Burma generals grip on power fueled by Shwe gas project

Who is investing in the project?
The 'Shwe' (meaning 'golden' in Burmese) projects entail exploitation of underwater natural gas deposits off the coast of western Burma's Arakan State and dual oil and gas pipelines that will transport this gas along with oil imports from Africa and the Middle East, to southwest China.

The Shwe Gas Project: A consortium of four Indian and South Korean companies led by Korea's Daewoo International are teaming up to exploit natural gas from blocks A-1 and A-3 in the Bay of Bengal. The project will be comprised of an offshore production platform, an underwater pipeline and an onshore gas terminal in Kyauk Phyu Township on the Arakan coast which will cost an estimated US$ 3.73 billion to develop. The consortium expects to extract 500 million cubic feet of natural gas per day.

Dual Oil & Gas Pipelines: The gas will then be transported through Burma to southwest China (possibly as far as Nanning, capital of Guangxi Province), via a 2,800 km gas pipeline to be built by the China National Petroleum Corporation (CNPC). The gas will be distributed by CNPC's subsidiary PetroChina. The Burmese military regime stands to profit at least US$29 billion over 30 years from the revenues.

Alongside the gas pipeline, CNPC plans to build a sister oil pipeline. The oil pipeline will allow CNPC to ship oil from Africa and the Middle East to China bypassing a slower shipping route through the Strait of Malacca. In October 2009 CNPC began construction on a deep-sea port and crude oil terminal to receive the oil in Arakan State's Kyauk Phyu Township. The 771 km-long oil pipeline may transport up to 22 million tons of oil per year to China's southwest Yunnan Province. CNPC holds a 50.9% stake in the pipelines project, with the Burmese military regime's Myanmar Oil and Gas Enterprise (MOGE) holding the remaining 49.1%. The estimated construction costs are US$ 1.5 billion for the oil pipeline and between US$1.04 and 1.95 billion for the gas pipeline. Additionally, CNPC may pay an annual transit fee of US$ 150 million per year to the regime for the use of the pipeline in Burma. The pipelines contract is expected to run 20-30 years, with CNPC paying as much as US$ 4.5 billion in transit fees to the regime.

The pipelines will traverse the entirety of central Burma, from Arakan State, through Magwe Division, Mandalay Division and Shan State, before entering China.
current status (Mar 02, 2010)

Pipelines: In March 2009 Su Shifeng, chief consultant of China Petroleum Pipeline Bureau, a unit of CNPC, announced that preliminary work on the dual pipelines would begin in the fourth quarter 2009. In August 2009, just before the planned start of construction, the Burmese military launched an attach on the Kokang militia, which controls territory near the planned pipeline route. The Kokang militia, which represents an ethnically Chinese minority from northeast Burma's Shan State, is one of the many armed ethnic groups opposing the military junta's rule. The fighting sent an estimated 30,000 refugees into China's Yunnan Province where they settled in temporary camps and with relatives. The assault and resulting refugee crisis prompted the Chinese Foreign Ministry to warn Myanmar to "properly handle domestic problems and maintain stability in the China-Myanmar border region."

CNPC began construction of the oil terminal in Kyauk Phyu Township in October 2009, according to Oil & Gas Journal.

On 20 December 2009 CNPC and the Myanmar Ministry of Energy signed a contract making CNPC the sole owner and operator of the crude pipeline. According to a CNPC press release, the agreement stipulates that CNPC will be responsible for construction and operation of the pipeline, while the Myanmar government will guarantee the company's ownership and provide security. The Myanmar government will grant CNPC-controlled South-East Asia Crude Oil Pipeline Ltd. tax concessions and customs clearance rights.

Gas Blocks: Daewoo reported that it would begin construction of the A-1 and A-3 Shwe gas blocks in September 2009, including offshore production platforms, an underwater pipeline and an onshore gas terminal in Kyauk Phyu Township on the Arakan coast.

Additionally, in October 2009 Irrawaddy News reported that Myanmar Petroleum Resources (MPRL), a Singapore-based company run by a Yangon businessman, is preparing to conduct seismic studies in an additional gas block in the Shwe reserve for possible exploitation at a later date.

Activism: On 28 October, the Shwe Gas Movement held a Global Day of Action Against the Shwe Gas Project. This included delivering an appeal letter written to Chinese president HU Jintao from SGM and over 100 other organizations at Chinese embassies around the world. Until date no response from the Chinese government has been received.
brief history

In August 2000, South Korea's Daewoo International signed a production sharing contract with the Myanmar Oil and Gas Enterprise (MOGE) to explore, produce, and sell underwater gas reserves off the Arakan coast.

In January 2004, Daewoo announced a "commercial scale gas deposit" in the offshore A-1 block. One month later, Daewoo acquired the neighboring A-3 block. In August 2006 the two blocks are certified to have an estimated available reserve of 5.4-9.1 trillion cubic feet.

In June 2008, CNPC signed a memorandum of understanding with Daewoo and other members of the Indian-South Korean consortium to purchase and transport the natural gas from blocks A-1 and A-3.

In June 2009 CNPC signed an MOU with Burma's Ministry of Energy to construct, operate and manage the oil pipeline, an unloading port, terminal, and storage and transportation facilities.

In October 2009, CNPC began construction of the oil terminal in Kyuak Phyu township.

Completion of the crude oil port and storage facilities was expected sometime in 2010 and commencement of natural gas transfer to China was expected in 2013.

*unless otherwise noted, all information can be found in the Shwe Gas Movement's September 2009 report, "Corridor of Power," p.10.