By Arno Maierbrugger/Gulf Times Correspondent /Bangkok
Myanmar finally opened a new crude oil pipeline last weekend linking its western coast with China’s southern province of Yunnan, cutting shipping time for Middle Eastern and African oil to China by more than a third. It is designed to transmit a capacity of 22mn tonnes of oil per year over 771 kilometres to China.
The pipeline – which runs parallel to a natural gas pipeline that commenced operations in October 2013 and since transported around four billion cubic meters of gas, including from Qatar – will cut short the usual tanker route from the Arabian Gulf to China across the Indian Ocean through the busy Strait of Malacca and across the disputed waters of the South China Sea. Instead, oil tankers – after they have sailed around the southern tips of India and Sri Lanka – will just cross the Gulf of Bengal and discharge their freight at a brand-new deep-sea port with 12 huge storage tanks off the coast of Kyaukpyu district in Myanmar’s Rakhine state, the starting point of the pipeline.
Total construction costs for the two pipelines and the port facility were $2.45bn, fully financed by China, and the works were carried out by a joint venture between China National Petroleum Corp and state-owned Myanmar Oil and Gas Enterprise. In addition, there is a refinery and a petrochemical complex under construction on the Chinese side in Yunnan’s capital Kunming by oil giant PetroChina where the oil is going to be utilised.
The huge investment shows the Chinese government’s dedication to create energy security for the country by diversifying its sources of crude supply and receiving fossil fuels from countries to its west much more directly and efficiently, especially since demand for crude oil in China is heading towards new heights due to both growing domestic demand and the current opportunity to stockpile crude cheaply as long as the oil price remains at multi-year lows.
China imported 308.36mn tonnes of crude oil in 2014, a 9.5% year-on-year increase and a new record high. According to forecasts by China National Petroleum Corp (CNPC), the nation’s biggest oil and gas company, net crude imports will climb another 5.4% to 325mn tonnes in 2015 and the share of imports needed to meet domestic demand will surpass 60% this year for the first time ever.
For Myanmar, the pipeline project is expected to create a veritable source of income, and the government is anticipated to make $54bn from fees and royalties over a period of 30 years. However, the project has come under fire from activists in the past on the grounds of environmental concerns, labour issues, alleged forced village relocations and claims over inadequate compensation for lost land. Farmers were alleging a “substandard quality” in which the pipelines have been built and said that they would be leaking and contaminating their land. The pipeline also crosses through two unstable regions in Myanmar, Muslim-dominated Rakhine State and the eastern Shan State partly controlled by several ethnic armies. It helped a bit that China’s CNPC put about $25mn into local education and development projects to ease tensions in the region. On the Chinese side, street protests against the construction of the pipeline-related petrochemical complex in Kunming were held, but to no avail.
