Pipelines to make Myanmar trade hub

27 May 2013, Bangkokpost - Myanmar is on track to becoming Asia's newest crossroads with the completion of two overland pipelines to China, expected this month.

By May 31, the China National Petroleum Corporation (CNPC) is scheduled to finish two 800-kilometre pipelines from Kyaukphyu, in Myanmar's Rakhine state, to Ruili on the Chinese border.

By mid-year, natural gas should start flowing through one pipeline from the Shwe Gas reserves in the Bay of Bengal, and by the end of the year a parallel oil pipeline is expected to be operational.

The project is estimated to have cost US$2.5 billion.

"China is on the cusp of realising a long-held dream of cutting out the problem of transporting oil through the Strait of Malacca," said Sean Turnell, an economist at Australia's Macquarie University.

China currently receives an estimated 37% of the oil it consumes through the Strait of Malacca. This dependence on the strait could be reduced to 30% by the Myanmar oil pipeline, which has the capacity of supply 22 million tonnes a year.

Myanmar will receive a "road right fee" of $13.8 million per year and a transit fee of one dollar per tonne of crude oil, which would raise the annual total to about US$35 million.
The deal, signed by Myanmar's former junta, is only worth a "pittance" compared to the potential benefit to China, according to Turnell.

"The government should review the projects signed by the former military leaders and should assess Myanmar's benefits," said Aye Maung, chairman of the Rakhine Nationalities Development Party.

The pipelines run through two of the most volatile states: Rakhine, the scene of bloody sectarian fighting last year, on the western coast; and Shan state, where a handful of ethnic insurgencies are ongoing, in the north-east.

"We want the government to address the issue of ethnic rights before shipments of oil and gas begin," said Major Sai La, spokesman for the Shan State Army (SSA), which has been struggling for semi-autonomy in their territory for the past five decades.

"I don't know what benefits Myanmar will get from these pipelines, but I know exactly what the Shan ethnic groups will get: nothing."

The gas comes from the offshore Shwe Gas project, a joint venture between South Korean firm Daewoo International (51%), ONGC Videsh Ltd of India (17%), Myanmar Oil and Gas Enterprise (15%), GAIL Ltd of India (8.5%) and Korea Gas Corp (8.5%).

It is exected to deliver about 12 billion cubic metres of gas to China per year, earning Myanmar foreign exchange revenues of about $1.5 billion. Another one billion cubic metres will be reserved for domestic use, according to Myanmar's energy ministry.

Natural gas is already Myanmar's main export earner, bringing in about $2.5 billion per year from gas piped to Thailand, but precise figures of government earnings from gas are difficult to come by.

To allay concerns about the local impact of the pipeline, CNPC says it has done much to improve the lives of residents affected by it.

The company has spent $10 million on a local electricity transmission line and another $14 million on community projects in health, education, electricity, and vocational training, CNPC sources said.

But Myanmar officials and locals continue to raise objections to the project.

"People fear the government troops guarding the pipelines, and potential pipeline explosions," Shan spokesman Sai La said.

"Local people didn't get full compensation for their land so they see this project - which made them landless - as good for nothing," Rakhine parliamentarian Aye Maung said.

Perhaps the greatest economic benefit for Myanmar will come from the nearly completed deep-sea port at Maday Island, Kyaukphyu, which offers a new route to India.

"Burma (Myanmar) is now the world's second-largest producer of pulses and beans, and most of it is exported to India," Turnell said. "The port could open the door to other commodities."

"We are already looking into exporting beans from Maday instead of Yangon," said Mg Mg Lay, vice chairman of the Union of Myanmar Federation of Chambers of Commerce and Industry.

http://bangkokpost.com/breakingnews/352043/pipelines-to-establish-myanmar-as-regional-trade-hub