China Remains a Key Player in Myanmar's Energy Sector
- Part 2 -

Dr. Puyam Rakesh Singh *

Oil Pipeline and Refinery Projects

In addition to power sector, China is a key player in oil and gas projects in Myanmar. The construction of crude oil pipeline passing through Myanmar and the oil unloading terminal on Ma-de Island in Kyaukpyu was a significant achievement in this direction. For a developing country like Myanmar, the pipeline project offered not only transit fee but also a share of crude oil for domestic consumption, job opportunities and technological knowledge.

This enabled the formulation of plans to construct new oil refinery with larger capacity to meet the increasing demand. No doubt, China has much to gain by lessening dependence on the Malacca Strait. The 2,400 kilometre long oil pipeline will feed the proposed 260,000 barrels per day Anning refinery plant in Yunnan province of China bordering Myanmar.

The construction of the pipeline project began in 2011 and it was completed in early 2015 at the cost of US$2.4532 billion.[31] The concerned authorities implementing the pipeline construction took up social welfare measures for the people affected by the project.[32] In May 2014, Myanmar Union Minister for Energy Zeyar Aung visited oil field in Daqing, South East Asian pipeline control station, Liquefied Natural Gas (LNG) gas station and China National Petroleum Corporation (CNPC) pipeline control centre in Beijing.

He also visited the West to East pipeline control station in Shanghai and the Yunnan oil refinery project in Kunming to strengthen technical cooperation with China in energy sector.[33] During Chinese Premier Li Keqiang's visit, a MoU on China-Myanmar cooperation in oil and gas sector was signed between the CNPC and the Ministry of Energy of Myanmar.[34] The enthusiasm on the part of Myanmar and China's interests in the oil and gas sector points to a shared future through cooperation between energy departments.

Building of the US$3 billion refinery in Dawei by Guangdong Zhenrong Energy Co. and other host partners will have major implications. Unlike the oil pipeline project, the refinery in Dawei will enhance cooperation in energy sector among Myanmar, China and other South East Asian countries. With a total capacity of 100,000 bpd, the oil terminal, storage and distribution facilities would enhance Myanmar's standing in energy market in South East Asia. In addition to other players, China could be a prospective buyer of the petrochemical products.

Because of Myanmar's geographical location, China and Myanmar can join hands with other actors to make Myanmar a petrochemical industry hub. Crude oil (also natural gas) from Africa and Middle East can be easily transported to Myanmar and an oil and gas refinery industrial complex can do wonders in economic development. Nevertheless, China needs approval of Myanmar to engage in such major projects. Despite having the capital and technological expertise to build such infrastructures, Myanmar's readiness for greater energy cooperation is wanting. This is further plagued by lack of capital and technological expertise on the part of Myanmar. Earlier, the refinery in Dawei also met opposition from some quarters.

The Dawei refinery is a key project from China's energy security point of view. China imports refined petroleum products on the Lancang-Mekong River from Thailand.[35] With the development of the Dawei Special Economic Zone (SEZ), the volume of trade along this river will also increase. To meet the requirements, China joined hands with the Mekong River countries to dredge the river to allow 500-tonne ships to navigate the river year round.[36] Without further delay, China hosted the First Lancang-Mekong Cooperation Leaders' Meeting in Sanya, Hainan Island.

The refinery will also strengthen energy cooperation at regional and sub-regional levels. The Greater Mekong Subregion (GMS) has economic cooperation programme in areas such as infrastructural linkages, energy, telecommunications, transport and trade facilitation, development of regional economic corridors, agriculture, tourism, human resource development and environmental conservation.[37] Based on this premise, the Economic Corridors of the GMS will link Dawei refinery to Mekong shipping route to facilitate import of petroleum products to China and neighbouring ASEAN countries.

At present, Myanmar has three ageing refineries. The refineries at Chauk with production capacity of 6000 barrels-per-day (bpd), Thanbayagan with capacity of 25,000 bpd and Thanlyin with capacity of 20,000 bpd are unable to meet the demands. Plan for new refinery with larger capacity was floated. A refinery in Minhla Township in Magway was proposed to process crude oil coming from the China-Myanmar oil pipeline.[38]

Such a plant to refine some share of Myanmar's crude oil imported through the Kyaukpyu oil terminal would enhance energy security of Myanmar. The combined refinery capacity of just 51,000 bpd is behind the total demand and the energy consumption is increasing rapidly.[39]

A report states that the three refineries are in poor state and produce barely one third of the official figure of 55,000 barrels per day combined capacity.[40] Myanmar with a population of about 55 million population uses only 35,000 to 40,000 barrels of oil products a day while Thailand with 65 million consumes around one million barrels a day.[41]

In 2013, Myanmar produced around 20,000 barrels of oil per day from its onshore and offshore oil reserves.[42] The Myanmar Oil and Gas Enterprise and the US Energy Information Administration suggests that the country has a proven reserve of 540 billion cubic metres of gas and around 50 million barrels of oil.[43]

The proposal for a new oil refinery involving Guangdong Zhenrong Energy Co. received the green signal from China's National Development and Reform Commission (NDRC) in November 2014.[44] Under the new Myanmar laws on foreign investment, Ministry of Energy of Myanmar should participate in every new petrochemical project undertaken in the country. With 70 percent share in the investment, Guangdong Zhenrong Energy Co. will work with other joint venture partners of Myanmar. [45] The MoU on the project was signed in 2010 and an environmental assessment was conducted in 2012.[46] Successful completion of the project will open new opportunities for both China and Myanmar.

Myanmar has become a level playing field for various players including China. China invested in some major projects in energy sector. Further cooperation and collaboration in this field would create more wealth and services for the two peoples. Restoration of mutual trust and strengthening of strategic ties could open new windows of opportunities. In fact, there is vitality in the bilateral relationship to engage in major cooperation projects. Oil and natural gas are strategic resources to fuel economic development.

Moreover, Myanmar has huge potential for hydropower generation. Cooperation in these areas will bring major achievements in other sectors of the economy too. To tell the truth, it is a priority area in bilateral cooperation at present. The power plants, oil pipeline and refinery projects would help awaken Myanmar from its long slumber. A well-played game is expected when the players have discipline and rules are fair to all. These are the basic requirements to engage in a mutually beneficial cooperation.

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43. Ibid.
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45. Ibid.
46. Ibid.

Concluded...