Gas deal fuels China's plans for Myanmar

Feb 2, 2006
By David Fullbrook
For The Straits Times

AFTER wrapping up oil and gas deals in Africa, the Middle East and Latin America over the last year, China is now lining up to buy Myanmar's gas.

State-controlled PetroChina has quietly reached an understanding with Yangon to pipe gas from a new offshore field to Yunnan as early as 2009.

Myanmar plans to sell 185 billion cubic metres of gas to PetroChina over 30 years via a new 800km pipeline to Kunming from exploration area Block A1. It would take Singapore 30 years to use that much gas. Given the close relations between Yangon and Beijing, turning the memorandum of understanding into a deal should be just a formality.

Even furious lobbying from India is unlikely to change that. Delhi had hoped to be the first customer for gas from Block A1, which lies under the Bay of Bengal offshore from the Myanmar town of Sittwe and is only a few hundred kilometres from Kolkata.

Still, with 2.5 trillion cubic metres of gas - only slightly less than in Indonesia - estimated to lie off Myanmar's coast, there should be some left for India. However, it is embarrassing for India because it had been making much of joint ventures between Chinese and Indian energy companies in Syria and Sudan. The suggestion was that there was a degree of tacit cooperation between Delhi and Beijing over energy.

It is no surprise then that neither Myanmar officials nor PetroChina executives have been trumpeting the memorandum, signed in early December. PetroChina did not respond to requests for further information. Indeed the agreement only slipped out because Indian consultants leaked it to the Indian press.

There simply is not enough oil and gas in the world for China and India to share. Even if China's economy stopped growing - and it doubles in size every nine years - its oil and gas imports would continue to rise because China's own oil and gas fields are small and shrinking.

Piping in gas from neighbouring Myanmar will help make up that shortfall. More deals could follow as more gas is discovered. Firms are drilling exploratory wells along Myanmar's coast. A pipeline already runs from the offshore Yadana gas field through mountains once controlled by Karen and Mon guerillas to power stations in Thailand.

But a pipeline to Yunnan means more than just helping to power China's economy. It would set a precedent for more pipelines and quite possibly roads, railways and even river shipping between nearby Myanmar ports and central China, where the economy is not producing jobs and increasing wages at anything like the rates seen along China's distant Pacific coast.

Gas and oil imported from Africa and the Middle East now sail through the Strait of Malacca and up through the South China Sea to China's Pacific coast. If these tankers could unload their cargoes into pipelines running from Myanmar's coast to China, shipping times would be cut by as much as a week.

That would save money, and help Chinese generals sleep easier. They worry that the Strait of Malacca might be closed either by a terrorist attack or a blockade caused by a crisis, say between China and America over Taiwan.

Cheaper energy would also help make places like Yunnan, Sichuan and Chongqing more exciting to investors, who currently favour coastal provinces despite land and labour being more expensive. Slow and congested transport makes inland China, which is days, even weeks, from east coast ports, unattractive.

Though there have been no official announcements, roads, railways or rivers from Yunnan to Myanmar's coast are high on Beijing's agenda. Chinese workers are reportedly busy building roads from Ruili in Yunnan to Bhamo, a port on the Irrawaddy River in northern Myanmar, and from Tengchong to Myitkyina, the northern terminus for Myanmar's dilapidated railway.

Traders in Ruili say Chinese engineers have surveyed Bhamo's port for expansion and even considered dredging the upper reaches of the Irrawaddy to improve navigation.

Ruili, now a small town notorious for gambling and prostitution, attracts migrants from across China hoping to make a quick yuan or two from border trade. A building boom suggests people are betting on a bright future. A new 12-lane Customs and immigration post awaits the arrival of one of seven new national expressways announced a year ago. Locals talk of the railway from Kunming arriving in 2007. China clearly has grand plans for Myanmar.

And they are plans that Myanmar's military regime appears to share. In the past, rebel armies made running a pipeline through Myanmar to China risky. These days, most rebel armies have either surrendered or agreed to ceasefires with Myanmar's powerful armed forces. In particular, a corridor sweeping through southern Kachin State and northern Shan State that covers trade routes between Mandalay and China is now quite secure.

Receipts from gas sales and transportation fees will make Myanmar's generals even more immune to Western sanctions intended to push Yangon to improve its dismal human rights record and restore democracy. Asean's attempts to coax Yangon into changing its way seem even less likely than ever to work.

Tentative gas sales, a pipeline plan and road-building are bringing China and Myanmar closer together than ever. It means jobs for China and dollars for Myanmar's generals. Still, those dollars might turn out to be a curse. Oil revenues have only led to jealousies, political turmoil and fighting in many poor countries.

The writer-researcher is based in Bangkok.