Burma – China Pipeline Opens

British Embassies Beijing and Yangon

August 2013

Summary

Burma-China pipeline opens after a two month delay. The new pipeline will bring much needed gas and, later, oil to western China; and big economic benefits to Burma.

Detail

 

The US$2 billion gas pipeline was officially opened on 28 July by Burmese Vice President U Nyan Tun, Burmese Energy Ministers, the Chinese Ambassador and representatives of China National Petroleum Corp (CNPC) who built the pipeline. The pipeline, which has taken more than 3 years to construct, was delayed by 2 months.  Protestors in Kunming, concerned about the health implications of a chemical plant for refining oil linked to the pipeline, are widely believed to be the cause of the delay. The parallel oil pipeline, also owned by CNPC, is on target to begin operating at the end of 2013.

 

The gas pipeline, which will stretch 793km from the Bay of Bengal through the west coast of Burma to Kunming in Yunnan province, with an expected capacity of 12 bcma (billion cubic metres per annum) equivalent to 10 million tons of oil and making up 28% of China’s total gas imports, is demonstrative of how energy needs are driving China’s foreign policy. The oil pipeline stretching 770 km brings oil from the Middle East and Africa, with an estimated capacity of 440,000 barrels per day (making up 8.1% of China’s total oil imports). A senior source linked to China’s National Development and Reform Commission (NDRC- China’s macro-economic planning Ministry) stated “This project could diversify China’s oil and gas import channels so as to guarantee the country’s energy safety”.

 

This pipeline is one of a series that China is developing to secure natural gas from its neighbours in order to meet ambitious targets to promote natural gas. This is part of a general shift away from coal and to reduce its reliance on oil and LNG coming through the Malacca Strait. China’s gas consumption is set to triple this decade to 10% of China’s total energy needs by 2020.

 

But China currently doesn’t have sufficient networks of natural gas pipelines to support this increased gas consumption and is rapidly developing more. By 2020 the government plans to double the existing pipelines from 50,000km to 100,000km and to reach 200,000km by 2030, a 400% increase in 17 years. This network of pipelines will include imported natural gas, shale gas pipelines, coal mine methane and internal natural gas.

 

Burma will reap significant economic opportunities following the completion of the pipelines. Natural gas exports are becoming an increasingly important source of income for the government, in order to finance its economic reforms.  Income from gas exports in FY 2012-13 were was around US$4 billion, and, according to the IMF, is likely to increase by around 85% over the next three years. Burma’s Ministry of Energy has said that the pipelines will operate for 30 years with the government receiving US$13.81 million per year in royalties. In addition, Burma will receive US$6.095 million annually for the ‘right of passage’ and an oil transit fee of US$1 per tonne of export crude for the 22 million tonnes a year. Burma will also receive 2 million tonnes of crude oil and 2bcm of natural gas per year from the respective pipelines.

 

But the construction of the pipeline has led to environmentalists and activists urging pipeline authorities to increase transparency and address local complaints about land confiscation, inadequate compensation, safety, environmental degradation and lack of tangible benefits to Burma. In May members of the prominent and well-respected 88 Generation civil society group called on China to revisit all Chinese contracts for a number of ongoing projects in Burma.

Disclaimer

The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.

Sectors: Oil & Gas
Countries: Burma and China
Menu
Export Action Plan