CNPC Announces China-Myanmar Gas Pipeline Open

By EnergyGlobal, July 30th, 2013

China, the world’s largest energy consumer has begun importing natural gas from Myanmar.

CNPC, the Chinese state-owned company, recently stated that a natural gas pipeline that connects China, Myanmar and the Indian Ocean has formally begun operations. A parallel crude oil pipeline is expected to start next year.

While the pipelines are only expected to provide a small proportion of China’s energy needs, they are strategically important. The gas pipeline that began operating last week offers Beijing a nearby source of gas.

New energy corridor for China

With the completion of the gas pipeline, China will now have access to gas supplies from Myanmar’s offshore gasfields, and will soon be able to access oil shipments through a giant port on the coast. The pipeline will also economically strengthen the Myanmar government thanks to increased natural gas revenues.

Wang Dongjin, President of CNPC’s Hong Kong-listed subsidiary PetroChina, emphasised the pipeline’s contribution to China’s energy security in a recent interview: “In future China’s crude oil imports will not have to go through the Strait of Malacca,” said Mr Wang. “This has great strategic significance for China’s energy diversification and energy security. The supply of natural gas is equally important.”

Pipeline statistics

Stretching 793 km, the pipeline took more than three years to construct. The line links the Myanmar port of Kyaukpyu with the Chinese city of Kunming, and has a design capacity of 12 billion m<sup3<>/yr. The natural gas supplied is expected to account for around 6% of China’s annual gas consumption.

By avoiding the sometimes hazardous Strait of Malacca, which lies between Malaysia and Indonesia, the new gas pipeline is expected to cut transport distances by as much as 1200 km for shipments from the Middle East and Africa.

Controversy

However, the US$ 2.5 billion project has also been hindered by controversy and construction delays, and China’s relationship with Myanmar has grown fraught recently.

For years, China was the closest ally of Myanmar’s military regime, which was eschewed by the West because of its poor human rights record and failure to hand power to an elected government. Since 2011, when an elected, though still military-backed, government took office, Myanmar has undergone political and economic reforms and has invited investment from the West.

This has all affected China’s relationship with the country; Beijing is realising that it needs to be more transparent about how its projects will affect and bolster the local communities. Significantly, in 2011, the Myanmar government suspended a US$ 3.6 billion Chinese dam project that threatened to flood the spiritual heartland of Myanmar’s Kachin ethnic minority, and more recently the government seized a majority stake in a Chinese-owned copper mine that had been the subject of repeated protests.

Local energy supplies

The pipeline will supply a capped amount of gas to Myanmar as well, under the current contract, although this is one area where analysts foresee a future conflict point. The central and northern part of Myanmar are short of energy supplies, and local deliveries “could rise if political pressures increase within Myanmar,” Zha Daojiong, an energy security expert at Peking University, said.

International shareholders

The pipeline is majority owned by CNPC. Minority shareholders in the project include Myanmar’s national oil company Myanmar Oil and Gas Enterprise, ONGC of India, Daewoo of Korea, and Indian gas company GAIL. The Burmese conglomerate Asia World – which has close ties to the military – is also taking part.

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