ............ ... ... 65 A. Introduction . ................ 65 D. The Resource ase . .. 66 C. SustainableYield ef Woodfuels ..... 69 D. Consumption and Demnd . ........... .70 B. Investments,InstLtutLonal and Policy Issues . ... 73 F. Conclusions and Recoendations .... 75 VII. ERGY PRICING . 77 A. Introduction .77 S. Crude Oil and Petroleus Products .78 C. Natural Gas.83 D. Electricity Tariffs ...... .. .. .. 86 E. Coal Prlces .... 88 F. 'raditional Energy Prics .89 C. Conclusions and Reco_smendatlons .90 VIII. INSTITUTIONALAND FINANCIAL ISSUES AND INVESTMENTPROGRAM . 92 A. Institutional and Flnanclal Issues .92 B. Investment Strategies .98 C. Investmnt Profile .103 D. Financial Requirements ................ 104 1.1 MP by Sctor 1.2 Erergy Bltace Taloes 1.3 Oil and G" Productfon & Consuption (1976-1990) 1.4 Petroltm Production Consmption (197-1990) 1.5 Cool Production & Contaption (1978-1990) 1.6 Electricity Production & eAruptfon (1976-190) 1.7 Energy Conwqption Foreats 1.6 Petroltm Product Cc . mt' n Forecat 1.9 Electricity Dow_d Forecast 1.10 Ga Supply Forecast 2.1 Nyurmr: Post Discoveryad FuturePotential for Ofl en Ga 2.2 Cost ReservesIn KIlee 3.1 Oil Production Forecast - Baic Aass tion 3.2 Oil Production Costs 3.3 GCsProduction Costs 3.4 Noatt_n offshore Gas Production Costs 4.1 NE plant characteristics 4.2 Main Ptroltu Products Production and ODstribution 4.3 Product Exports 4.4 DemwndForecast Scerio and Assumptions 5.1 Industrial Electrfcfty ConruAption 5.2 Existino and Expected 2ehabilitated Conditionof UEPE Gan ntting Plant 5.3 Existing and Comaitted Transmission Lires 5.4 ElectricityDem nd Forcats - gate, *saAptions wd results 5.5 Transmissionand Substation Invest_nts 5.6 Distribution Inv*stuanto 5.7 Capital investment Plan For Transmissfon and Distribution 5.8 Computatfon of Long Run Narginel Cost of Supply 5.9 Suvnery of NEPE Tarfffs 6.1 Estimtes of 'oodfuet standing stock 6.2 Crop residLes viable for fuel 6.3 Woody nd non woody bimes consauption estim_tes 6.4 Charcoal production nd transport costs 6.5 Cost of fuelwood collection and transport 7.1 Energy Prices in Nyw.uar - 1989 7.2 Petroletm Product Prices 7.3 Electricity Tariffs 7.4 Price of Charcoal 8.1 Organization of the Energy Sector 8.2 Flincial statements nd analysis of energy entorprfses 8.3 Detailed InvestmentProfile an IRD 22977 Union of Nyanr IRD 22979 Geologic Basfns IMb 23051 Coal Deposits IM 22974 Power Systm IURD22978 Forest Resource ItD 22976 HydrocarbonResources This report is based on the findings of an -e.gy sector misslon that visited Myanmar in November, 1990, and discussionswith the Government of Myanmar at an energy symposium held in Yangon in January, 1992. The mission comprised: 1. Anil K. Malhotra, Principal Energy Specialist/MissionLeader 2. Hossein Razavi, Principal Energy Economist 3. Etienne Linard, Senior Power Engineer 4. John Irving, Power Engineer 5. Peter Eglington, Energy Economist 6. Moiffak Hassan, Reservoir Specialist 7. Thomas Fitzgerald,Geologist 8. Sadhan Chattopadhya,Coal Specialist 9. Isidoro Lazzarraga,Refinery Specialist 10. Paul Ryan, Biomass Specialist 11. Alfred Banks, Power Specialist 12. Chi-Nai Chong, Power System Planaer 13. P.T. Venugopal, Financial Consultant 1 AEECUTIVE SUMKARY A. Background and Objectives 1. Since the early.1960's, Myanmar has pursued economic policies based on government ownership of economic resources, central direction of the economy, strict government controls and limited interactionwith the rest of the world. Beginning in 1974, the government made a number of policy adjustments to revitalize the sagging economy, which, along with external support, helped to temporarilystimulate production. But the partial economic recovery could not be sustained in the absence of structuralreforms; and in response to the major deficits and increase in debt service ratio to 36% in .983, the government cut down drasticallyon investmentsand imports. In late 1988, the government took steps towards implementation of merrket-orientedeconomic policies aimed at encouraging foreign capital, restructuring state economic enterprises, stimulating private sector participation and liberalizing the domestic and external trade. The Myanmar economy is now in a state of shifting from extreme centralization towards a greater market orientation and these transitions, combined with present political uncertainty, are severely affecting economic performance and investmentplanning in the energy sector. 2. The energy sector in Myanmar at present faces a critical situation. Modern energy consumption level is one of the lowest in the world even accounting for the low per capita income. There is significant unmet demand because of severe supply constraints. Industrial production is severely handicapped by shortage of energy. At the same time, the existing sources of supply are deterioratingrapidly for a number of reasons including the use of inadequate and obsolete technology, inappropriate policies and weak sector management. The sector is capital intensive,has incurred substantial foreign debts, and in the past has been prevented from providing domestic financial savings to the governmentbecause of excessivelylow pricing of energy. But it today requires substantialinvestments just to maintain its existing capability for energy supplies, and for the economy to grow rapidly the capital requirementswill be all the greater. However, investmentsare not likely to result in efficient production and utilization of energy resources unless policy reforms are implemented, notably in technology acquisition, energy pricing and financial management of the sector. A much more systematic effort is also essential to evaluate the various domestic resources, whose potential is uncertain because of inadequateassessments. 3. The purpose of this study is to review: (a) the prospects for development of the country's indigenous energy resources including hydro, power, oil, natural gas, coal and biomasa; (b) the pricing policy for the energy sector; (c) selected operationalissues affecting the efficiency of the energy sector including rehabilitationof power, oil and gas sectors; and (d) management and financialissues facing the major entities in the energy sector. Based on this review, a short, medium and long term strategy for national energy development is suggested. il B. £nhrsLfDmand 4. Myanmar has one of the lowest levels of energy consumptionin the developingworld--0.31 tons of oil equivalent(toe) per capita/yrin 1990. The total use of primaryenergy in 1990 was 12.3 million toe (or about 250,000 barrelsof oil equivalentper day) with primaryenergy being suppliedin the form of fuelwoodplus charcoal(76.7%). biomass (6.2%),domestically produced crude oil (5.0%)and importedoil (1.1%),natural gas (8.2%),hydroelectricity (2.7%)and coal (0.2%). In terms of secondaryenergy the largestconsuming sectorwas household(87.2%), followed by industry(5.6%), transport (3.9%) and other users includingfertilizer manufacture (2.3%). There are serioussupply restraintswhich curtail actual consumptionof all energy products: at present,electricity is regularlyload-shed