August 22, 2018
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China’s fossil fuels delivery turned on

The pressing of a button, fireworks and cheers welcomed the turning on of a project that has dramatic significance for China.

The Myanmar section of the Myanmar-China natural gas pipeline, co-invested by six parties from four countries including China, Myanmar, South Korea and India, was inaugurated in Mandalay July 28 and started to deliver gas to China. At about 4 pm local time, Myanmar Vice President Nyan Tun, Energy Ministers Than Htay and Zeya Aung, Chinese Ambassador to Myanmar Yang Houlan and a South Korean representative jointly pressed the commissioning button. When torches flamed in the sky at Namkham Measuring Station of Myanmar-China Gas Pipeline, a storm of applause and cheers broke out on the ceremony site and Namkham Metering Station.

The importance of this event should not be easily dismissed. The gas pipeline, and the parallel oil pipeline, delivering fossil fuel to China’s Yunnan province and beyond, breaks Beijing’s dependence on fuel deliveries through the Malacca Strait. It offers another lifeline to the outside world for a country that feels itself largely hemmed in and is proving aggressive, short of declaring war, in its search for energy to fuel its growing economy, industrialization and urbanization.

The pipeline is part of a so-called Myanmar-China Oil and Gas Pipeline project, which also includes building a crude oil pipeline. Starting from Kuaykphyu, it passes through Rakhine state, Magway and Mandalay regions and Shan state and enters Chinese territory at Ruili, Yunnan province through Namhkan.

Fuel from Myanmar and the Middle east

The dual pipeline will act as a delivery system for fuel extracted off the coast of Myanmar but also will be used to deliver fuel from the Middle East. As countries scramble for energy supplies in a volatile world, China has just secured a drip feed plugged in to its southwest flank.

Gas is gaining increasing importance for China. The country’s consumption in 2012 reached 147 bcm which makes China one of the four largest gas consumption countries with America, Russia and Iran. However, the gas consumption only accounts for 4.6 percent in that of primary energy and the percentage is quite lower than 23.8 percent which is the average level of advanced countries.

China’s gas needs look set to grow as the country becomes more urbanized. China announced the 12th five year development plan for natural gas on October 2012 which anticipates that the gas consumption will increase to 230 bcm and the penetration will be much higher in 2015. By then the domestic gas supply will exceed 260 bcm, including imported LNG and unconventional gas like CBM, shale gas and coal gas. Till the year 2015, the natural gas onsumption will take 7.5 percent in the primary energy consumption.

The gas pipeline stretches for 793 km onshore within Myanmar’s territory with six processing stations, while the crude oil pipeline, which is nearing completion, starts from Made Island and extends onshore for 771 km.

The gas pipeline has a designed annual throughput of 12 billion cubic meters before offloading in Myanmar. The transmission capacity of the crude oil pipeline on the Myanmar side is designed at 22 million tons per year with a 300,000-ton crude oil wharf being added.

Not just for China

Although the majority of the fuel supplies will be pumped through to After the completion and commissioning of the whole project, 2 million tons of crude oil and 20 percent of the designed throughput of gas will be off-loaded in Myanmar, which will be helpful to promote Myanmar’s economic development and people’s living standards.

Two joint ventures - SouthEast Asia Crude Oil Pipeline Co., Ltd. (SEAOP) and SouthEast Asia Gas Pipeline Co., Ltd. (SEAGP) - were registered and established with investment from all parties to respectively take charge of operation of the two pipelines.

The SEAOP involves China National Petroleum Corporation (CNPC), Myanmar Oil and Gas Enterprise (MOGE), while the SEAOP involves CNPC of China, DAEWOO of South Korea, OCEBV of India, MOGE of Myanmar, KOGAS of S. Korea and GAIL of India.

The two joint ventures have conducted operations in strict accordance with specifications and patterns of international pipeline projects since the beginning of pre-feasibility study stage, according to sources with the investors.

Responsible official of the SEAOP Jiang Changliang said at the commissioning ceremony that the areas where the pipeline passes through are featured with complicated terrain and environment, which posed serious challenges to the construction.

After three years of construction, the gas pipeline (Myanmar section) was completed and underwent a test run on May 30.

Claims of jobs and business

The Myanmar-China Oil and Gas Pipeline project is said to have created a huge amount of job opportunities for local people, hiring as many as over 6,000 for the construction work.

Meanwhile, a total of more than 220 Myanmar enterprises were involved in the project with their employees being technically trained.

There has also been socioeconomic development aid projects undertaken along the Myanmar-China gas pipeline project areas. So far, 20 million U.S. dollars have been donated for use in education, medical treatment, health and disaster relief. Besides, 45 schools and 24 clinics have been built to improve the teaching facilities for 19,000 students and medical facilities for 800,000 local people.

There have been claims by some NGO and rights groups that these facilities were not always provided for those who were negatively affected by the pipeline construction.

The joint ventures also offered 10 million dollars for repairing high voltage power grid line in Kyaukphyu, in which CNPC donation accounted for 3 million dollars.

In the second half of 2012, when Rakhine state experienced communal riots, the joint ventures extended 50,000 U.S. dollars of aid in cash and 10 tons of rice. Moreover, they also donated 50, 000 dollars to quakehit victims in central Myanmar.

According the publicity and hype promoted by the parties involved, the China-Myanmar Oil and Gas Pipeline project is a multi-national and mutually beneficial energy project and also carries the goodwill of the peoples of China and Myanmar, adding it is bound to promote the regional economic development while deepening the China-Myanmar “Paukphaw” (fraternal) friendship.

Energy-hungry giant

China is estimated to have invested at least US$14 billion in Myanmar in the first decade of this century, primarily in natural resources extraction and in fuel infrastructure such as an oil transhipment terminal on the coast at Kyaukpyu and the oil and gas pipelines from the Bay of Bengal. But with the emergence of a reformist government in 2011, opening up Myanmar economically and politically, Beijing’s influence appears troubled and facing competition from other countries, not least the U.S. However, energy industry analysts reckon that despite the surprise halt to the multibilliondollar Chinese hydroelectric project on the Ayeyarwady River at Myitsone by President Thein Sein, and vocal public protests against the Chinese-run copper mine at Monywa, China will remain a key player in helping to develop Myanmar’s future.

Observers say Myanmar is trying to balance between China and the U.S., and sometimes it may lean towards U.S., and sometimes towards China, but the government does not appear to be in a rush to take sides. China will remain the single biggest investor for years to come. The trans-Myanmar pipeline projects in which the state-controlled China National Petroleum Corporation (CNPC) has invested several billion dollars are nearing completion. Crude oil transhipped at a new terminal at Kyaukpyu on Myanmar’s central coast is forecast by the Chinese to be flowing by the end of this year.

Chinese national oil companies are expected to bid for some of the 30 offshore blocks in the Bay of Bengal put up by the Ministry of Energy for auction.

They are in a strong position to benefit from the infrastructure, which Chinese state money has already built around Kyaukpyu. This includes a deep draught port terminal to handle oil tankers bringing in crude from the Middle East and North Africa, finally enabling Beijing to circumvent the narrow Malacca Strait between Indonesia’s Sumatra and Malaysia.

Kyaukpyu is also the point where an undersea pipeline from the Shwe gas field in the Bay of Bengal emerges. CNPC has already bought most of the estimated 200 billion cubic metres of gas in two blocks of the field developed by a South Korean and Indian consortium. Two other blocks have still to be developed.

Other players

Interest in investing in Myanmar’s offshore potential has also been expressed by Royal Dutch Shell, ConocoPhillips, Total, Nippon, Chevron and China National Offshore Oil Corporation.

Analysts believe China will pull all the diplomatic and economic levers it can to keep in favor with the Myanmar government in Naypyitaw as Beijing seeks to keep abreast of the new competition.

“Under the new conditions, China is willing to work with Myanmar to increase strategic mutual trust [and] strengthen mutually beneficial cooperation between the two nations in all areas,” the official Chinese news agency said recently.

President Thein Sein has told Beijing’s new ambassador to Naypyitaw, Yang Houlai, that Myanmar is “willing to continue to develop the good neighborly friendly cooperative relations with China.”

The Myanmar president has visited China three times since March 2011 but he has also been averaging one foreign tour per month elsewhere in that time too. This year, in addition to China, he has been to New Zealand, Australia, several countries in Europe, the headquarters of the European Union, and the White House for talks with President Barack Obama.

Japan in the game Opposition leader Aung San Suu Kyi has this year visited Japan, regarded by many analysts as the biggest regional rival investor to China in Myanmar. Tokyo’s cancellation of old debts owed by Myanmar totalling US$3.7 billion was described by the Japanese government as “counterbalancing” Chinese influence.

Meanwhile, recent fighting between Kachin and Shan autonomy-seeking militia factions and the Myanmar army in the country’s north has raised concerns about the security of CNPC’s pipelines, though combatants in Kachin State recently signed a seven-point agreement with the government, aimed at bringing peace.

CNPC has publicly said everything is in order but AsiaPacific Energy Consulting’s Troner believes the Chinese have a “legitimate” security worry.

However, Beijing may view possible risks to its new pipelines as less problematic than a blockage of the narrow Malacca Strait in a major international political crisis or from a shipping disaster. The pipelines are an important strategic move, particularly given tensions between China, the U.S. and Japan over territorial claims in the South China Sea. For now, pressing the button to start pumping gas is an important move for China as it seeks greater energy security.

(Mizzima, Xinhua, Gordon Brown)

This article first appeared in the August 15 edition of M-ZINE+.

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