Case Analysis: Unocal in Burma
Case Analysis: Unocal in Burma Union Oil Company of California, Unocal, progressed into a full-service oil business after being founded more than 100 years ago to develop oil fields in California. Its services included extraction, refining, distribution, marketing and retail. Because of the depletion of oil fields in the United States, Unocal turned to foreign investments with a strategy to market its one-stop shopping business to governments.
A major international project of interest was the "Yadana Field" off the shore of Burma, which contained approximately 5 trillion cubic feet of natural gasenough to produce gas continuously for about 30 years. Burma's government created the company Mynamar Oil and Gas Enterprise (MOGE) to find private companies to help develop their oil. In 1992, MOGE signed a contract with Total S.A which gave Total the right to develop the field and build a pipeline to transport the gas from Yadana to Thailand. In the contract, MOGE agreed to provide Burmese government security through its army and ensure that land was cleared and that the right of way was secured in the passage for the pipeline through Burma. Thailand's government would purchase the gas. Burma had the opportunity to earn approximately $200-$400MM per year over the life of the project. A portion of the revenues would be shared with Burma's oil development partners. The Burmese project was appealing to Unocal for many reasons: cheap, educated labor, and rich natural gas resources as well as other untapped resources. There was also the advantage that Burma would provide an entry point into other profitable international markets such as China, India and other Southeast Asian countries. The fact that Burma had a strong, dependable government with a stable political climate was also appealing. Yet it was widely known that since 1988, Burmese government had continuously violated human rights in a brutal manner. Prior to taking on the Burmese project, Unocal conducted
A major international project of interest was the "Yadana Field" off the shore of Burma, which contained approximately 5 trillion cubic feet of natural gasenough to produce gas continuously for about 30 years. Burma's government created the company Mynamar Oil and Gas Enterprise (MOGE) to find private companies to help develop their oil. In 1992, MOGE signed a contract with Total S.A which gave Total the right to develop the field and build a pipeline to transport the gas from Yadana to Thailand. In the contract, MOGE agreed to provide Burmese government security through its army and ensure that land was cleared and that the right of way was secured in the passage for the pipeline through Burma. Thailand's government would purchase the gas. Burma had the opportunity to earn approximately $200-$400MM per year over the life of the project. A portion of the revenues would be shared with Burma's oil development partners. The Burmese project was appealing to Unocal for many reasons: cheap, educated labor, and rich natural gas resources as well as other untapped resources. There was also the advantage that Burma would provide an entry point into other profitable international markets such as China, India and other Southeast Asian countries. The fact that Burma had a strong, dependable government with a stable political climate was also appealing. Yet it was widely known that since 1988, Burmese government had continuously violated human rights in a brutal manner. Prior to taking on the Burmese project, Unocal conducted