Myanmar military cashes in on Thai pipeline

Myanmar military cashes in on Thai pipeline

French energy giant Total and partners implicated in 'tax optimisation' scheme

PTT Exploration and Production Plc of Thailand is one of three partners with majority operator Total of France in the Yadana natural gas field off the coast of Myanmar. (Handout photo via PTTEP)
PTT Exploration and Production Plc of Thailand is one of three partners with majority operator Total of France in the Yadana natural gas field off the coast of Myanmar. (Handout photo via PTTEP)

Myanmar’s military has received hundreds of millions of dollars from natural gas sales through a financial scheme linked to the Myanmar-Thailand pipeline, a French newspaper has reported.

The French energy giant Total was implicated as one of the companies behind the “tax optimisation” scheme outlined by Le Monde. For two decades, money from gas shipments that should have been going to the Myanmar government has been going instead to shareholders of a military-linked company that is a partner in the pipeline operator, the newspaper said.

Total has come under pressure from pro-democracy activists to “stop financing the junta” since the military coup in February that overthrew the elected government in Myanmar.

Total said last month that it would not stop producing gas from the Yadana offshore field as long as operations remained safe, in part to protect employees there who might otherwise face repercussions from the junta if work were to stop.

Total and the military-controlled Myanma Oil and Gas Enterprise (MOGE) hold stakes in Moattama Gas Transportation Company (MGTC), which owns the pipeline linking the Yadana gas field and Thailand.

Gas from Yadana is used to generate about 8% of the electricity consumed in Thailand and around half of the power used in Yangon.

Total is the operator and majority shareholder of the Yadana field with a working interest of 31.2%. Its partners include US-based Chevron with 28.3%, PTT Exploration and Production Plc of Thailand (PTTEP) with 25.5%, and MOGE with 15%.

Revenue from MOGE is one of the largest sources of income for the military, which is facing a financial squeeze from many western countries that are imposing sanctions on individuals and businesses linked to the coup makers.

MGTC, which was created in 1994 and incorporated in Bermuda, has set exorbitant prices for the transport of gas, according to Le Monde, which cited company accounts and audits.

The scheme reduced the amount of royalties received by the state since transporting gas is taxed at a lower rate, the newspaper said.

This allowed the military to directly receive money from gas transport via MOGE, with turnover of $523 million in 2019 against just $11 million in charges.

Le Monde said this allowed “tax optimisation” for MGTC shareholders at the expense of the state.

The agreement signed by Total also provides a guarantee that dividend payments made by MGTC will not be subject to any withholding tax.

According to Total’s 2020 annual report, the amount paid to the Myanmar Finance Ministry was three to four times lower than the sum distributed to its co-shareholder MOGE, the newspaper said.

Total said it did not know the “exact reasons” for incorporating MGTC in Bermuda three decades ago, adding that the company “no longer incorporates any new subsidiaries in tax havens”.

It said the creation of separate companies to exploit the pipeline and transport the gas was not unusual, adding that similar arrangements exist in the North Sea and other countries.

“There are no extraordinary profits” in the Myanmar pipeline, Total said.

“They are shared between the transport and production of gas. It is a classic scheme and it was endorsed by the Myanmar authorities at the time,” it said, adding that it continued under successive governments until today.

Total chief executive Patrick Pouyanne said last month that the company was suspending drilling operations in Myanmar but would continue exploiting gas at Yadana because it is needed to produce electricity for millions of people in two countries.

He also said Total would donate the equivalent of the taxes it will owe the Myanmar government to organisations working on human rights in the country.

Pro-democracy activists in Myanmar have called on international energy companies — including Chevron and Total — to suspend their activities and to stop providing financial support to the junta.

PTTEP and its parent PTT Plc have not commented directly on the Thai company’s activities in Myanmar, beyond acknowledging that a gas-fired power plant planned earlier could face delays because of the current turmoil in the country.

Chevron, meanwhile, is spending heavily on lobbyists in Washington to warn against any sanctions that might disrupt its operations in Myanmar, the New York Times has reported.

The California-based oil and gas giant says sanctions could endanger the long-term viability of the Yadana field, risk worsening a humanitarian crisis for people who rely on the operation for power and expose the company’s employees to criminal charges.

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