Myanmar signs up energy partners

Sources: Asia Times Online

As media attention fades from the death and devastation wrought in Myanmar by Cyclone Nagris in May, India, China, South Korea and Thailand have provided the military government a financial lifeline at a time when Western criticism of the military regime's perceived inadequate response to the natural disaster still runs on high.

An estimated 135,000 people are believed to have died in the storm and relief organizations have said that 2.4 million have been affected. A recently released interim report by the tripartite core group comprised of the Association of Southeast Asian Nations (ASEAN), the United Nations (UN) and Myanmar authorities estimate that 40% of the country's food stocks were destroyed, 380 villages were leveled and 90% of the affected population is still in dire need of assistance.

The junta will take that joint assessment to international donors with the aim of helping to drum up cash for reconstruction and rehabilitation activities in the devastated Irrawaddy Delta and other affected areas.

The junta's initial request for US$11.7 billion was spurned in late May by donors who were not satisfied that the government's search and rescue operations had been satisfactorily concluded. Before donors reach for their check books with ASEAN's and the UN's endorsement, they would be wise to consider the funds the junta has earned from recent foreign investments in the country's fast-growing energy sector.

Chief among Myanmar's foreign suitors are India and China, both of which refrained from issuing strong statements against the regime for its perceived poor handling of post-cyclone relief efforts. China, which has a permanent seat and veto power on the UN's Security Council, let it be known that it would veto any motions to censure or unilaterally force aid on Myanmar through UN mechanisms. Thailand and South Korea likewise remained mum while international opinion turned against the generals. In recent weeks they have apparently been rewarded in kind for their diplomatic reticence.

India was among the first countries to extend emergency aid to Myanmar in the wake of the cyclone disaster and has in recent weeks led the way in resuming large-scale investments the country. Indian Minister of State for Commerce and Power Jairam Ramesh made a four-day visit to Myanmar from June 22-25, during which he signed several new deals with Myanmar's Minister for National Planning and Economic Development U Soe Tha.

Included among the deals was a bilateral investment promotion agreement that entailed new preferential provisions for both promotion and protection of investments, the extension of national treatment to Indian firms, the repatriation of profits and easier immigration regulations for technical and managerial personnel to cross borders.

A second credit line agreement was signed between India's Exim Bank and the Myanmar Foreign Trade Bank to provide for the extension of $64 million to finance three 230 kilovolt electricity transmission lines. The lines are to be built by the government-owned Power Grid Corporation of India Limited (PGCIL). Bharat Heavy Electricals Limited (BHEL), another partially state-owned Indian company, was given the nod and extended a $60 million line of credit to build a 120 megawatt power project at Thatay Chaung in Myanmar.

Another $20 million was extended by India's Exim Bank to build a wire manufacturing facility, from which materials will be sourced for electrical transmission lines to expand Myanmar's woefully outdated power grid. Banking arrangements supporting a previous pact which covered trade between the border towns of Moreh and Manipur were also signed between the United Bank of India and the Myanmar Economic Bank, Myanmar Investment and Commercial Bank and the Myanmar Foreign Trade Bank.

Ramesh also reportedly expressed interest in two proposed hydropower projects along the Chindwin River in Sagaing Division and an acceleration of the previously signed bilateral Kaladan River multi-modal transit project, bringing forward the previously scheduled completion date by one year to 2012. The ambitious project aims to provide an alternative trade route for goods from India's northeastern regions through Myanmar's western Sittwe port.

Before the cyclone, the two sides in April signed an accord where India agreed to invest $130 million to expand the Sittwe port's facilities, make the Kaladan River navigable for 225 kilometers to Kaletwa in Myanmar's Chin State, and build a 62-kilometer road from Kaletwa to the Indian-Myanmar border at Mizoram. Myanmar's Vice Senior General Maung Aye, number two in the junta's hierarchy, oversaw the signing of that agreement.

Commercial diplomacy
Up until the mid-1990s, India was a staunch supporter of pro-democracy leader Aung San Suu Kyi and diplomatic efforts to establish democracy in the military-run country. Since then, successive Indian governments have pursued a policy of economic engagement with one eye towards tapping Myanmar's huge energy and trade potential and another towards hedging China's more established diplomatic and commercial influence.

Bilateral trade between India and Myanmar reached $590 million in 2005-2006, according to Indian foreign ministry statistics. Last year New Delhi pledged to invest $150 million in Myanmar for new gas exploration activities, with the Oil and Natural Gas Corporation Videsh (ONGC) and the Gas Authority of India Ltd leading the way. The two Indian companies hold respectively 17% and 8.5% stakes in the Shwe Gas project in the Bay of Bengal, a field energy analysts estimate contains 4.53 trillion cubic feet of natural gas.

The Shwe Gas project is led by Daewoo of South Korea, which has a 51% share in a consortium that includes the Myanmar Oil and Gas Enterprise and Seoul's Korea Gas Corporation. On May 28, Daewoo signed a preliminary agreement with the China National Petroleum Corporation (CNPC) to expand joint exploration for oil-and-gas resources including in so-called block AD-7, one of four the company has earned the concession rights from Myanmar’s government to explore.

Daewoo said recently that it expects to earn $10 billion from the Shwe Gas project over the next 25 years. The Shwe Gas Movement, a grouping of human rights and environmental organizations opposed to the project, has said the junta will earn between $12 billion and $17 billion over the life of the project. The group has criticized Daewoo officials who were charged and later convicted in 2006 for selling weapons technology to the military regime in violation of South Korean government embargoes.

An agreement signed between the Shwe Gas consortium and CNPC on June 23 covers the production, transportation and sale of natural gas from the A-1 to A-3 gas blocks off Myanmar's coast to China. Meanwhile Myanmar Oil and Gas Enterprise decided last week to exercise its rights to claim 15% of the gas field's yield once discoveries are made, allowing the state-run energy producer to begin earning as soon as production begins.

Plans are now underway to construct oil-and gas pipelines from Myanmar to China's southwestern Yunnan province. State-run PetroChina will reportedly oversee the pipeline project, which will transport gas from the Shwe gas fields and pipe fuel from Chinese tankers unloading their Middle Eastern cargoes on Myanmar's western coast. An agreement towards that end was reportedly signed on June 10, though neither government has made details of the deal public.

Thailand, which has served as a hub for aid distribution throughout Myanmar's cyclone crisis, has also secured new energy deals with the junta. PTT Exploration and Production (PTTEP) signed a deal with Myanmar Oil and Gas Enterprise on June 23 to pump gas from a yet-to-be-developed offshore field known as M9 in the Gulf of Martaban. The M9 field, which PTTEP holds in a 100% concession through Myanmar's government, is believed to hold 1.76 trillion cubic feet of natural gas. The Thai company said in August 2007 that it plans to spend $1 billion developing the field and was seeking financial and technical partners to help share the costs.

The project is expected to come on-stream in 2012 and will supply 300 million cubic feet of gas per day with 240 million cubic feet going to Thailand and 60 million to Myanmar. Initial profit-sharing agreements were first signed between PTTEP and Myanmar Oil and Gas Enterprise for the M9 block and another offshore block, M7, back in 2003. Thailand is currently receiving gas shipments in take-or-pay contracts from the Yadana and Yetagun gas fields in the Andaman Sea, making it Myanmar's largest gas customer.

Sean Turnell, an expert on Myanmar's economy at Australia's Macquarie University, said in a recent interview with The Irrawaddy magazine that over half of the junta's declared $8.7 billion export income for 2007 was derived from gas sales. A recently released report by the Myanmar Ministry of National Planning and Development said that foreign investment in oil-and-gas ventures last year more than tripled to $474.3 million, representing over 90% of the $504.8 million of total foreign investment received and well over the $134 million foreigners poured into energy-related projects in 2006.

Even those figures are widely viewed with skepticism, as the secretive government is known to under-report foreign investment earnings and stash the funds in secret accounts used for weapons purchases or prestige projects, including the recent construction of a new capital city at Naypyidaw.

Foreign donors will certainly take all of this into account when military representatives arrive hat-in-hand later this week in New York seeking billions of dollars in donations to rebuild cyclone-hit areas which Myanmar's secretive and apparently cash-rich military government had before the disaster long ignored.