The Myanmar-China natural gas pipeline (Myanmar section) commenced
delivery of natural gas to the Peoples Republic of China (PRC) after it
was inaugurated by Myanmar Vice President U Nyan Tun at Mandalay on July
28. The pipeline is part of the Myanmar-China Oil and Gas Pipeline
project, which also includes a crude oil pipeline.
Starting from Kuaykphyu on Myanmar’s Arakan coast, it passes through
the Rakhine state, Magway and Mandalay regions and Shan state and enters
the PRC at Ruili, Yunnan province through Namhkan on the Myanmar
border. It took three years to construct the Myanmar section of the
pipeline, which underwent a test run on May 30.
The Pipelines
The $2.5 billion pipeline project (Myanmar and China sections) will
cover a total distance of 2,500 km, including 793 km in Myanmar and
1,727 km in PRC. The gas pipeline section in Myanmar has six processing
stations. The crude oil pipeline, which is also nearing completion, will
cover approximately 2,402 km, traversing 771 km in Myanmar and 1,631 km
in Chinese territory. It starts from Maday Island in Myanmar carrying
crude oil into Yunnan and eventually to Chongqing in PRC. The pipeline
will transport oil brought by sea from the Middle East and Africa to
south-western PRC. The project also involves the construction of a new
deep-water 300,000-ton crude oil unloading port and associated storage
facilities on Maday Island.
The gas pipeline has been designed for an annual throughput of 12
billion cubic meters. The transmission capacity of the crude oil
pipeline on the Myanmar side is designed at 22 million tons per year.
The gas pipeline has been constructed as part of an agreement signed
between PetroChina and the Myanmar government for the supply of 6.5
trillion cubic feet (tcf) of natural gas to the PRC over a 30 year
period. The natural gas is being exported from the Shwe gas project in
the Rakhine Basin, which could have a peak production capacity of 500
million cubic feet per day.
Myanmar Hydrocarbon
Myanmar has 7.8 tcf of proven natural gas reserves according to BP
Plc data, and is worth about $75 billion at benchmark prices for gas
futures traded in the U.K. The U.S. Energy Information Administration
estimates 10 tcf of proven reserves. Myanmar, as per official
statistics, is also estimated to have 3.2 billion barrels of recoverable
crude oil reserve.
Myanmar has three main large offshore oil and gas fields and 19
onshore ones which produced 421 billion cubic feet (bcf) of hydrocarbon
in 2011. Gas now accounts for more than 90% of Myanmar’s hydrocarbon
production (of which over 80 percent is exported to Thailand) and is
expected to exceed 2.1 bcf by 2015.
The foreign investment in Myanmar’s oil and gas sector had reached
$14.372 billion at the end of February 2013, accounting for 34.14
percent of the country’s foreign investment. The foreign investment will
increase in the future as Myanmar prepares to bid out more of its
offshore and onshore blocks for exploration to oil majors.
Hydrocarbon Blocks
In 2011, the Myanmar Ministry of Energy (MOE) offered 18 onshore
blocks for bidding and has awarded eight of these to foreign firms. In
January 2013, the MOE put up a further 18 onshore blocks for tender, and
another 30 offshore blocks in April 2013. The rounds have attracted
significant interest, with over 75 letters of interest submitted for the
onshore blocks. Myanmar’s first offshore licensing round in more than
20 years is expected in the second half of 2013, having been delayed
from late 2012.
One contentious issue related to these pipelines is the amount of oil
and gas they must deliver within Myanmar, as the central and northern
part of the country are short of energy supplies. As per the present
terms, 2 million tons of crude oil and 20 percent of the designed
throughput of gas of the whole project will be off-loaded in Myanmar,
which will be helpful to promote Myanmar’s economic development and
people’s living standards.
Implications
Energy security has been a priority for the PRC since the early
1990s, especially after it overtook the US as the world’s largest
overall energy consumer in 2009. Last year, the major part of China’s
total oil imports — about 4 million barrels a day out of 5.43 million
barrels — was shipped through the Strait of Malacca, where the US Navy
has a strong presence. To ensure the security of its energy lifeline,
Beijing has constantly been making efforts to diversify its
energy-supply routes. The Myanmar energy corridor is a part of this
strategy.
Besides bypassing of the Malacca straits, a noteworthy implication of
these pipelines lies in the fact that they will carry gas from a source
as close as possible to Chinese borders and by the cheapest means of
transporting oil and gas. Further, these pipelines will also provide
China a potential direct line to over 30 new offshore oil and gas
exploration blocks that will go up for international auction in 2013.
This will provide a significant cost advantage to the Chinese entities
in the forthcoming bidding.
According to MOE, in all, 61 companies have been prequalified to bid
for 11 shallow water and 19 deepwater blocks in the international
tender. The shortlisted companies from India include RIL, ONGC Videsh,
Cairn India, GAIL (India) Ltd and Jubilant Offshore Drilling.
However, what India will be watching with concern is the change in
maritime commercial traffic in its back yard – the Bay of Bengal. It is
expected that as early as September this year (though the Chinese have
said oil may not start before year-end), crude oil tankers carrying
China-bound oil will sail into the Bay of Bengal to Myanmar’s coastal
town of Kyaukpyu ( Maday island), where the oil will be unloaded into
the new pipeline.
This will shift part of the Chinese maritime security focus from the
Malacca Strait to the Bay of Bengal and increase the Chinese naval
presence in the Bay of Bengal. India on its part is reported to be
constructing a new submarine base on its eastern coast that will be
named INS Varsha at a cost of Rs.160 crore and upgrading its
capabilities in the Andaman &Nicobar islands.
As Myanmar takes on the path of economic development, the
international competition for its natural resources will see a buzz of
activity in the Bay of Bengal .It will bring both challenges and
opportunities for India, as it too will try and secure for itself some
minerals and hydrocarbon resources closer to its borders.
source: Eurasiaview
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