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Confusion Over Myanmar-China Gas Supply Talks

As appeared in

Has the Government of Myanmar declined to sell gas from its Arakan reserves to and decided to sell it to China? There has been considerable confusion over this issue.

2. The confusion started by the publication of the following report by South Korea’s “Chosun Ilbo” newspaper on March 21, 2007.The report cited an unidentified South Korean Energy Ministry official as its source: “The Myanmar Government has agreed in principle to provide gas from blocks A-1 and A-3 to China by pipeline. The only thing left at this moment is the price negotiation between Myanmar and China. Chinahas already agreed to build pipelines free of cost to Myanmar to win the deal.”

3. The same day, a New Delhi date-lined report by the Press Trust of India said: ‘In a major blow to India’s quest for energy security, Myanmar has refused to export gas to the energy-hungry nation and instead wants to lay a pipeline to China to sell natural gas found in its offshore area. Myanmarlast week told an Indian delegation it wants to export gas from discoveries made in offshore Block A-1 and potential reserves in Block A-3 to China, highly placed sources said. India ‘s ONGC Videsh Ltd and GAIL ( India ) have 30 percent stake in Blocks A-1 and A-3 , where South Korea’s Daewoo is the operator with 60 per cent interest. The remaining 10 per cent is with KoGas of South Korea. GAIL last year proposed a 1,573-km pipeline from Myanmarthrough the north-eastern states of Mizoram and Assamto West Bengal and to Gaya in Bihar to transport gas from A-1 and A-3. China and Thailand had submitted competing pipeline proposals. Myanmar at that time had said the volumes in A-1 were not sufficient to support a pipeline and called for bids for selling the gas in its liquefied form. GAIL bid USD five per million British thermal unit for 3.5 million tons of LNG which was lower than Marubeni of Japan and KoGas. “We were told (by Myanmar government) that a review of the export option (pipeline or LNG) will be taken in May when appraisal of gas reserves in A-3 (which is to be tied-up with A-1 for export purpose) would come. However, they called us and said the gas will go to China,” an official said.

4. In a commentary issued the same day on these reports , the “Platts Commodity News” said: “Confusion over who will eventually get gas from Myanmar ‘s offshore blocks surfaced once again on Wednesday (March 21,2007 with South Korean and Indian press reporting that the Southeast Asian country had agreed to sell the gas to China. The reports were later dismissed by South Korea’s Daewoo International, which is developing the two offshore blocks, A-1 and A-3, and the South Korean energy ministry, which was cited as the source of the South Korean report. An official at Myanmar’s energy ministry declined to comment. “There are lots of news floating around. I cannot comment at this time,” he said. “A consortium led by Daewoo International has the right to select buyers, not the Myanmar government,” a Daewoo official said. “The consortium has not picked buyers yet and will discuss with the Myanmar government only after selecting potential partners,” he added. This is not the first time that such a report has emerged. Talk of an agreement between Myanmar and state-owned PetroChina on gas sales from A-1 and A-3 was reported last January. At that time, both parties denied the report, saying they had only signed a general agreement on joint exploration and gas sales from offshore Myanmar. Chinahas been investing heavily in Myanmar’s oil and gas sector in a bid to increase its own energy security. State-owned giant CNOOC and China National Petroleum Co. hold stakes in six offshore and some onshore blocks there. South Koreaand Japanhave also been eyeing gas from the two blocks since Myanmar floated the idea that it would consider exporting the gas as LNG. Myanmar earlier this year invited several companies to bids for 3.5 million mt/year of LNG supply. According to sources in Seoul , KoreaGas and Japan’s Marubeni were selected as the preferred bidders at a price of $7/MMBtu. But Myanmar’s energy ministry official was quick to clarify then that the government had not firmed up the LNG option and was waiting for further reserve reports from Daewoo before making a final decision. Daewoo, which holds a 60% operating interest in the two blocks, last year announced that its two field discoveries in Block A-1 held between 4-6.6 Tcf of gas and that one field discovery in A-3 held 1.8-3.4 Tcf. The company is currently conducting further drilling on the blocks and hopes to get a better idea of the reserves after its latest drilling program. Korea Gas holds the remaining 10% stake in the blocks.

5. A Beijing datelined agency (AFX Asia) report of March 26, 2007, said: “Construction of the China-Myanmar oil pipeline is expected to start this year, the China Oil News reported. Huang Qifan, vice mayor of Chongqiing, was quoted as saying that China National Petroleum Corp has chosen Chongqing as the destination for the pipeline, which has capacity of 10 mln tons. “According to the schedule, construction of the pipeline will start this year,” Huang said. Huang also noted that Chongqing will build a 10 mln ton capacity refinery to process imported crude, which is is due to come on stream three years later. In January, CNPC signed production sharing contracts with Myanmar’s Ministry of Energy covering crude oil and natural gas exploration projects in three deep-sea blocks off western Myanmar.”

6. Myanmarese political exiles say that the Myanmarese authorities have so far signed only contracts for exploration and production with companies in India, China, Singapore and South Korea, but have not yet signed any agreement for the actual sale of the gas to any party. The factual picture is not yet clear.

(The writer, Mr.B.Raman, is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and ,presently, Director, Institute For Topical Studies, Chennai. He is also associated with the Chennai Centre For China Studies.

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