ExpertiseEnergy

OIL AND GAS

VDB Loi offers a comprehensive selection of high quality professional services to the petroleum industry in Myanmar, fielding a team of leading lawyers and regulatory experts who have an intimate knowledge of all aspects of the sector. Our clients seek our assistance with their oil and gas projects for our access to local knowledge and our experience. Clients often comment they select us because we go beyond the theory and deliver actual results and insights on how things work in reality.

OIL AND GAS (UPSTREAM)

VDB Loi has a strong track record on all aspects of exploration and development of hydrocarbons in Myanmar and throughout our markets, comprising acquisitions, bidding and concessions, production sharing arrangements, cost sharing agreements, drilling contracts, joint operating agreements, construction contracts, FPSO issues and marketing agreements. Our advisors are often asked by international oil exploration companies to advise on the legal and commercial terms of the Myanmar Model PSC, to advise on the optimal corporate and tax structure, to assist with local regulatory requirements and permits, and to advise on our experience dealing with the Government’s Energy Planning Department.

Our team regularly advises oil and gas clients on:

  • Bidding for tenders of onshore or offshore oil and gas blocks
  • Corporate onshore and offshore legal structure for holding oil and gas interests
  • Production Sharing Contracts
  • Joint Operating Agreements and joint ventures
  • Tax advice in connection with Production Sharing Contracts
  • Farm-in transactions. We have advised on two farm-in transactions in recent years
  • Floating production storage and offloading (FPSO) contracts
  • Regulatory and environmental approvals for development infrastructure projects
  • EPC and drilling contracts
  • Financing transactions
  • Contract disputes
  • Tax calculation and tax planning

Here are a number of updates and analyses which demonstrate our team’s experience with Myanmar’s upstream oil and gas sector:

Legal advice in relation to Production Sharing Contracts, Gas Sale Agreements, Joint Operating Agreements

Although fairly international and highly standardized, Myanmar’s PSCs and accessory documentation continue to raise important legal and commercial questions. Our clients seek guidance and information on the local application of oil and gas agreements. How has the Government in the past interpreted or applied certain provisions of the PSC? Has the Government agreed to remove certain language from the PSC in other instances? How do the tax calculations and licensing requirements work in practice? What are the Myanmar law aspects of important contractual provisions, such as force majeure, dispute resolution and material breach? Our advisors provide an in-depth analysis of and advice on the legal terms and issues in the Myanmar Model PSC. We provide our assessment, based on our experience with the Government’s Energy Planning Department, of how to approach certain important legal issues, such as clauses on the re-introduction of sanctions, term of the contract, state participation, domestic market obligations, and clauses which in Myanmar are commonly included in the side-letters.

Investment structure advisory

One of the main challenges for clients to design a suitable corporate structure for their Myanmar oil and gas interests is to understand how the country’s tax authorities will apply the tax laws in actual reality. Complex tax structures serve no purpose if they are built only on a too theoretical reading of the relevant laws and treaties. Our outstanding tax skill set and credentials in international taxation combined with a deep understanding of local practices puts us in a good position to add significant value. We often contribute to devising the offshore shareholding structure (head office of a branch or shareholder of a subsidiary, depending on the case) keeping in mind farm-out, divestment, withholding taxes and financing considerations.

Our team provides detailed advice and recommendations with respect to the different structuring options to hold an interest in a Myanmar PSC, notably through a Myanmar branch or through a Myanmar subsidiary; detailed advice and recommendations on the key Myanmar legal differences between the available options in terms of investment licensing, Myanmar fiscal regime, financing, farm-out, Myanmar legal compliance, and divestment.

For example, the Firm assisted a large number of major oil companies prior to the 2013 tender to determine which location would be the most suitable for a Special Purpose Vehicle (SPV). We contributed not just what the relevant tax law and tax treaty states in relation to a future potential capital gain, but we were able to advise on the position the Myanmar tax authorities have taken in other divestments, and what the outcome was of the matter. Another question that is often raised is whether the SPV is best set up before or after the bid is awarded. Our local know-how in relation to the tender process is helpful for clients to understand under which circumstances the SPV would pass, from a prequalification perspective.

Advisory services and assistance in relation to oil and gas tenders

VDB Loi provides specific advice on the expectations of the Ministry of Energy with respect to application for prequalification or bids for onshore or offshore blocks, including information on the criteria which the Ministry might use to decide on prequalification, advice on risks, and detailed advice on the Ministry’s expectations in terms of work commitments.

This assists clients in maximizing their chances to be selected for prequalification. Our advice often includes the recommended group entity to use for the Expression of Interest, keeping in mind the perceptions of the Ministry of Energy (and its requirement to see a technical track record and financial capability), and that the entity needs to fit into an efficient legal and tax structure should a bid be successful. Clients also often seek our advice on and assistance with the documents that are to be prepared, and on obtaining the required endorsements.

OIL AND GAS FIELD SERVICES

Clients providing geophysical services, drilling services or other services in relation to oil and gas exploration seek our assistance because of our deep understanding of the tax and licensing issues they face on the ground in Myanmar. Our team fields typical questions, such as whether a commercial presence or a tax presence must be set up in order to perform services, with clear answers and a wealth of practical experience, rather than high-level theoretical replies. We understand the contractual structure, the differences between equipment supply, services and consumables. Because we advise more than a half dozen oil and gas operators, we are very familiar with the details of the subcontractor approval process under Myanmar PSCs and the MOGE’s current practices.

Our service extends to facilitating immigration formalities and providing agency services to comply with tax obligations –  a level of nuts-and-bolts experience that is untypical for a law firm.

Our clients in the oil and gas field services industry often ask us to assist them with:

  • Review of service contracts for compliance with Myanmar law or tax inefficiencies
  • Advice on licensing and approvals for subcontractors
  • Advice on local law and tax requirements for non-resident service providers
  • Advice on import of equipment and drawback
  • Assistance with immigration, work permits and tax compliance for technical staff

OIL AND GAS (MIDSTREAM)

Our oil and gas team has gained unique experience with midstream petroleum projects in Myanmar, particularly when acting for the Government of the Union of Myanmar in the privatization of a number of state owned enterprises comprising its entire holding of midstream businesses and assets. Our team assists the Government in its joint venture to construct and operate the largest petroleum refinery in the country. We also assist developers, operators and financiers with their projects in storage, transportation, marine systems, and refinement of petroleum products. Our team’s deal record, local knowledge and Government relationships are widely recognized in this space. We advise on the Myanmar aspects of:

  • Privatization of state owned enterprises
  • Joint ventures with and without Government participation
  • Concessions for pipelines, offshore supply bases, tank farms
  • EPC and construction agreements
  • Land access, transfer of land use
  • Secured lending

OIL AND GAS (DOWNSTREAM)

VDB Loi advises, through its dedicated oil and gas team, on a wide range of downstream petroleum issues, from marketing and trading agreements to terminal use and regulatory aspects. Acting for the Government of the Union of Myanmar, VDB Loi advises on the privatization and corporatization of the Government’s petroleum products trading business, formerly a state monopoly. In conjunction with our Nay Pyi Taw team, we also often advise clients on:

  • Optimal corporate and tax structure for the importation and distribution of petroleum products
  • Assistance securing importation licenses
  • Tax structuring advice
  • Joint ventures and acquisitions
  • Investment and project approvals
  • Land use matters

POWER

VDB Loi is at the forefront of the dynamic Myanmar legal and regulatory architecture of power generation. Our team assisted clients to secure the first “international” Power Purchase Agreements and has worked extensively on a number of power generation projects, from 50MW to 500MW, comprising coal, gas, biofuel and hydro. Independent power producers (IPPs) seek the firm’s assistance on a variety of issues, ranging from Myanmar law advice on the documents of the investment, to investment licensing and tax structuring. Equipment manufacturers and EPC providers consult our advisors on contractual issues, Government procurement rules and tax implications. Our team has also advised the Japanese Government on the regulatory structure of investment in the Myanmar power sector.

Of particular note is the firm’s report “The Legal and Regulatory Framework of Foreign Investment in Myanmar’s Power Sector” which can be downloaded here. The report analyzes the current practices and obstacles in power investment from a legal angle, and formulates recommendations for improvement.

The Myanmar team can, if required, draw on the expertise and resources of our offices in Laos, Cambodia and Vietnam, where the firm’s lawyers and advisors have extensive and longstanding experience with power projects.

Our power and infrastructure practice delivers the combined outstanding legal and tax expertise in the region together with our deep understanding of the commercial and financing aspects of the power industry. We advise the full spectrum of energy-related clients: governments, corporates, sponsors, developers, lenders and investors alike.

Project procurement, consenting and planning

Because of our close working relationships with the Government, whom we advise and act for on numerous projects, and our strong Nay Pyi Taw presence, we are in an excellent position to assist clients with project procurement. Our clients often need us to stay in touch and to follow up progress with authorities.

  • Preliminary documentation (MOU)
  • Land due diligence
  • Negotiation with off-takers, regulators
  • Assistance with preparing bids and proposals
  • Government liaison

Project documentation

Our clients primarily seek our assistance with respect to the Myanmar law issues of the contractual framework, which may include a number of documents including:

  • Power purchase agreement (PPA)
  • Memorandum of Agreement (MOA) and/or Build Operate Transfer (BOT)
  • Land lease
  • Gas Supply Agreement or other feedstock agreement
  • Joint Venture Agreement
  • O&M Agreement
  • EPC Agreement

Investment licensing

Our multi-disciplinary team comprising foreign lawyers, local attorneys and accountants which assists clients with the MIC process, is a core competency of our firm. Clients choose us because of our partner engagement, the wide scope of our service (which includes preparing and correcting the financial portion of the proposal) and the sheer volume of proposals we have already managed and completed with the MIC.

Financing

We assist development financial institutions, commercial banks and corporate borrowers with a wide range of legal and regulatory matters

  • Financing documents
  • Regulatory approvals and registrations
  • Security agreements

Regulatory

Our regulatory team comprises lawyers and regulatory experts with compliance or even technical backgrounds. We have extensive experience in the following areas:

  • Environmental and social aspects
  • Construction permitting
  • Import licensing
  • Foreign exchange
  • Labor compliance
  • Immigration matters

Transactions

Our team has deep experience with transactions in the energy space. Our services comprise:

  • Due diligence
  • Transaction documentation
  • Regulatory approvals

Taxation

We are uniquely placed to advise on the most tax efficient onshore and offshore corporate structure for investments in Myanmar. We advise sponsors on all tax issues including, the optimal debt-to-equity mix, taxation of generating and selling electricity and possible future divestment.

OUR PAST EXPERIENCES

Hydro

  • 1,000MW HPP in Myanmar for one of the world’s largest producers of electricity
  • 700MW HPP in Myanmar for a global hydropower developer
  • Hydropower concessions in Laos, assisting a Thai-based energy company
  • Financing transaction involving a hydropower developer in Laos, acting for the lenders
  • 300MW HPP in Myanmar, acting for the consortium of sponsors which includes the government

Photovoltaic, Wind, Other Renewables

  • 300MW solar plant in Myanmar, the largest in ASEAN, acting for the sponsors
  • Assisting an international financial institution with its financing of a solar project in Cambodia
  • 30MW wind farm in Myanmar for one of the largest Asian power producers
  • 90MW biomass power facility in Kampot, Cambodia, acting for the sponsors

Transmission

  • US$1 billion, one of the largest financings ever in Laos, acting for an international financial institution on the financing of two transmission line construction projects in Laos
  • Construction of a transmission line from Sihanoukville to Phnom Penh in Cambodia
  • Acquisition of a majority stake in a transmission line interest in Cambodia

Gas and Other Thermal Generation

  • 500MW CCGT at Thaketa, Myanmar acting for the lenders
  • 250MW CCGT at Myingyan, Myanmar acting for prospective sponsors
  • 200MW CCGT in Myanmar, acting for the sponsors
  • 300MW power rental project with HFO/LNG in Myanmar
  • International acquisition of a major coal mining asset in Indonesia

Mid- and Downstream Gas, Petro, LNG

  • Acting for the Ministry of Electricity and Energy in Myanmar on the privatization of 5 state-owned assets in the mid-stream space
  • Assisting sponsors of an LNG terminal in Myanmar with planning and project acquisition
  • Assisting the developer of a petroleum refinery in Cambodia

Upstream Oil and Gas

  • Advising 4 supermajors on the acquisition and operation of their oil and gas interests in Myanmar
  • Disposal of a producing gas asset and pipeline interest in Myanmar, acting for the purchasers
  • Advice on the acquisition of an oil and gas block in Cambodia
  • Assistance with 3 farm-in transactions in Myanmar
  • Acquisition of an onshore gas block in Laos
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