http://www.atimes.com/atimes/South_Asia/KD03Df0…
China secures Myanmar energy route
By Sudha Ramachandran
BANGALORE – China and Myanmar have signed
an agreement for the construction of fuel pipelines that will
transport Middle East and African crude oil from Myanmar’s Arakan
coast to China’s southwestern Yunnan province – short-circuiting
the long sea voyage past Singapore – while also drawing from
Myanmar’s own gas reserves.
Under the March 27 agreement, a gas pipeline will tap into
Myanmar’s reserves at the Shwe gas fields, and an oil pipeline will
carry Middle East and African crude that is currently transported
in tankers through the Malacca Strait to China.
Construction of the US$1.5 billion oil pipeline and the $1
billion gas pipeline will begin soon and is expected to be
completed by 2013. China’s largest oil and gas company, the China
National Petroleum Corporation (CNPC), holds 50.9% stake in the
project, with the rest owned by the Myanmar Oil and Gas Enterprise
(MOGE).
The roughly 2,000 kilometers of pipeline will cut through the
heart of Myanmar, beginning near Kyaukphyu on the Arakan coast and
running through Mandalay, Lashio and Muse before crossing into
China at the border town of Ruili. The pipelines will terminate at
Kunming in Yunnan province. A gas collection terminal and a port
for oil tankers will be constructed on an island near Kyaukphyu.
The entire cost of constructing the pipelines will be borne by
China.
Myanmar has the world’s 10th-largest natural gas reserves,
estimated at over 90 trillion cubic feet (tcf) in 19 onshore and
three major offshore fields. According to Myanmar officials, the
country’s daily gas production will almost double to 2.235 billion
cubic feet by 2015 from the current 1.215 billion cubic feet.
The Shwe reserves in the gas field off the Arakan coast have
attracted considerable attention following the discovery of
deposits at block A-1 (Shwe field and Shwephyu field) in January
2004 and at block A-3 (Mya field) in April 2005. It has been
estimated that the Shwe field holds a gas reserve of 4tcf to 6 tcf
and the Shwephyu, and the Mya fields have a combined proven reserve
of 5.7tcf to 10 tcf. The finds have triggered fierce competition
between India, China, South Korea, Thailand Japan and
Singapore.
Thanks to its decades of proximity to Myanmar’s military rulers,
China has been successful in swinging decisions in Myanmar’s energy
sector in its favor. That it is a veto-holding member of the United
Nations Security Council and in a position to prevent resolutions
critical of the junta from being passed at the top UN meeting place
has helped increase China’s presence and profile in Myanmar’s oil
and gas sector.
Stakes held by Chinese companies in 16 oil and gas blocks make
China the largest foreign investor in Myanmar’s energy sector,
although it entered only as recently as 2001.
In December 2008, China finalized an agreement with a consortium
led by South Korea’s Daewoo International and including
MOGE, India’s Oil & Natural Gas
Corporation, GAIL India (Ltd.) and Korea Gas
Corporation, under which it was assured of 30-year supply of gas
from the A1 and A-3 blocks beginning 2013. The pipeline from
Kyaukphyu will carry this gas to Yunnan.
Besides opening up a new source of gas in Myanmar for China, the
pipeline project will strengthen China’s bonds with Myanmar’s
military rulers and increase its already considerable influence
over its neighbor. No less significant, the link will enhance
China’s energy security, helping to reduce China’s excessive
dependence on the Malacca Strait.
The 900km-long strait, which connects the Indian and Pacific
Oceans, is one of the world’s busiest shipping channels. Around
65,0000 vessels pass through it every year, carrying a quarter of
the world’s traded goods. Roughly a quarter of all oil transported
by tankers passes through the strait, mainly from the Gulf and
Africa to China, Japan and South Korea.
The Malacca Strait is crucial for China’s trade and energy
security. At present, roughly 80% of China’s annual imports of 1.5
billion barrels of oil pass through the narrow seaway, which
separates Malaysia from Indonesia.
Over the past few years, Chinese analysts and leaders have been
describing the strait, as a strategic vulnerability, drawing
attention to the consequences for China if this shipping channel
were to fall into the hands of “hostile powers” or pirates or
terrorists. What if the US were to block China’s access to the
strait in the event of a China-Taiwan conflict?
In November 2003, Chinese President Hu Jintao articulated this
fear when he declared that “certain major powers” were bent on
controlling the strait. Analysts have been discussing the country’s
“Malacca dilemma” since then and exploring options to overcome it.
One proposal, partially undertaken, is to develop a port and
pipeline terminal at Gwadar, in southwest Pakistan, from where
Middle East fuel could also be pumped to western China.
From 2013, Chinese oil tankers from the Middle East and Africa
will be able to cross the Bay of Bengal to dock at Myanmar’s Sittwe
and Kyaukphyu ports from where their cargo will be transported
through pipelines to Yunnan. The transport time of fuel that
bypasses the Malacca Strait in this way will be cut by a week.
The pipelines, however, will mean an increased Chinese presence
and activity in the immediate neighborhood of India. The pipelines
might have eased Beijing’s anxieties somewhat, but they have added
to New Delhi’s.
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