In July 2014, the Myanmar Centre for Responsible Business named Yangon-based Parami Energy as the most responsible and transparent company in the country’s energy sector. Two weeks ago, the World Economic Forum added another accolade: Parami was invited to join its exclusive Community of Global Growth Companies. Eligible companies have a turnover of at least US$100 million and are committed to having a positive effect on the economies and societies in which they operate. Frontier spoke with Parami CEO Ken Tun about his vision for natural resources development in Myanmar and the country’s future as a supplier of energy to Southeast Asia.
How did Parami Energy begin?
We started out in 2004 as an engineering company. In 2009 we moved into the oil and gas sector. We managed to grow quickly, because we focused on reliable engineering, professionalism and relationship building. Relationships were very important at that time. In those days the gas industry was in a growth stage; the Shwe project was upcoming.
My philosophy at the time was: even if it is not profitable, we will deliver. But please teach me! It was big learning experience. So the first years we didn’t make a lot of profit, we built up a track record.
Then, in 2010-2011, the Myanmar-China pipeline project came along. They said: Ken, that is for the big boys. I thought, why shouldn’t I bring in an international partner? We worked very hard and won a $500 million project. The new government then launched the first open tenders. Among other things we got into exploration with a partner from India.
Our name is derived from the Pali word Parami, which is a concept that you have to sacrifice if you want to achieve something that is bigger than you. Don’t expect a free lunch. The company is built on this concept.
Hydropower projects have generated controversy. What’s your opinion about the right way forward?
Myanmar has four big rivers and enormous hydropower potential. Potentially we can generate 100,000 megawatts per year. To put this into perspective: Thailand needs about 40,000 megawatts a year.
Ideally, before a project starts you consider environmental implications, and social and economic costs and benefits to arrive at a nett benefit. Then you address the issues with the stakeholders. I feel not all the hydropower projects in Myanmar have gone through this process.
The thing is: Myanmar is developing, so we can’t stop these projects. We need to build trust and get the multilaterals involved. Once they are part of the dynamic, social and environmental issues will be addressed in a public manner. My opinion is that we need to form a model that is inclusive. We need to find a way to engage local communities and give them some ownership. The current situation is a stalemate.
New projects should not only provide electricity to communities, but also social benefits. Then projects will fly. Lets bring in best practices from outside. We can learn from countries like Norway.
Huge volumes of gas are exported, but Myanmar faces electricity shortages. What do you think about this? How do you feel Myanmar’s natural resources should be managed?
Most governments want to show a good report card with a healthy GDP, trade balance and growth. If you look at the income from gas exports, it accounts for 20 to 30 percent of GDP. During the sanction years export of natural resources was a way of getting dollars inside Myanmar.
If you talk about energy in Myanmar, three aspects are important. Firstly, 70 percent of people don’t have access to electricity. This needs to change and we should use natural gas to generate electricity. The government can decide to use this 30 percent of GDP to electrify our people. It would be good for their social report card.
The second issue is FDI [foreign direct investment]. Whoever will form the new government, in 2016 I foresee super aggressive FDI coming in. I talked with a number of strategic partners. They are not doing window shopping. They are serious about it. One of the prime targets for investment will be infrastructure development. Our logistical costs are a multitude of those of other countries, because our infrastructure is outdated. I expect a lot investment in regional and domestic connectivity projects. Regionally there will be a huge appetite for investing in deep-sea ports, airports and to power this infrastructure, the energy sector will drive this growth.
Thirdly, being connected to energy-hungry economies in the region is key. Laos did a great job connecting to Thailand and Vietnam. We should use a similar framework to sell energy to China, India, and Bangladesh.
We should think about what we sell as well. Should we sell milk or ice-cream? I prefer to sell more value-added products.
How should Myanmar respond to falling oil and gas prices?
The oil price decline benefits a lot of net importing energy countries, like Indonesia and China. Indonesia uses the lower oil price to cut subisidies, which is a huge budget burden for them. China can start substituting gas for coal.
In Myanmar the story is different. The number of cars has exploded. There is a huge demand for gasoline and diesel. Expenses go up, GDP goes up, but gas and oil revenue goes down. I think we should build up an energy independence agenda.
Look at downstream. We have three oil refineries. These refineries are older than I am. We should modernise the existing facilities and build new refineries with a higher capacity. We should create a local, downstream processing industry. Do we want to deal with China? Now we are giving them oil [via a pipeline from Rakhine State]. Let’s change that and build the refinery at the beginning of the line. Our local communities will benefit. The latter is important; 70 percent of Myanmar live in rural areas. I want to help empower these people; this is important for the sustainable development of Myanmar.
With regards to the near future, the government has inked 10-year agreements with the oil and gas companies. All the conditions and percentages are fixed for this time period. Only a few people in the government have access to these agreements. I for one haven’t seen it. Maybe there is a clause that we can renegotiate the deals and sit down with all the stakeholders? I would hope so.
The new government faces the prospect of budget deficits because of shrinking oil and gas revenues.
I worry about that. It is one of the reasons why I want to see investment in productive infrastructure. Loans are now coming into the country. We need to focus this influx of money on long-term, strategic investments. We need to prioritise and be brave enough to invest our money in long-term development.
I know people like to invest in highways and in buildings, but we need to consider developing communities as well. How about feeder roads, so people can access infrastructure? And how about education and SME-development strategies, so our SMEs become more competitive?
Multilaterals have the responsibility to help us minimise our learning costs. They have the intention to help Myanmar, so let’s engage a little bit more. We should not make the same mistakes other developing countries made. Multilaterals can actually guide us.
What role can state-owned Myanma Oil and Gas Enterprise play in the future?
I keep telling the stakeholders: we cannot forget the importance of the national oil company. In a natural resource rich country like Myanmar, the role of this company is very big. We should align MOGE with our energy master planning. PTT from Thailand went global and became a big player. We should aim for a similar scenario and strengthen our national oil company in midstream. MOGE should be involved in ground-breaking projects and learn new technologies for energy transport, and from infrastructure that is actually being built on Myanmar soil. MOGE should participate instead of playing a fringe role in projects, like it does all too often.
In short, we should try to maximise our net national benefit, so we will become a respected player in the region, instead of a handicapped player. The new government will need listening ears and the vision to be competitive.
The World Bank has announced a $400 million loan to provide an electricity supply to 1.25 million households over the next six years.
Let me start by saying that President U Thein Sein should be given credit. He came out with a call to electrify everyone in the country by 2030. Which means half a million households a year. In Myanmar there’s 53 million people and 10 million households. The plan is to expand the national grid, which now only covers 30 percent of the people, in the next decade and a half.
The World Bank invited me to one of their national workshops. I told them, and keep telling them, that solar-powered systems are good but not sustainable. Money should also be spent on community grids, the mini grid. If you build the mini grids you can plug them in right away, when the national grid is expanded. The approach should be balanced, which I am making a lot of noise about right now. Now the plan is skewed towards solar.
On the other hand, there will be demand for 2 million solar plates [panels]. Maybe we should create a solar plate joint venture and start a local manufacturing industry? We can spark something, even if it is not competitive at first.
What’s the future for Parami Energy?
Domestically I see a lot of gaps and opportunity. I hope Parami can grow along with Myanmar, plugging into the regional value chains, and become a company with great technology and knowhow. At first we want to expand domestically, after five years we want to grow regionally as well. There are no boundaries. The ASEAN Economic Community is coming, there’s a regional cooperation framework. We want to innovate and compete internationally, and learn from people who are better than us right now.
What are your thoughts on the expected leadership change after the election?
The leader of this nation should be someone who has the passion to see his fellow people developing and wealthy. Whichever party is in charge, there should be genuine political will to develop Myanmar. I hope that the next government will have a bigger vision on telecom and energy infrastructure. The ideal government combines technical capability with a vision, so we can become a respected and competitive nation that is no longer looked down on by our regional neighbours. We have to restore our national pride.
The big boys are here to find oil resources, and we are already the largest natural gas exporter in the region. We should look further in our master planning than our population. There is a bigger market out there. We can export to China, Bangladesh and India as well. In 10 year’s time I think we will be the largest energy exporter. If we do it properly, we can be the generator of Asia.
Source: FRONTIER MYANMAR (By Hans Hulst | Photo by Andre Malerba | 10 October 2015)