Over the past 10 to 15 years, the fastest growth on new HC reserves have come from deep water areas, including the Gulf of Guinea, the Gulf of Mexico and off the coast of Brazil. Most large discoveries in those deep waters are found in mass flow deposits of sandstones developed as a result of contemporaneous deformation, such as in the spectacular oil discoveries between Ghana and Liberia on along the West coast of Africa, or most recently from Tanzania to Mozambique.

The western coast of Myanmar is one of the last remaining deep water provinces in the world which has yet to be explored; and indeed, the Shwe gas discovery in the Bengal Fan ( the world’s largest present day turbidites fan system ), has certainly helped to start drawing the attention of the industry to this largely unexplored basin.

Having demonstrated its uniqueness and ability to succeed in very complex onshore areas, MPRL E&P has now set its sights on the move offshore, an area where most small, independent oil & gas companies would not care to be exposed to the risks involved. However, with the acquisition of the rights to explore Offshore Block A-6, a 9,830 km² offshore tract located along the western Rakhine coastal region, the company has showed a willingness to accept the risks and uncertainties associated with the offshore oil & gas sector.

The rights to explore and operate Block A-6 were secured by the company through its signing of a Production Sharing Contract ( PSC ) in conjunction with MOGE and the Ministry of Energy on 18 January 2007. Block A-6 is located south of Blocks A-4 and AD-6 ( operated by the China National Petroleum Corporation - CNPC, and the China National Offshore Oil Corporation - CNOOC ) and also of Blocks A-1 and A-3 ( operated by Daewoo ) where vast gas deposits were recently discovered. Block A-6 was originally jointly explored by Martaban Cities Services Inc., ( MCSI ) and MOGE, who undertook a 2D seismic survey in the early 1970s. A non-exclusive shallow marine survey was also carried out by CGG in 1993 for a total of 200 line kilometers. Since Block A-6 comprises of similar sedimentary formations to those found in A-1 and A-3, it therefore offers clear potential for discovery of large new reserves of gas.

Block A-6 is also located South of the Ramree and Cheduba islands, where hand-dug wells provide economic oil to the local population. Indeed, MPRL E&P has confirmed an active, prolific and proven petroleum system in place near Block A-6, as indicated by numerous oil seepages onshore and oil slicks offshore.

Should MPRL E&P make a discovery of any commercial quantity and enter into production phase, the government will retain a maximum royalty of 10% on all production, with MPRL E&P retaining, on a quarterly basis, a maximum of 50% of all petroleum production drawn from a water depth of up to 600 feet, and a maximum of 60% of all available petroleum production drawn from a water depth in excess of 600 feet.

The company’s planned three-year exploration period commenced on 09 January 2008, with work commitments including:

The second stage of the exploration period came into operation on 09 January 2009, with the company’s work commitments involving:

Having shot the 2D survey, MPRL E&P decided to pick the location of the commitment wildcat based on 2D alone and to acquire 3D seismic on the area with the highest density of leads. To drill a wildcat in such low grid ( 1-5 by 2-20 km ) would have been a sure recipe for failure

The third year exploration period commenced on 09 January 2010, with work commitments which should have included:

Instead MPRL E&P acquired a 550-km² ( full-fold ) 3D survey straddling the 110 m water depth line between the waters where jack-up rigs can operate, and the deep waters where floating units are necessary for drilling operations.

Consequently, MPRL E&P obtained an extension for one year of the first three-year exploration period so as to be able to drill the commitment wildcat with a maximum geological, operational and technical chances of success. In exchange the commitment of one well was increased to two wells, with a clear understanding between MOGE and MPRL E&P that a geological sidetrack would account for the second well commitment.

MPRL E&P has also secured the right to extend the exploration period by one year with an option to exercise this right over two successive years. The company’s option of its right to use the first extension year of the exploration period may be exercised on 09 January 2011, whilst the option of its right to use the second extension year may be exercised on 09 January 2012. This, in itself, is a very valuable addition to the development rights in offshore Block A-6.

Although the decision to undergo its transformation from onshore to offshore, including possibly even deep water exploration, may appear to be a very bold step for an independent company like MPRL E&P, it was a logical development for the company at a time when bids for additional offshore blocks were being invited by the Ministry of Energy. The simple fact was that the company was ready to take on the challenge, and the move clearly provides it with further room for expansion. There is a very strong belief throughout the company’s highly-skilled management and staff that there are still numerous opportunities for further expansion in Myanmar, and, in line with this mindset, the company is demonstrating its total commitment, having already applied for additional onshore acreage.

At a presentation at MPRL E&P’s offices in Yangon in 2008, CEO U Moe Myint, provided an explanation in layman’s terms, of what was happening in and around the Rakhine Coastal Region, and why the company was prepared to expand its operations into the offshore region, as follows:

“At the time that Daewoo made their major offshore discovery, the geological thinking was very different from the current way of thinking. At that time, it was all more or less about structural geology. Based upon that, and some 2D Seismic, Daewoo decided to go ahead and drill. The original results were not good, but then, as a result of an unplanned side track, they made an important discovery. After studying the reservoir, they then began to realize that there were other systems in play, such as what is now being referred to as the Turbidites Fan or Bengal Fan system; thus, the whole geologic play and thought process has now changed, such that the blocks in the vicinity that were previously thought to be less viable, have now become far more attractive”.

“Following our acquisition of Block A-6, based upon this new thinking, we then embarked upon a comprehensive analysis and survey, over a protracted period, not only of the block itself, but of the whole area surrounding the block, a process which had not previously been carried out by any of the other exploration companies. I felt, very strongly, that a full geoscience interpretation of the whole area was very important as a means of gaining a better understanding of what was happening in Block A-6. This course of action proved to be extremely worthwhile, since the geological survey team subsequently was able to confirm a petroleum system in place”

So, to those who may ask the question: “why take the risk?”, the answer lies simply in the above comments made by CEO, along with all of the undisputable facts that have been outlined throughout this entire document; i.e., the evidence of increasing discoveries of hydrocarbon in the region, and the demand for energy which manifests itself in the rapidly growing economies of China and India. Based upon such demand, the groundwork and infrastructure to efficiently and systematically transport oil and gas into these two countries utilizing Myanmar as a gateway, has already been explained.

MPRL E&P has always been looking for opportunities to increase its exploration and production activities in Myanmar, and Offshore Block A-6 provides the company with exactly such an opportunity. MPRL E&P has already completed the 'Data Study' period of the contract for Block A-6, and is currently in the 'Exploration Phase' including the following activities carried out:

At ‘Production Phase’, from the outset, the company, and its investment partners, will enjoy a three year tax exemption period commencing on the first day of production. On the expiry of this tax-exemption period, under the current tax laws, a 30% income tax on profit will be applicable.

Following the deduction of royalty and cost recovery production, the remainder of the petroleum production will be allocated, on a quarterly basis, to MOGE and MPRL E&P in accordance with incremental scales as shown.