Country set for regional hub status
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However, ethnic tensions threaten to derail projects
Myanmar is on track to becoming Asia’s next crossroads, with the completion of two overland pipelines to China expected this month.
By May 31, the China National Petroleum Corporation (CNPC) is scheduled to finish two 800-kilometre pipelines from Kyaukphyu, in Myanmar’s Rakhine state, to Ruili on the Chinese border.
By mid-year, natural gas should start flowing through one pipeline from the Shwe Gas reserves in the Bay of Bengal, and by the end of the year a parallel oil pipeline is expected to be operational.
The project is estimated to have cost US$2.5 billion (Bt74.67 billion).
“China is on the cusp of realising a long-held dream of cutting out the problem of transporting oil through the Strait of Malacca,” said Sean Turnell, an economist at Australia’s Macquarie University.
China currently receives an estimated 37 per cent of the oil it consumes through the Strait of Malacca. This dependence on the straits could be cut to 30 per cent by the Myanmar oil pipeline, which has the capacity of supply 22 million tonnes a year.
Myanmar will receive a “road right fee” of $13.8 million per year and a transit fee of $1 per tonne of crude oil, which would raise the annual total to about $35 million.
The deal, signed by Myanmar’s former junta, is only worth a “pittance” compared to the potential benefit to China, according to Turnell.
“The government should review the projects signed by the former military leaders and should assess Myanmar’s benefits,” said Aye Maung, chairman of the Rakhine Nationalities Development Party.
The pipelines run through two of the most volatile states: Rakhine, the scene of bloody sectarian fighting last year, on the western coast; and Shan state, where ethnic insurgencies are ongoing, in the northeast.
“We want the government to address the issue of ethnic rights before shipments of oil and gas begin,” said Major Sai La, spokesman for the Shan State Army (SSA), which has been struggling for semi-autonomy in their territory for five decades.
“I don’t know what benefits Myanmar will get from these pipelines, but I know exactly what the Shan ethnic groups will get: nothing.”
The gas comes from the offshore Shwe Gas project, a venture between South Korean firm Daewoo Interna-tional (51 per cent), ONGCVidesh of India (17 per cent), Myanmar Oil and Gas Enterprise (15per cent), GAIL of India (8.5 per cent) and Korea Gas Corp (8.5per cent).
It is expected to deliver about 12 billion cubic metres of gas to China per year, earning Myanmar revenues of about $1.5 billion. Another 1 billion cubic metres will be reserved for domestic use, according to Myanmar’s energy ministry.
Natural gas is already Myanmar’s main export earner, bringing in about $2.5 billion per year from gas piped to Thailand, but precise figures of government earnings from gas are difficult to come by.
To allay concerns about the local impact of the pipeline, CNPC says it has done much to improve the lives of residents affected by it.
The company has spent $10 million on a local electricity transmission line and another $14 million on community projects in health, education, electricity, and vocational training.
But Myanmar officials and locals continue to raise objections.
“People fear the troops guarding the pipelines, and potential explosions,” Shan spokesman Sai La said.
“Local people didn’t get full compensation for their land so they see this project – which made them landless – as good for nothing,” Rakhine parliamentarian Aye Maung said.
