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Myanmar Gas Deal with China

Updated On: Jul 02, 2008

Myanmar has signed a new deal to sell and pipe natural gas to southern Yunnan province in China, a move that could boost plans for an ambitious oil pipeline along the same route.

An oil pipeline linking Myanmar's western coast with Yunnan in China has been talked about for years as a possible solution to the country's reliance on the Strait of Malacca as the main transit route for oil imports. About 80 per cent of the crude oil that China imports from the Middle East and Africa sails through the Strait of Malacca. This has prompted fears that the busy strait could become a potential choke point.

The proposed Myanmar-Yunnan oil pipeline will ease this problem, boost China's energy security, and potentially cut costs and shipping times. For Myanmar, the lucrative natural gas deal would bolster the generals' ability to weather international criticisms and sanctions imposed by the West.

But high costs and political uncertainties involved in such a project could still emerge as stumbling blocks.

China's success in clinching the pact also likely came at the expense of India, which is competing for influence in Myanmar and also reportedly in hot pursuit of this natural gas deal. According to Reuters, South Korea's Daewoo International Corp has a 51 per cent stake in the fields, followed by India's Oil and Natural Gas Corp with 17 per cent, India's GAIL with 8.5 per cent, South Korea's Korea Gas Corp with 8.5 per cent and Myanmar Oil & Gas Enterprise with 15 per cent.

Under the deal the mainland's China National Petroleum Corp will work with these five partners for the 'sale and transportation' of the Myanmar natural gas.