The Business Of The World's Steel Producers From South Korea In Myanmar Could Be Affected By The Coup

A gas field project run by POSCO International off the coast of Myanmar. (Source: POSCO International via Koreatimes)

JAKARTA - It is feared that the military coup in Myanmar will affect the business of Pohang Iron and Steel Company (POSCO), one of the largest steel producers in the world, where the company has a gas field project off the coast of Myanmar.

Cited from Koreatimes, the Shwe POSCO International gas field project is the main business for the South Korean company. The project generated an operating profit of 305.6 billion won or USD 276 million last year, accounting for 64 percent of the company's total operating profit of 474.5 billion won in the same year.

The project is now in Phase 2 of the development and POSCO International recently signed an engineering, procurement, construction, installation, and commissioning contract with Hyundai Heavy Industries for Phase 3 development.

In a February 2 report, S&P Global said the coup "has the potential to disrupt energy investment in Myanmar's oil, gas and electricity sectors, as companies consider these operating risks amid growing political uncertainty and the potential for renewed international penalties. The report also named the Shwe Project as one of the major energy projects in Myanmar.

An official at POSCO International said the company was closely monitoring the situation but did not see any setbacks in gas production or delays in developing the current gas field. However, analysts said risks remained due to uncertainty in winning development approvals from local governments.

"The start of the Shwe Phase 2 and Shwe Phyu POSCO projects are planned for 2021 and 2022, respectively, but it is possible to be delayed here as well", Vishruthi Acharya, an analyst at Rystad Energy, told Energy Voice as reported by Koreatimes.

POSCO International said in its statement Tuesday, February 16, that 70 of its employees sent to the company's gas field project in Myanmar have been working from home since the coup earlier this month. Except for the essential personnel required to run the production facility. The field workers employed there also stay at home for their safety.

In addition to the Shwe gas field project, Amnesty International in September said that POSCO International's subsidiary, POSCO C&C has a joint venture with Myanmar Economic Holdings Limited (MEHL), a conglomerate involved in mining, beer, tobacco, garment manufacturing, and banking, where there are Myanmar military stocks.

POSCO C&C established two joint ventures with MEHL, Myanmar POSCO Steel in 1997 and Myanmar POSCO C&C in 2013. MEHL owns 30 percent of the shares in each company.