15 October 2010

The Geopolitics of the Myanmar-China Oil and Gas Pipelines

Bo Kong, The Geopolitics of the Myanmar-China Oil and Gas Pipelines,” Chapter 5 in Edward Chow, Leigh E. Hendrix, Mikkal E. Herberg, Shoichi Itoh, Bo Kong, Marie Lall and Paul Stevens, eds., Pipeline Politics in Asia: The Intersection of Demand, Energy Markets, and Supply Routes, NBR Special Report 23 (Seattle, WA: National Bureau of Asian Research, September 2010).

Two documents signed between China and Myanmar in 2009—a bilateral agreement between the two governments in March and a memorandum of understanding (MOU) between China National Petroleum Corporation (CNPC) and Myanmar’s Ministry of Energy in June—made China’s decision to build a cross-country crude oil and gas pipeline from Myanmar official and mapped out the parameters. The crude pipeline will start from the port of Kyaukphyu in Rakhine State to Kunming in Yunnan Province. This 690-mile crude pipeline is designed to transport the 22 million tons of oil per year (440,000 barrels per day) that China imports from the Middle East and Africa to Southwest China. In parallel with the crude pipeline, the 1,123-mile natural gas pipeline will deliver 12 billion cubic meters (bcm) of natural gas per year from blocks A-1 and A-3 in the Bay of Bengal, operated by a consortium led by the Korean-based Daewoo International, to Yunnan Province and possibly other parts of Southwest China. Investment required for the crude and gas pipelines was reported to be $1.5 and $1.04 billion, respectively, with CNPC holding a 50.9% stake and managing the project and Myanmar Oil and Gas Enterprise holding the remaining 49.1% stake. CNPC will build sections of the pipelines in both China and Myanmar. It will also build an oil terminal with 600,000 cubic meters (cm) of storage capacity and an oil berth capable of receiving tankers of up to 300,000 dead weight tons at the starting point of the pipeline in Myanmar. CNPC commenced the construction of the two pipelines on June 3, 2010.

Any knowledge of the geographical terrain that the pipelines will traverse or of the complex environment that shapes Myanmar’s domestic politics and foreign relations prompts reservations about the pipelines. Why did Beijing decide to build them? How did energy dynamics and geopolitical concerns shape Beijing’s decision? Given that Myanmar is already dependent on Beijing for political cover in the international system and on Chinese investment to prop up its economy, how will these pipelines affect bilateral relations? Further, how will Beijing’s increased influence in Myanmar affect the interests of other stakeholders, especially India and the United States? India sees Myanmar as part of its backyard and desires to secure more natural gas from the country. What do these planned Myanmar-China pipelines mean for India? While showing signs of adopting a new approach, the U.S. government still maintains sanctions on Myanmar. An important question thus arises: what are the implications of these pipelines for U.S.-China relations vis-à-vis Myanmar? This essay will address these questions. …