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Will Myanmar’s government cancel Woodside Petroleum Limited’s contracts?

oil gas LNG

Woodside Petroleum Limited’s (ASX: WPL) dealings with the brutal Myanmar government appear to be getting murkier.

The energy company has been touting the prospective lucrative returns it hopes to gain from its investment in Myanmar.

“Woodside is one of the largest offshore petroleum acreage holders in Myanmar,” according to the company’s website

“Collectively, our nine permits across the Rakhine Basin make up approximately 56,600km².

“Our significant footprint in Myanmar represents an organic, high-value growth opportunity to meet increasing energy needs of an emerging region.”

The company has been hit by criticism from environmentalists and human rights activists for its ties with the Myanmar government, accused by the UN of subjecting “widespread fear and trauma” upon minority groups.

Now, Woodside’s dealings with the Myanmar government appear even more complicated after a confusing report in the Myanmar Times suggested the government is looking to cancel contracts with international energy companies.

“If they fail to honour their commitments going forward, the financial guarantees deposited at the Ministry of Electricity and Energy will be forfeited,” an anonymous source from the Ministry of Electricity and Energy reportedly told The Myanmar Times.

“If they want to drill, they will have to drill by next year and if they don’t drill, we will revoke the contract,” the source told the newspaper.

Woodside stated its “early-mover strategy in Myanmar delivers competitive advantage” but only time will tell.

Myanmar’s significant oil and gas potential has been well documented and so too have the risks of dealing with what is often perceived as an unstable and unpredictable government.

The price of oil has climbed recently but, like Myanmar’s government, what it will do next remains uncertain.

With the IMF projecting global economic growth of 3.7% for 2018, and amid reports of oil supplies tightening, it looks as though the price of oil will continue to climb.

That would come as good news to Woodside and its shareholders who have endured a turbulent year.

The Woodside share price was trading at above $33 earlier this year and closed on Wednesday at $29.06.

The Beach Energy Ltd (ASX: BPT) share price has seen a better run of late, climbing from $0.55 in late June to close on Wednesday at $0.82.

And the Oil Search Limited (ASX: OSH) share price has surged since closing at $6.40 on August 18 to close on Wednesday at $7.11.

Still, there are better places to put your money than the oil and gas sector.

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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