BANGKOK, Thailand – The jungles of Myanmar now seem certain to provide a shortcut for oil from the Middle East and Africa to the Chinese border.

With China scouring the world for oil and gas supplies to replace its own rapidly decreasing reserves, strategists have pondered the potential security problem posed for Beijing by the Malacca Strait, wedged between Indonesia and Malaysia and through which between 70 and 80 percent of China’s oil imports must pass.

Not only is the strait congested and prone to accidents and pirates, it could also easily be blocked in an international conflict.

According to UN statistics, more than 60,000 vessels pass through the strait annually, carrying 25pc of the world’s trade.

China’s President Hu Jintao has referred to it as Beijing’s “Malacca Dilemma”.
“The Bay of Bengal and the adjoining Andaman Sea impinge far less on the geopolitical consciousness of Southeast Asia and its policymakers than the South China Sea and the adjacent Gulf of Thailand,” said Michael Richardson, a visiting senior research fellow at the Institute of Southeast Asian Studies in Singapore, in a recent paper.

To be able to cope with its economic development, China needs enormous amounts of energy from overseas sources like Myanmar. Pic: AFP

“Yet both maritime zones are integral parts of the same vast conveyor belt of seaborne trade that runs between the Indian and Pacific oceans and carries huge quantities of oil to Asia from the Middle East and Africa. The route is a critical lifeline for the export-oriented economies of East Asia, among them China, Japan and South Korea.”

A pipeline – perhaps eventually more than one – from a Myanmar port up to China’s southwestern province of Yunnan, which Beijing is keen to develop, would not only bypass this potential obstacle, it would lop over 1800 sea miles (2880 kilometres) off the present journey to Chinese South China Sea ports from the country’s main oil sources.

Oil tankers bound for China from the Mideast and in particular new sources in Africa, where Beijing is also engaged in a charm offensive, are likely to be carrying more than half of total Chinese energy needs by 2015, the independent US Institute for the Analysis of Global Security has projected.
Last year, the Chinese imported 145 million tons of crude, an increase of more than 14pc on 2005, and costing US$15 billion according to the General Administration of China Customs.

The Chinese did consider a deal with Thailand to build a pipeline across that country’s narrow 60- mile (96-kilometre) Kra isthmus, connecting the Indian Ocean with the Gulf of Thailand and the South China Sea. However, Thai government sources say this idea has been dropped by Beijing’s planning body, the National Development and Reform Commission, as too fraught with problems – not least the risk of becoming a target by disaffected Muslim separatists operating in southern Thailand, who are becoming increasingly violent. Myanmar – offers Beijing more reliable security for a pipeline that would be about 900 miles (1440km) long.

The state China National Petroleum Corporation has ended speculation about Beijing using Myanmar as an oil conduit by announcing it is conducting a detailed assessment with the state Myanma Oil and Gas Enterprise (MOGE) for a crude oil terminal on the Myanmar island of Yanbyai, off Myanmar’s Rakhine coast, fringing the Bay of Bengal.

A pipeline would course more than 500 miles (800km) from the coast-hugging island through rugged terrain to the Chinese border, and then another 400 miles (640km) or so through Yunnan to the provincial capital of Kunming, where a refinery is also planned.

Analysts suggest one oil pipeline across Myanmar might cost between $2 billion and $3 billion and might eventually handle up to 40 million tons per year. A sum of $3 billion is a trifle for China when you consider that the country’s biggest coal-producing province, Shanxi, last year achieved a turnover in domestic coal sales of $24 billion, and paid taxes of more than $2 billion.

There has been speculation that the Chinese would use the existing Myanmar port of Sittwe, closer to Bangladesh and founded by the British in the 19th century. But there are two reasons why the Chinese prefer the tiny port town of Kyauk Phyu, about 70 miles (112km) farther south: security and isolation. The island is remote with virtually no transport infrastructure linked to it. The only way to get there is by ship or by plane using a small airstrip.

Sittwe is set to become the centre of Myanmar’s Bay of Bengal gas processing industry, but this is where India has already staked a claim to a gateway to the sea for its landlocked and isolated northeastern states, which have a combined population of 36 million, fractious and clamouring for development.
As part of its much-touted, but neglected, Look East economic policy, New Delhi has undertaken to spend over $100 million redeveloping Sittwe – whether or not it eventually becomes the major buyer of the trillions of cubic feet of gas discovered less than 50 miles (80km) offshore.

China also has its eye on that gas, and both countries have said they would be interested in building gas pipelines to their respective countries from Sittwe, if the purchasing terms were right.

“An oil pipeline, or maybe several, makes a lot of sense to the Chinese when you consider the volumes they are going to be importing,” said Bangkok energy commodities analyst Rex Garrett.

“If they pull off a deal with Myanmar on the gas as well they could run a feeder pipe down from Sittwe and run oil and gas pipelines together.

“Of course, none of this is quite what Association of Southeast Asian Nations (ASEAN) – of which Myanmar is a member – had in mind when it recently discussed energy security with China.”

ASEAN agreed at its annual summit in January to press ahead with its own transnational gas pipelines and power grid development among the 10 member countries, and to discuss joint energy projects with China.

What seems to be happening is that China is using ASEAN countries as a conduit for its own energy security and also seeking to buy up as much gas and oil from Southeast Asia as it can. Beijing recently secured a 25-year supply deal for liquid natural gas from Malaysia. – World Politics Watch
Graham Lees is a Bangkok-based British journalist who has worked in several countries in East Asia over the last 10 years covering regional business and political affairs.