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Indo-Chinese energy diplomacy centering on Myanmar

Updated On: Jan 12, 2009

As much as 80% of China's oil imports flow through the 630 mile-long Straits of Malacca, which is just 1.5 miles wide at its narrowest point  and this supply route can be easily disrupted by an accident or terrorist attack along the Malacca Strait or a US-led blockade during a conflict over Taiwan. Therefore, China is also looking into bypassing the straits with discussions for a pipeline to Myanmar, as well as possibly Bangladesh, Pakistan or Thailand but Pakistan looks like an unlikely candidate given the threat of terrorist attacks on pipelines traversing its territory while a pipeline through Bangladesh would have to cross the territory of strategic competitor India and this quest for an alternative may thus bring China into the Indian sphere of influence.

Even without directly entering India’s South Asia sphere of influence, Myanmar with its close relationship with China hosting a 1,250 kilometer pipeline from the deepwater port of Sittwe on the Bay of Bengal to Kunming in Yunnan province may itself become a site of Sino-Indian competition due to India's desire to access energy resources within Myanmar and Myanmar's proximity to India's troubled northeast insurgencies. Myanmar is crucial to China as building oil pipelines originating in Myanmar and ending up in Yunnan would enable Chinese oil tankers need only to unload in the Myanmarese and Thai ports without having to traverse through the dangerously piracy-infested waters in the Straits of Malacca.

In dealing with the Myanmarese, China utilized all possible tricks in the bag, for example, investing 8 billion yuan ($1.04 billion) in a 2,380-km gas pipeline between the two countries despite initial uncertainty about who will get the gas from some of Myanmar’s largest offshore deposits and Beijing also offered to build pipelines for free as part of its price negotiations and, even within China itself, intra-provincial competition has seen the Chongqing municipality lobbying to have the pipeline extended to supply feedstock for a planned new refinery in competition with the main pipeline to Yunnan.

But Sino-Indian quests for oil need not result in zero-sum competition. Sino-Indian relations have manifested in the energy sphere, with the chairman of Xinjiang autonomous region, Ismail Tiliwandi, making a trip to India in October 2004 to discuss transport links and a Sino-Indian natural gas pipeline project and India and China are already collaborating in the energy sphere, with India holding a 20% stake and China a 50% stake in the development of the Yahavaran oil field in Iran while China Gas Holdings established an alliance with India's largest energy conglomerate, Gail.  

Even in Myanmar, trilateral cooperation between China, Korea and India have helped to provide a win-win situation. The China National United Oil Corporation (CNUOC), Daewoo International Group Corporation [with partners South Korea Gas Corporation (10%), India's ONGC Videsh Ltd (20%) and Gas Authority of India Ltd (GAIL, 10%)] and Myanmar signed a 30-year gas pact involving the Shwe Project on 24 December 2008 Wednesday. This is seen as a victory for Asian energy diplomacy in the Indo-China region as Myanmar’s large 3 natural gasfields had been the subject of a geopolitical tug-of-war between nearby China, India and Thailand as well as potential LNG buyers South Korea and Japan. By cooperating, a potential source of conflict is resolved.

The natural gas deposits Shwe gas project (comprising of Shwe and Shwephyu fields) located at A-1 block and block A-3 (Mya field) in Myanmar's Rakhine offshore area was developed and exploited by the Daewoo consortium (60% stake in the project) and the 24 December 2008 pact concluded the sale and transport of natural gas from offshore blocks A-1 and A-3.  The Shwe field is estimated to contain a gas reserve of 4 to 6 trillion cubic-feet (TCF) or 113.2 to 170 billion cubic-meters (BCM), while the Shwephyu 5 TCF and the Mya 2 TCF have a combined proven reserve of 5.7 to 10 TCF of gas.  

Myanmar is rich natural gas offshore deposits with three main large offshore oil and gas fields and 19 onshore ones and recoverable reserve of 18.012 trillion cubic-feet (TCF) or 510 billion cubic-meters (BCM) out of89.722 TCF or 2.54 trillion cubic-meters (TCM)'s estimated reserve of offshore and onshore gas (in addition to 3.2 billion barrels of recoverable crude oil reserve) and according to the Central Statistical Organization, in the fiscal year 2007-08, Myanmar produced 7.62 million barrels of crude oil and 13.393 BCM of gas and had drawn in 3.243 billion dollars in 85 projects as of the end of 2007 ever since the country opened to such investment in late 1988.  Its gas industry now stands the second in the country's foreign investment sectorally after electric power.

In early 2009, China will begin construction of oil and gas pipelines from the Kyaukpyu port on the Bay of Bengal in proximity to the Yunnan Province, a US $2.5 billion project that was inked pipeline project in November 2008. Kyaukpyu Port is part of China’s two-ocean strategy in geopolitics, involving the extension of its influence in both the Pacific and India oceans, reduces China’s dependence on the Straits of Malacca.

Sources:

Korea Times, "Human Rights Abuse in Myanmar?" dated 4 Jan 2009 in the Korea Times [downloaded on 9 Jan 2009], available athttp://www.koreatimes.co.kr/www/news/opinon/2009/01/137_37236.html

Reuters, "China-Myanmar oil pipe work to begin this year" 22 April 2007 in ASEAN Energy News Service website [downloaded on 1 Jan 2009], available athttp://aseanenergy.org/news/?p=859.