Stock has been suspended since Feb 6 as company seeks legal advice

 

OIL and gas exploration and production company Interra Resources on Thursday (Feb 6) denied a report that alleged it has supplied the Myanmar junta with more than two million barrels of oil since the military&rsquo s &ldquo illegal coup attempt&rdquo .

 

It refuted a few allegations that were made, including the signing of contracts with the junta and controlling how the oil is distributed.

 

Interra was responding to questions from the Singapore Exchange (SGX) on matters pertaining to its operations in Myanmar, which came after activist group Justice for Myanmar published an article alleging that the company was &ldquo fuelling the country&rsquo s ongoing war crimes and crimes against humanity&rdquo by supplying the junta with oil.

 

In the article published on Jan 29, the activist group noted that Interra owns 60 per cent of Goldpetrol Joint Operating Company, which is &ldquo one of the few companies still extracting oil from Myanmar&rsquo s onshore fields&rdquo .

 

Citing data from Interra&rsquo s annual reports, the article said Goldpetrol provided state-owned Myanma Oil and Gas Enterprise (MOGE) with more than 2.3 million barrels of oil from January 2021 till end-2023.

 

The report noted that MOGE has been sanctioned by the European Union and US, yet continues to provide the junta with its single-biggest source of foreign revenue through the sale of fossil fuels.

 

Contracts obtained before military coup: Interra

In response, Interra said Goldpetrol&rsquo s current contracts were obtained and extended under the civilian government, before the 2021 military coup. Justice for Myanmar pointed out that the Myanmar military had &ldquo illegally seized control&rdquo of MOGE in its February 2021 coup attempt.

 

Goldpetrol and MOGE signed improved petroleum recovery contracts that were first established in 1996 between MOGE and another company, APN Petroleum. Interra said it was not involved in the signings.

 

Interra&rsquo s wholly owned subsidiary, Goldwater, later acquired the contracts by way of a farmout agreement. The contracts were subsequently extended by Goldpetrol and MOGE for 11 years, from Apr 4, 2017, to Apr 3, 2028.

 

The move allows junta chief Min Aung Hlaing (centre) to retain control over Myanmar grappling with an economy battered by the civilian conflict and US sanctions. 

Myanmar generals extend emergency rule again, delaying polls

 

The extension of the contracts was approved by the Myanmar Investment Commission, of which Aung San Suu Kyi was the chairman in 2017, said Interra.

 

Interra, therefore, refuted the report&rsquo s allegations that Goldpetrol was &ldquo favouring the junta&rdquo and &ldquo has long enjoyed a close relationship with the Myanmar military&rdquo , or that it had signed the contracts with the &ldquo previous military junta&rdquo .

 

The mainboard-listed company also said that the improved petroleum recovery contracts are a common type of production-sharing agreement between a host government and a resource extraction company.

 

After the junta seized power in 2021, Goldpetrol continued to operate in Myanmar as provided for under the terms set out in the contracts.

 

The terms of Goldpetrol&rsquo s contracts in Myanmar are similar to production-sharing agreements in other jurisdictions, said Interra.

 

Interra on distribution of oil, alleged increased output and revenue

Interra stressed that it has no control over how oil produced by Goldpetrol is distributed or even used, under the contracts&rsquo terms.

 

The company also denied allegations that Goldpetrol increased its output after the coup attempt.

 

Referencing its annual reports for FY2019 to FY2023, it said Goldpetrol&rsquo s gross oil production in Myanmar has &ldquo remained largely consistent&rdquo and peaked in 2020 before the coup. In 2021, however, gross oil production fell as Goldpetrol &ldquo did not have continuous and uninterrupted access&rdquo to some of its field operations, said the company.

 

It pointed out that the report&rsquo s allegations that the improvement in Interra&rsquo s revenue is in tandem with the junta&rsquo s activities in Myanmar is &ldquo erroneous&rdquo .

 

This is because petroleum exploration and production is &ldquo fundamentally a commodity business&rdquo and changes in revenue are dependent on factors such as international demand and supply, as well as geopolitical developments.

 

The article by the activist group said Goldpetrol is &ldquo one of the junta&rsquo s few remaining domestic sources of oil that it can refine into jet fuel and diesel&rdquo , key to powering military aircraft.

 

Compliance with laws

SGX queried Interra on whether it had complied with all rules, laws and regulations, and if it had provided sufficient information to enable its stock to continue trading.

 

Interra said its board of directors believe that the company has conducted its business operations in compliance with the laws of the jurisdictions in which it operates.

 

The group&rsquo s principal places of business are Singapore, Indonesia and Myanmar. It has no operations in the US or the European Union.

 

Interra requested to suspend the trading of its stock on Thursday after the article was published, as it needed &ldquo more time to prepare the responses to the SGX queries&rdquo .

 

It also noted that the company is getting professional legal advice on whether its dealings violate foreign laws, and if potential violations may impact its business and operations.

 

It is seeking clarity on the adequacy and effectiveness of the control measures to address these risks, said Interra.

 

&ldquo The company will request for a lifting of the trading suspension when there is clarity in the findings from professional legal advice,&rdquo it added.

 

But it highlighted that the trading suspension should not be taken to imply that the company is behind any wrongdoing, adding that it would make further announcements when there are material updates.

Interra Resources has been granted another 12-month extension by Singapore Exchange S68 Securities Training (SGX-ST) to meet the criteria required to be removed from the SGX watch-list. 

 

The previous waiver granted by SGX-ST is set to expire on Dec 4. 

 

For its FY2023, Interra Resources recorded a consolidated pre-tax profit, which fulfilled one of the requirements under the exit criteria. 

 

However, as at Oct 25, the company had not had an average daily market capitalisation of $40 million or more over the last six months.

 

The waiver granted to Interra Resources expires on Dec 4, 2025.