Courtesy of The Wall Street Journal, an interesting look at how China and its neighbors are moving ahead on a multibillion-dollar oil-and-gas pipeline project that promises to greatly enhance the financial strength of Myanmar’s military regime and boost its political clout in Asia. As the article notes:

“…Many details of the project remain a mystery. Myanmar’s highly secretive military government has disclosed little, and the main foreign companies involved, including China National Petroleum Corp. and Daewoo International Corp. of South Korea, have said little in recent months aside from some general outlines and cost estimates of their plans.

But activity is ramping up along the proposed route, residents say. In September, a crew of two-dozen Chinese engineers showed up to survey the path through this once-quiet mountain town, which is becoming a major crossroads for trade with China, a few hours’ drive away.

“It’s very hard work, in the mountains,” said one of the workers, as he ate fried eggs and papaya one morning in a local guesthouse. The man, who didn’t give his name, said he worked for an arm of CNPC.

When completed, the pipeline will help unlock large untapped deposits of natural gas off Myanmar’s coast and carry it hundreds of miles to southern China, expanding Myanmar’s role as one of Asia’s important energy exporters and enhancing its influence over other countries that rely on its supplies.

The project also is expected to include a port that can take deliveries of oil from the Middle East and Africa before transferring them to China. That will give China a new route for oil that bypasses the congested Strait of Malacca near Singapore, which handles a large portion of China’s imported crude today.

All this should improve China’s energy security while generating about $1 billion or more in annual revenue for Myanmar’s government over 30 years, according to estimates by advocacy groups tracking the project, including the Shwe Gas Movement, based in Thailand. It is an annual payday equivalent to roughly a third of the country’s existing foreign-exchange reserves.

The project is an important part of China’s wider strategy to diversify energy sources and reduce its reliance on supplies that could be blocked easily by foreign powers or pirates.

Chinese media reported this year that full-scale construction of the Myanmar pipeline would begin in September, but an official at a pipeline division of CNPC said work had been delayed by ethnic tensions along the pipeline route. An official at Daewoo said work on the gas portion should begin by year’s end.

Daewoo has said the overall investment, which includes developing the offshore gas with other partners, including Myanmar Oil & Gas Enterprise, Korea Gas Corp., Oil & Natural Gas Corp. of India, and GAIL (India) Ltd., will cost at least $3 billion. Other partners have put the total at nearly double that amount.

The project will likely make it harder for U.S. officials to achieve their goal of weakening the regime. The U.S. and Europe imposed tough sanctions on Myanmar after its ruling junta ignored a 1990 national election won by supporters of opposition leader Aung San Suu Kyi, who remains under house arrest.

Many analysts argue sanctions have only pushed Myanmar, formerly known as Burma, deeper into the arms of Asian countries, such as China and North Korea, that still do business with the regime. In September, the U.S. government decided it would step up dialogue with Myanmar military officials to rebuild U.S. influence there, though it says sanctions will remain in place for now.

U.S. Assistant Secretary of State Kurt Campbell and a deputy are expected to travel to Myanmar Tuesday for a two-day visit, as part of the new initiative.

More recently, though, the region — including this small city up the road from Hsipaw — has started to take on a new commercial importance as a transit point for trade from China, which is a few hours away by road.

The pipeline project isn’t without risks, especially for China. The route traverses border regions, including areas near Hsipaw, rife with ethnic tensions. Many residents in the area say they detest China’s growing influence. In August, Myanmar military forces clashed with local rebels near the pipeline route, killing more than 30 and sending 30,000 residents fleeing into China, resulting in a rare public rebuke of Myanmar leaders from China.

Myanmar experts say further violence is possible, if not likely, in advance of a national election scheduled for next year — the first such vote since 1990.

The project also has attracted the ire of human-rights groups that say any project built in Myanmar will lack sufficient environmental and social safeguards. Daewoo and CNPC declined to comment on those concerns.

The advocates point to the other major pipeline project in Myanmar — the Yadana project developed by Total SA, Unocal Corp. and others in the 1990s — that carries gas to neighboring Thailand for its power grid, even as much of Myanmar suffers from daily power outages.

International advocacy groups alleged a host of human-rights abuses with the project, including forced labor and land confiscations. In September, a Washington-based group called EarthRights International said Myanmar’s military had siphoned off $4.8 billion in revenue from the project, storing much in foreign banks.

An official at Myanmar’s public-relations department declined to comment and referred questions to another ministry whose staff wasn’t available to respond. Total and Chevron Corp., which later bought Unocal, have said they weren’t connected to any abuses and that their investments are benefiting local residents.

In Hsipaw, many people seem unaware a pipeline is even contemplated. A once-quiet town of wood and concrete buildings, including an Art Deco movie house, it is becoming a major crossroads for trade with China, which is a few hours away by car. A temporary bridge across the local river is loaded down with Chinese trucks while a new, bigger bridge is being built, and the honking of horns can be heard echoing throughout the valley from a mountaintop Buddhist temple nearby.

At least one guesthouse in the area is adding a wing to accommodate the expected influx of Chinese workers for the pipeline. But many of the local residents who said they were aware of the project said they expected it to bring little but trouble. The pipeline “is only good for the government,” said one resident, who works as a waiter. “China is colonizing our country.” Others said they believed that only residents who have connections with the military will benefit or get jobs.”