China Wins Rights to Myanmar's Gas, Beating India

Daewoo International Corp., the operator of the field, said it picked a Chinese company as the preferred bidder. State-owned Indian companies own 30 percent in the area, which holds as much as 7.7 trillion cubic feet of gas.

India has lost out to China in more than $10 billion of oil and gas assets in Nigeria, Kazakhstan and Canada in the last two years, depriving the resource-scarce nation as crude oil prices rose to a record. China's planned construction of a pipeline underscored its commitment to win the latest contest.

``The Indians showed interest but they haven't been so aggressive,'' said Tony Regan, a consultant for U.S. Nexant Ltd. based in Singapore. ``The Chinese were showing much more interest and they were looking at how to get it to China and they got a pre-approval from Beijing for a pipeline to China.''

China, India, Thailand, South Korea and Japan are competing for a share of Myanmar's gas supply as discoveries increase. The Southeast Asian country had about 19 trillion cubic feet of reserves last year, BP Plc said in its annual energy report.

Planned Pipeline

The gas will be transported via pipelines, Daewoo said in a regulatory filing in Seoul today, without identifying the buyer.

The Korean company is the operator of the A-1 and A-3 offshore blocks, in which it has a 60 percent stake. Korea Gas Corp. owns 10 percent of the areas, GAIL India (Ltd.), the nation's biggest gas distributor, holds 10 percent and Oil & Natural Gas Corp., the biggest explorer, owns 20 percent.

``Gas from the field has to be sold and if Daewoo has chosen China, in-principle, I see nothing wrong with it,'' said R.S. Sharma, chairman of Oil & Natural Gas. ``GAIL was dealing with the bit relating to getting the gas to India.''

Energy consultant Gaffney, Cline & Associates certified that Myanmar's A-1 and A-3 areas hold as much as 7.7 trillion cubic feet of gas.

State-Owned Bidders

Daewoo International is in talks to sell the gas to PetroChina Co., the Korea Economic Daily reported on Nov. 27, citing Daewoo International's Chief Executive Kang Young Won. Daewoo and PetroChina are in discussions over the price and may reach an agreement soon, Kang said in an interview with the Korean-language newspaper.

``Daewoo and Myanmar government had agreed to put the first priority on profitability when it comes to the gas project, and the selection of a Chinese company is in line with the basic principle,'' said Kim Sang Ook, director at Daewoo International's public relations department.

China is Myanmar's closest ally and one of its biggest trading partners. As a permanent, veto-wielding member of the UN Security Council, its support is essential for any international effort to bring about change in the Southeast Asian country.

Myanmar's military, which has ruled the country formerly known as Burma for 45 years, was condemned around the world for deploying soldiers Sept. 26 to crush the biggest anti-junta protests in almost 20 years.

Energy Consumption

China, the biggest contributor to global growth, last year consumed 1.96 trillion cubic feet of gas, according to BP Plc's Statistical Review of World Energy released in June this year. India, the second-fastest growing economy in the world after China, estimates its demand for gas will more than double to 14 billion cubic feet a day by 2025.

Natural gas is the largest source of revenue for Myanmar, according to the New York-based Human Rights Watch. Myanmar earned $2.16 billion by selling gas, mainly to Thailand, in 2006, Human Rights Watch estimates. And that amount accounted for half the country's total exports, it said.

Cnooc Ltd., China's biggest offshore oil company, in 2006 bought a stake in a Nigerian oil field for $2.7 billion after India's government blocked Oil & Natural Gas's plan to buy the share.

China National Petroleum Corp., or CNPC, in August 2005 won $4.2 billion bid for PetroKazakhastan Inc. A month later, the Chinese company won a $1.42 billion bid for Encana Corp.

``They go in with a sovereign mandate,'' Oil & Natural Gas's Sharma said in an interview in October. ``We have commercial considerations and need to do due diligence.''