KYAUK PHYU, Myanmar ― A 40-minute helicopter flight from the western coast of Myanmar, out in the Bay of Bengal, stands a massive offshore platform.

It is here that Daewoo International is to take its first step in its progression from a focus on conventional trade to becoming a comprehensive project developer.

“The gas development project in Myanmar is the symbol of our past efforts and future vision,” said Yang Su-yeong, senior executive vice president and chief operating officer of the resources development department.

On June 22, the company successfully kicked off gas production at its Mya offshore gas field and on July 15, sent out the initial amount to China through a series of subsea and overland pipelines.

The corresponding gas is first to be supplied to the city of Kunming, 600 kilometers from the Myanmar-China border and then to neighboring areas in Southwest China.

This was the first step in the commercialization of the Shwe Project, covering three gas fields located off the coast of Myanmar ― Shwe, Shwe Phyu and Mya.

The three gas fields developed by Daewoo International are estimated to have some 4.53 trillion cubic feet of natural gas, according to U.S.-based certification organization Gaffney and Cline & Associates.

At maximum production capacity, they are expected to yield some 300 billion won ($268 million) per year for the next 25-30 years, according to Daewoo officials.

In 2000, Daewoo International kicked off its overseas energy development operations by signing a production sharing contract with Myanmar Oil and Gas Enterprise.

It was also in that year that the company entered its corporate workout program, after the former Daewoo Group fell apart in the aftermath of the Asian financial crisis of the late 1990s.

“Under the circumstances, there was no way that we could invest some $20 million into a tentative project,” Yang said.

These subsea areas of Myanmar had long been neglected by natural resource developers, partly because global oil refiners had not detected signs of natural oil and gas in the 1970s.

“Despite the skepticism, we fully embraced the opinion of our research and engineering team and decided to venture further to the outer seas,” Yang said.

“It was a game of double or quits, but to our greatest luck, we detected a plausible seismic anomaly that seemed worth a drill.”

Because of the geological structure, however, the operators had to attempt a skewed drilling and the company’s consortium partners refused to take the chance, he explained.

“Once again, retreat was not an option for us so we pushed ahead with the exploration at our sole risk,” Yang said.

The adventure paid off in 2004 as the company detected huge gas reserves in the Shwe gas field, the largest of all three and named after the Myanmarese word for “gold.”

The discovery eventually brought Indian developers such as ONGC Videsh Limited and GAIL back to the consortium.

Daewoo International is currently the sole operator of the Shwe Project, holding 51 percent of the shares.

Its initiative also helped the growth of other Korean companies such as Hyundai Heavy Industries, which won a $1.5 billion deal to build the underwater jacket and the topside of the Shwe Platform.

The platform consists of drilling facilities, gas restoring systems and residential areas.

“Korean offshore builders are recognized as global champions but they have so far had few opportunities to build facilities for Korean energy developers,” said SB Joo, executive vice president and managing director of the Myanmar E&P.

The Shwe Project was, in fact, the largest gas development project led by a Korean E&P company over the past 30 years, according to officials.

“I remember the day when we assembled the topside and the jacket last November,” Joo said.

“Though we had little doubt about HHI’s technology level, all of us were extremely strained lest the lifetime bet by any chance go wrong.”

The construction had faced other obstacles, one of them being the devastation of the March 2011 earthquake and tsunami in Japan which cut off the supply of some of the key components.

It was the company’s affiliation with the nation’s top steelmaker POSCO that saved the day at the time, officials said.

POSCO acquired Daewoo International in 2010 as part of a long-term vision to expand its overseas business, especially in the natural resource development field.

After the key platform was finally put together, the entire gas project picked up speed, especially with the completion of the Onshore Gas Terminal in Kyauk Phyu, Ramree Island.

From the OGT, the gas is to be handed over to the China National Petroleum Corporation, based on the contract signed between China and Myanmar.

“Some misunderstood this as the Chinese buyer snatching away the Korean-developed gas but this is not true,” Yang said.

The gas sales deal between Myanmar and China was a government to government transaction, which is on a higher plane than the ordinary business to business model, he explained.

“Daewoo International, by developing offshore gas in Myanmar and offering it for sale, has set a new model of energy business in the overseas market.”

The Korean energy market, mostly dominated by state-run companies such as the Korea Gas Corporation, should also note the Chinese government’s active stance, he added.

“Korea is still underdeveloped in terms of natural resource policies, especially when considering its advanced economic status,” he said.

“The Chinese administration, on the other hand, is visibly determined to secure energy resources at all costs for its domestic industries.”

By Bae Hyun-jung, Korea Herald correspondent
(tellme@heraldcorp.com)