China-Myanmar oil pipeline delayed again

30 March 2017, Week 12 Issue 636

Myanmar is reportedly delaying the operational start-up of a pipeline to transfer crude oil through the country to China.

The 770-km long pipeline built by China National Petroleum Corp. (CNPC), in a joint venture with state-owned Myanmar Oil & Gas Enterprise (MOGE), has been ready for two years but a change in Myanmar’s government and hard renegotiations over terms of use have prevented shipments.

New demands on transit fees by the Naypyidaw government have left a very large crude carrier (VLCC) carrying the first oil from Azerbaijan for the pipeline stranded off the coast of Sri Lanka awaiting port docking permission, Reuters said.

The new government, which assumed power in March 2016, has asked for higher oil transit tax payments and improved port transit fees, Myanmar Business Today said.

A purpose-built transit terminal financed by China at Kyaukphyu on the central Myanmar coast, which includes 12 storage tanks with a capacity of 600,000 barrels, was officially opened in February 2015 by the former pro-Chinese government, The Irrawaddy said. Since then, however, it has stood empty.

The delays are holding up the commercial opening of a new 260,000 bpd refinery built by PetroChina near the capital of Yunnan Province, Kunming, where the pipeline ends, Reuters said.

Yangon’s Eleven Media noted in a commentary that relations with China were not “cordial” and that the Myanmar people traditionally viewed their larger neighbour as more an “intruder rather than an equal partner”. It added: “Therefore, China has to develop Myanmar as a good neighbour rather than using it as a stepping stone.”

Official Chinese media suggested this week, however, that Naypyidaw might approve the pipeline during Chinese President Xi Jinping’s visit to Myanmar in April in order to strengthen economic ties with Beijing.

The Global Times quoted Zhu Zhenming, a deputy director of the Southeast Asia Research Institute, which is affiliated with the Yunnan Academy of Social Sciences, as saying: “The possible start-up of the oil pipeline shows the Myanmar government attaches great importance to co-operating with China. It may be a ‘gift’ of the Myanmar president to China during his visit, intended to enhance co-operation in other fields.”

The oil pipeline, which reportedly cost US$1.5 billion to build, has a capacity of 12 million tpy (240,000 bpd). It runs parallel to a pipeline that is carrying gas from the Shwe offshore field in the Bay of Bengal to Yunnan.

Eleven Media has reported that local people continue to make allegations of land theft or poor compensation for loss of land during the pipelines’ construction, which was ordered by the previous government.

Edited by

Andrew Kemp


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