Burma’s silence in response to a UN tribunal ruling on the decades-old sea territories dispute with Bangladesh perhaps underlines the fact that the country has lost out on what could be a rich vein of natural gas.

Exploration licenses awarded by the state Myanmar Oil and Gas Enterprise (MOGE) in 2008 to companies from China and South Korea will now have to be abandoned because the beneath-the-sea territory they were licensed to exploit has been awarded to Bangladesh.

It means ConocoPhillips Inc of the United States and not Daewoo International Corporation of South Korea can now legally drill for gas off the south coast of St Martin’s Island, which is only 20 km or so from the mainland where the Naaf River flowing into the bay forms the land border between the two countries.

The island is about 70 km south of Cox’s Bazar.

Daewoo was at the center of a naval confrontation between the two countries in November 2008 which finally led to the dispute going before the International Tribunal for the Law of the Sea (ITLOS) in Hamburg, Germany.

The South Koreans, under Burmese navy guard, went ahead with an expensive drilling operation in the area designated Block AD-7 by MOGE, but they were forced to withdraw after Bangladesh sent its navy to challenge the work.

The sovereignty of St. Martin’s, a coral island that is home to several dozen fishing families, has never been in doubt. It belongs to Bangladesh. But the two countries have long argued over ownership of the seas around it.

In its arbitration on March 14, the ITLOS extended Bangladesh’s sea territorial boundary south of the island in what it termed a delimiting judgment in line with standard offshore rights.

This and other adjustments mean that Bangladesh has acquired about 4,000 square kilometers more sea territory that it had before.

“The tribunal said it had reached a compromise but the fact is that Bangladesh gains access to potentially rich gas stock,” Bangkok energy industries consultant Collin Reynolds told The Irrawaddy on March 17.

“The Burmese energy authority [MOGE] had awarded exploration licenses to Daewoo and Kogas, another Korean operator, and other firms for zones now legally established as Bangladeshi territory. It extends the area which ConocoPhillips had been licensed by Bangladesh to explore.

“What this [tribunal] ruling does achieve, however, is stability through legal certainties which will benefit both countries because there will be no hesitation now by reputable big oil and gas companies to take on new exploration licenses. The territorial dispute had deterred a number of potential investors because of the uncertainty of ownership and legality.

“Burma can count itself lucky in so far as this ruling plus the political reforms at home will make the country much more attractive to investors keen to search for offshore oil and gas in the Bay.”

A pointer to that potential is the rich vein of gas already found and about to be tapped in Burma’s Shwe field, which is only a few kilometers south of the new international boundary. Several more blocks of the Shwe field inside Burmese territorial waters have still to be explored.

Just two blocks of the Shwe field, being developed by Daewoo and two Indian state-owned partners, GAIL Limited and onGC Videsh, have confirmed gas reserves of at least 200 billion cubic meters. Most of this gas is to be exported to China via a new pipeline being built in a controversial deal made in secret by the former military regime. Its value to Burma’s state coffers remains unknown.

Meanwhile, Singapore energy firm MPRL disclosed last week that it has begun drilling in the A-6 Block in Burmese waters of the Bay about 200 km south of the Shwe field. MPRL is a consortium of private investors, including the US firm Baker Hughes Solutions Inc, in partnership with MOGE.

ConocoPhillips is now expected to be awarded extra territory around St. Martin’s Island by Bangladesh’s state-owned oil firm PetroBangla as a result of the tribunal ruling, said the international energy magazine Platts. In addition, two or three new deep-water exploration sites could be offered in the April licensing round.

The Bangladeshi Energy Ministry has ruled that any gas or oil found by ConocoPhillips must not be exported, said Platts.

Bangladesh’s main energy source is gas but limited supplies have caused severe power shortages which have seriously damaged the country’s garment manufacturing industry. Burma similarly suffers from an inadequate electricity supply, despite being rich in energy resources.

Burma’s Radio Myanmar said briefly last week that the Burmese government accepted the UN tribunal’s ruling but the authorities have otherwise remained silent—unlike Bangladesh, which has trumpeted what it sees as a triumph.

The tribunal ruling is binding and there is no opportunity for appeal.

“We see this [ruling] as cause for great satisfaction,” said German Foreign Minister of State Cornelia Pieper, whose country hosted the tribunal. “Disputes over maritime boundaries can cause perennial strain in relations between neighboring countries. The compromise found yesterday gives both countries legal certainty.”

The final settlement of the long-running maritime dispute comes as reports are emerging of a major relaxation of laws controlling foreign investment in Burma which, if correct, would make it much more attractive than at present for potential offshore oil and gas explorers.

New foreign investment regulations tipped to go before Parliament before the end of this month would permit 100 percent foreign ownership of a project, a five year tax-free period, and a promise of no nationalization, the New York Times and Reuters reported.

“The draft law goes some way to reassuring investors worried about a reversal of the reforms and the possible seizure of assets,” says the Oslo-based energy magazine Upstream. “Western companies shied away from the largest Burmese [oil and gas licensing] exploration round in years last November.”

What many observers are waiting to see, however, is whether Burma’s government will introduce rules ensuring that a large proportion, if not all, of new oil and gas discoveries remain inside the country rather than being sold abroad as at present.