China-Burma agree on oil pipeline project

Tuesday, 29 December 2009 17:01 Anirban Roy

Guwahati (Mizzima) - Whereas India failed miserably in its gas pipeline diplomacy with Bangladesh, China seems to be on track regarding its USD 1.5 billion oil pipeline project with Burma.

The China National Petroleum Corporation signed an agreement last week with Burma’s Ministry of Energy on rights and obligations for the China-Burma 2380-kilometre oil pipeline.

The new agreement clearly defines the rights and obligations of the Southeast Asia Oil Line, which is a CNPC subsidiary, in construction and operation of the pipeline. The new oil channel will be from Madel Island of Burma to Yunnan Province, in China and will transport over 22 million metric tons of crude oil a year.

The Burmese junta will be responsible for the security of the pipeline, which is to run through areas in north-eastern Burma, mostly inhabited by ceasefire armed ethnic groups.

The pact also provides for customs clearance for CNPC and unspecified tax concessions on crude oil passing through Burmese territory.

China also plans to set up an oil refinery in Kunming, the capital of Yunnan province in southwestern China. So far, China has signed several agreements with Burma for the oil pipeline project.

The recent agreement is the green signal to start implementing the project, sources said, adding that the oil pipeline will help China to a great extent in meeting its growing demand of hydro-carbon and reducing its imports from the Middle-East.

The pipeline will cut down on distance and time in importing crude oil to China. Currently around 80 per cent of crude is transported via oil tankers thorough the infamous congested Malacca Strait.

The proposed pipeline will transport crude oil over a distance of 771 kilometres from Kyaukphyu in Arakan state on the coast of Burma to the Chinese city of Kunming, the capital of Yunnan province.

The new pipeline is expected to be constructed in two phases. With an initial capacity of 241,000 barrels per day (bpd), the flow rate will rise to 402,000 bpd after the second phase of development.

In the joint project between the two friendly neighbours, the state run Myanmar Oil and Gas Enterprise will hold 49.1 per cent while CNPC will have 50.9 per cent stake.

Chinese and Korean companies have always outsmarted India while shoring up energy deals with Burma. Now, New Delhi is closely monitoring the Burma-China bonhomie in the oil and natural gas sector.

Earlier, India miserably failed to initiate a gas pipeline link with Burma because of poor diplomacy with Bangladesh. The pipeline was to run through Arakan and the Indian states of Mizoram and Tripura before crossing Bangladesh to reach West Bengal’s capital Kolkata.

The laying of this 900-kilometre tri-nation pipeline was agreed to in principle by the energy ministers of the three countries in Yangon in January 2005, but could not be implemented because of New Delhi’s poor diplomacy with Dhaka.