China To Build A New Oil & Gas Pipeline Across Myanmar

Via Energy Daily, a report that China will build a new oil & gas pipeline across Myanmar.  As the article notes:

“…Work on the oil and gas line will begin in southwest China’s Yunnan province in the first half of 2009, the state-run China Daily reported, indicating a project that has been in the planning stages for years may finally kick off.

Once it is completed, at least part of the nation’s crucial energy supplies will be able to avoid the long, cumbersome and potentially insecure route via the Malacca Strait.

“From a geopolitical point of view, having alternative routes for energy supplies into China is attractive,” said Jason Feer, a Singapore-based analyst with Argus Media, an energy market research firm.

“The Strait of Malacca is a very busy waterway. It’s a quite narrow waterway. There’s always been concerns that it could be disrupted because of terrorism or piracy.”

Around 80 percent of China’s oil imports, from areas such as the Middle East and Africa, is currently transported through the strait, earlier Chinese media reports said.

The pipeline is one of a series of large energy and infrastructure projects to be undertaken in southwest China’s Yunnan province, the paper said, citing Mi Dongsheng, head of the provincial economic planning agency.

The China-Myanmar pipeline had already been discussed by Yunnan officials at least five years ago but was put on the back burner.

The reason it may now have been revived could be China’s drive to boost its own economy to withstand the fall-out of the global financial crisis.

For Myanmar’s ruling junta, there will be economic benefits from a project of these dimensions, but the real value for the isolated regime could be symbolic, according to observers.

“The political benefits obviously would be that participating in a high-profile project with the backing of the Chinese government, I guess, reduces isolation,” said Feer.

China has been criticised for doing little to improve the rights situation in Myanmar, despite its status as one of the nation’s closest allies. The pipeline could increase the pressure on China.

“It’s an example I guess of the Chinese companies being willing to … engage a wider range of countries than some Western governments are. I imagine this will lead to some criticism,” Feer said.

China has come under similar criticism for signing energy deals with other pariah regimes, such as the government in Sudan which has been accused of genocide.

Investment in the Myanmar pipeline project will be 2.5 billion dollars, with China National Petroleum Corp, the country’s top oil producer, holding a 50.9-percent stake and managing the project, the China Daily said.

Myanmar Oil and Gas Enterprise will hold the remaining stake, according to the report.

However given the large size of the investment, China may not ultimately go ahead with the project, according to Victor Shum, a Singapore-based analyst with international energy consultants Purvin and Gertz.

“The issue is whether the investment cost is worth it compared to the chances of a disruption in the Strait of Malacca, and we haven’t really had any major disruption through the Strait of Malacca for a long time,” he said.

“The question is why do that while you can receive the Middle East oil through current transportation means? You can argue from the point of view of supply security that it provides an alternative. But it’s a big investment.”

China’s demand for oil has expanded rapidly in recently years to fuel its double-digit economic growth.

The country imported nearly 200 million tonnes of oil last year, up more than 10 percent from 2006, the China Daily said.”

This entry was posted on Thursday, November 20th, 2008 at 4:37 am and is filed under China, China National Petroleum Corporation, Myanmar.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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