Construction of the Shwe gas pipeline near Hsipaw, Shan State. (Photo: Francis Wade)

Much-delayed plans to kick-start an international scramble for oil and gas on Burma’s Bay of Bengal coast are due to be unveiled this month, but the Ministry of Energy has yet to provide any details of the license auction, or the level of transparency which will be in place to oversee it.

Up to 20 offshore blocks will be offered for exploration licenses, according to the ministry. However, potential foreign bidders still do not know whether they will be permitted to hold a full license—with a 100 percent shareholding—or take on domestic partners.

Foreign firms seeking onshore licenses must have a local partner, but offshore exploration requires heavier investment and a level of technology unavailable to Burmese companies, say industry analysts.

The auction was meant to take place last September but was postponed amid foreign concern about the transparency in the bidding process and the involvement of an unreformed Myanma Oil & Gas Enterprise, widely seen as a tool of the former military regime.

Four weeks ago Minister of Energy Than Htay said the government had taken the “necessary actions” to ensure Burma’s oil and gas sector fulfilled the standards of the Extractive Industries Transparency Initiative (EITI).

Based in Oslo, Norway, EITI is an international body which overseas financial openness and fairness in the industry.

According to EITI, however, Burma is still only at the stage of preparing to become a member and has yet to apply for inspection to qualify for candidate membership.

“Revenue from oil and gas is the largest source of foreign income for the government of [Burma],” said an EITI statement. “According to the IMF, revenue from gas will likely increase by 85 percent over the next three years as the Shwe gas project becomes operational.

“By preparing to implement the EITI, the government is taking practical steps to ensure that a robust framework is in place for dialogue about the governance of these natural resources.”

Analysts say the recent outbreak of sectarian violence between Buddhists and Muslims in Burma, renewed fighting in Kachin State and a major clean out of corrupt and incompetent senior officials by President Thein Sein may have distracted the government from the exploration licensing auction.

The president has in recent days forced the dismissal of key leading officials in the Ministry of Finance and Revenue, the Trade Department, the Department of National Economic Planning and Development and the Commerce Department as part of a dragnet to clean up the government.

“There is still an air of uncertainty around the proposed offshore oil blocks auction due this month,” industry analyst Collin Reynolds in Bangkok told The Irrawaddy on April 3. “We still do not know any details of the auction, such as how many blocks, locations and terms.

“It all could go ahead, however, Burma is under intense scrutiny from the international community in view of its recent past and the close financial involvement of the former regime.”

Chinese national oil companies are expected to be among bidders for Burma’s offshore blocks, where large volumes of natural gas are reckoned to be under the sea.

China’s interest is linked to its plans to use Burma as a conduit for oil and gas via the two pipelines it is building through the country from the central coast terminal it has developed at Kyaukphyu, where it also has proposed to bring a freight railway line from its landlocked Yunnan Province bordering Burma.

“Not only will these pipelines become a reliable means of delivering energy imports from the Middle East and Africa directly to China, without having to navigate the narrow Strait of Malacca and increasingly volatile South China Sea, they will also provide China a potential direct line to over 20 new offshore oil and gas exploration blocks that will go up for international auction in April,” said Eric Draitser, an American geopolitical analyst writing in the Asia Times.

One of the pipelines is due to begin pumping gas from the Shwe field in the Bay of Bengal in the middle of this year, but fighting between a Kachin militia and the Burmese army near the northern end of the pipeline just before it enters Yunnan has raised doubts about security.

A report by Natural Gas Daily, produced by the Russian news agency Interfax, quotes a security consultant saying it could be highly dangerous.

“Running an over-ground gas pipeline in a location where an armed conflict is taking place is absolutely unadvisable. An explosion could easily be caused by a stray bullet. If the pipeline is penetrated it will explode, causing it and the surrounding area significant damage,” Michael Oxlade, senior security consultant at Westminster International, was quoted by Interfax as warning.

Westminster International is a UK company run by ex-British Army officers which provides advice on security for all kinds of installations, including energy infrastructure.

Natural gas exports are becoming an increasingly important source of income for the Thein Sein government to finance its economic reforms and also reportedly to directly take part in new oil and gas explorations.

Income from gas exports in the 2012-13 financial year ended March 31 were expected to reach almost US $4 billion, according to the Ministry of Commerce, although official figures have yet to be published.

Next year, this source of income will be further boosted by the Shwe gas sales to China—if there are no pipeline mishaps—and also from gas bought by Thailand from a new field in the Gulf of Martaban to the east.

 Irrawaddy

A soon-to-be completed gas pipeline connecting the Indian Ocean coast of Myanmar with southwest China may help China avoid military obstacles set up by the United States, reports the Voice of Russia, an international broadcaster based in Moscow.

The state-owned China National Petroleum Corporation, which built the pipeline, announced on Monday that the 793-kilometer pipeline would become fully operational by May 30, less than three years after construction began.

The schedule of the pipeline was decided at an emergency Sino-Myanmar military meeting due to worsening violence between the Myanmar government and ethnic Kachins in the country’s north, not far from the country’s border with China.

The pipeline will help free China from its dependence on the Strait of Malacca for its energy imports, giving it a shorter and alternate supply route that also helps evade military obstacles from the United States, according to the Financial Times, adding that the pipeline is not only an issue of energy but also of strategic safety.

Countries in Southeast Asia including Myanmar have become the center of a silent conflict of interests between China and the US, with the latter attempting to develop its relations with those countries to restrict China’s growing power. Washington has already strengthened its cooperation with India and has established a new military base in the Asia-Pacific region through Australia.

The new gas pipeline will reportedly be able to carry 12 billion cubic meters of gas and 22 million tons of imported crude oil to China every year.

The pipeline offers China “an alternative supply route if the Strait of Malacca were ever blocked because of terrorism, piracy or conflict,” Stephanie Kleine-Ahlbrandt, director of North East Asia Project at the International Crisis Group, told the Financial Times.

“Beijing also fears that the straits could be threatened or cut off by the US if there was ever a conflict between the countries in the Taiwan Strait or elsewhere,” the director added.

According to the Global Times, a tabloid under the auspices of the Communist Party mouthpiece People’s Daily, the pipeline appears to have given China an advantage in its strategic conflict with the US, though whether the advantage will last remains to be seen.

Want China Times

But the political reforms under way in Myanmar, also known as Burma, are redefining its place in the world. President Obama’s visit in November was a sign of the dramatic turnaround in relations with the United States.

Meanwhile, China, which has been Myanmar’s main backer for years, is stepping up its investments. Chinese media report that 700-mile oil and gas pipelines will be completed in May. The pipelines will begin in the Bay of Bengal, stretch all the way across Myanmar and into southwestern China’s Yunnan Province.

It’s the most strategically vital of China’s investments in Myanmar. China will be able to ship oil from the Indian Ocean straight to the pipeline.

This will avoid a potential choke point in the Strait of Malacca, as tankers go the long way around the Malay Peninsula. The pipelines can reportedly transport 22 million tons of oil and 423 billion cubic feet of gas a year.

Villagers Caught In The Middle

Residents of Nong Pha village in southern Shan State say the Burmese army confiscated their farmland to build the pipeline, and kept money intended to compensate them

Anthony Kuhn/NPR

Myanmar stands to gain billions of dollars in revenue from the pipelines, but some villagers along the route are already complaining that they are worse off.

Chinese and Burmese work crews could recently be seen burying the pipelines outside Myanmar’s second city, Mandalay. When they’re done, all that’s visible is a ribbon of red earth, stretching through the green hills and valleys.

Further east, the pipeline cuts through Nong Pha, an ethnic Shan village. Residents there complain that the pipeline has left them utterly destitute.

Nong Pha’s 42-year-old village chief, U Hla Shwe, says that the army took away their farmland to build the pipeline last year. Since 1995, he says, farmers have been forced to give the army a portion of their crops.

He says the Chinese pipeline company gave the army money to compensate the villagers — but the army kept that money for itself.

“I don’t think this is a good project,” he says. “I don’t know what profits my country will get from it. I just know that my family and my neighbors are suffering and starving, and we haven’t seen any money.”

Many of the villagers appear hurt and bewildered by their misfortune. They say they fear the army. And they don’t dare complain about their troubles.

“We have no jobs, and no money,” Hla Shwe says. “Our children can’t afford to attend school. Our new president said early in his administration that poverty would be reduced. The present government is really no different from the last one.”

Another farmer, 55-year-old U Pin Nya, says the project is affecting his work.

“Even our cows and our water buffaloes are starving,” he says. “We may have no choice but to move to another village soon.”

Environmental Concerns

U Tin Thit, coordinator of the Myanmar-China Pipeline Watch Committee in Mandalay, cites a Ministry of Energy estimate, putting the cost of the pipeline at $2.5 billion. But only $32 million, or 1.3 percent of that, he says, will go to compensate Burmese citizens for their land.

Tin Thit says he is also concerned about the project’s effect on the environment and on human rights.

The last leg of the pipeline still to be built is in Shan State. Ethnic insurgents have been fighting the government there for decades. Tin Thit says the government will station soldiers in Shan State to protect the pipeline. And he says that could fuel the insurgency and threaten Burmese national security.

“If insurgents attack or blow up part of the pipeline, the Chinese could send troops into Myanmar to protect it,” Tin Thit says. “This would have a huge impact on our sovereignty.”

Officials in both countries deny such a thing could ever happen. Nonetheless, it’s a common perception among Burmese.

Backlash Against Chinese Investments

Such perceptions have led to a rising tide of opposition to Chinese investment projects. Last November, a police crackdown on demonstrators protesting the Letpadaung copper mine injured dozens and sparked a national outcry. The project is operated by a Chinese arms manufacturer, Norinco, and a Burmese military enterprise.

In 2011, strong public opposition prompted President Thein Sein to shelve the Chinese-funded Myitsone Dam on the Irrawaddy River. That incident was the clearest signal yet that Myanmar has begun to reduce its reliance on China.

Irked Chinese leaders have warned Myanmar to honor its agreements.

Ko Ko Hlaing, chief political adviser to President Thein Sein, says Myanmar’s government will address problems caused by the Chinese investments. And he also expects Chinese companies to clean up their acts.

“Yes, they have to admit that there is some sort of weakness in the CSR, corporate social responsibility, in the previous time,” says the former army colonel and military researcher. “Now they are quite aware of that. They need to amend their bad image in this country.”

He promises that the government will share revenues from the pipelines with communities living nearby.

China’s Roots In The Country

Realistically, he says, his small country has little choice but to stay on good terms with its giant neighbor to the north. But he suggests that like many Southeast Asian nations, Myanmar will be hedging its bets.

“We need some sort of help from the United States,” he says, “as a check and balance power to the Chinese influence on the region.”

Ko Ko Hlaing says Myanmar is returning to a policy of neutrality that it maintained during the Cold War.

But the big powers were never satisfied with Burma’s neutrality. Winston Churchill famously called Burma a hole in the West’s Cold War encirclement of China. China’s leaders, meanwhile, accused Burma of fence-sitting in the fight against U.S. imperialism in Asia.

China’s dissatisfaction grew to a climax in 1967. Maoists tried to export their Cultural Revolution to Burma. They mobilized ethnic Chinese in Burma to wear Chairman Mao badges and wave his Little Red Book of quotations, in defiance of the Burmese government. Anti-China riots followed in Burma, and dozens were killed.

Historians note that Burma’s then-ruler Gen.Ne Win benefited from the riots, as it distracted from economic woes at home, particularly soaring rice prices.

Beijing insists that it is careful not to meddle in Myanmar’s internal affairs. But the Burmese will not easily forget that for more than two decades beginning in 1967, it armed, trained and funded communist insurgents fighting the Burmese government.

Tug Of War

Yun Sun, with the Washington, D.C.-based Brookings Institution, says that China’s government now publicly welcomes Myanmar’s engagement with the West.

But in private, many Chinese are heatedly debating how China misread Myanmar and allowed the U.S. to increase its influence there at China’s expense.

Sun says that China and the U.S. both assumed that Myanmar’s 2010 elections were an attempt by the ruling military junta to appease public opinion, while hanging onto power.

“But it turned out the new civilian government was much more eager to engage in political democratization than China originally presumed,” she says. “And that’s where China’s grand strategic thinking on Myanmar fell apart.”

Sun adds that, based on its own experiences, China’s government believed Burma would be more grateful for the jobs and economic growth that Chinese investments bring.

“As for the downside of these investments,” she says, “such as the damage to the environment or the deprivation of the livelihood of some people, China sees these as necessary costs associated with economic development for a less-developed country.”

In other words, China may have overestimated the appeal of its development model to the Burmese.

At a Buddhist monastery outside Mandalay, a bell calls crimson-robed monks to prayer. Abbot U Sein Ni Ta, who has organized local farmers affected by the oil and gas pipelines, says he does not want to see his land exploited and his people subjugated, like Burma’s deeply Buddhist neighbor just to the north.

“I don’t want my country’s fate to be like that of Tibet,” he says sternly. “The international community should examine the impact of China’s investments in Burma. The former military regime signed these deals with China, and now we’re paying the price for it.”

NPR

Hostesses wait in Tiananmen Square as delegates arrive at the Great Hall of the People for the start of the closing ceremony of the Communist Party Congress in Beijing Wednesday, November 14, 2012. (AFP)

United States President Barack Obama visits Myanmar today.

This milestone is one of many over the past year of reform for the once-pariah state also known as Burma. These reforms and the consequent improvement of US-Myanmar relations appear to be an unalloyed good.

In the past year the reformist government of Present U Thein Sein has released many political prisoners, allowed progressively greater political participation by the democratic opposition and made significant progress towards ending ethnic insurgencies that have troubled the country for decades.

As Myanmar has reformed, the US, which once imposed a harsh sanctions regime, has sought to encourage and support the process. US Secretary of State Hillary Clinton visited Myanmar in December 2011.

The US has lifted or suspended most of its economic sanctions. This, in turn, paves the way for aid, investment and advice from the US, its allies, and multilateral financial institutions. For US and Western firms Myanmar holds the promise of rapid-growth investment opportunities in an underserved market of 60 million people.

But behind these positive developments lurks a danger: the sensitivity and potential reaction of China, Myanmar’s neighbour to the north, to increased US involvement.

For China, the relationship with Myanmar has economic and strategic value. Myanmar is a market for Chinese goods. Myanmar also supplies or will supply China with primary products ranging from agricultural and fisheries to minerals and natural gas.

China is also deeply involved in infrastructure construction in Myanmar, including several hydropower projects and a special economic zone in Kyaukpyu in Rakhine State. China is also building gas and oil pipelines and a transportation corridor across Myanmar from Kyaukpyu to Ruili, on the China border.

The natural gas will come from fields off Myanmar’s west coast but the oil will be brought from Africa and the Middle East. The pipeline allows China to bypass the Strait of Malacca, a potential choke-point subject to control by the US Navy.

Chinese descriptions of China-Myanmar relations invariably stress harmony between the two peoples from time immemorial. These often use the Burmese word “Pauk Paw” for the special fraternal nature of the relationship. This narrative glosses over historical conflicts, the last of which ended only in the mid-1980s when China shifted from supporting revolution to encouraging trade.

China’s vision of “Pauk Paw” harmony also papers over the anti-Chinese sentiment prevalent in Myanmar. The perception in Myanmar is that Chinese companies use bribes and the Chinese government’s support for Myanmar at the United Nations to obtain preferential concessions for resource and infrastructure projects. This popular view holds that the Myanmar military, the Tatmadaw, has been selling out the nation to the Chinese.

As long as the Tatmadaw was exercising dictatorial authority, the model that Chinese companies brought to Myanmar worked, as it does in China. In China the key to any project is having good government connections.

There is no need to develop relations with affected locals, civil society or other stakeholders. When the political situation in Myanmar changed and the new civilianised government began to make reforms that reflected popular will, Chinese projects, not having developed support among non-government stakeholders, were vulnerable.

In fact, despite precursors, the reform period in Myanmar can be dated from the September 30, 2011 presidential decision to suspend work on the main dam (of seven) in the Chinese-backed Myitsone Hydropower Project.

Despite public outcry against the Myitsone project over its perceived negative impact on the natural environment and cultural heritage, less than a month before the suspension Myanmar’s Minister for Electric Power 1, U Zaw Min, told the press: “We will not back down just because environmental groups are against it.”

He may have actually been correct, as the suspension appears to have had more to do with the perception of the project as Chinese exploitation. In a country suffering from chronic power shortages, 90 percent of the electricity produced was to be sold to China.

More recently protests against the expansion of a Chinese-operated copper mine at Letpadaung in central Myanmar have drawn national and international attention. The Chinese pipeline project has been criticised by local and exile non-government organisations over land use, compensation and environmental problems.

International NGOs have criticised it for construction in conflict zones, and members of the democratic opposition have privately called the project a violation of Myanmar’s national sovereignty.

Many Chinese policy intellectuals see the improvement of US-Myanmar relations, the reform process in Myanmar, and problems for Chinese projects there as part of a US-directed plot to contain China.

Yuan Peng of the American Research Centre at the China Institute of Contemporary International Affairs (CICIR) wrote in the July 31 overseas edition of the People’s Daily that “the US will avail itself of various non-military means to delay or hinder China’s progressive rise”.

Yuan said these include “[s]trengthening alliances and enhancing partnerships while undermining China’s relationships with the North Korea, Pakistan and Myanmar”. The Obama administration’s “Pivot to Asia” has only fed this dominant and paranoid strain in Chinese thought.

Why should Chinese anxiety about improvement in US-Myanmar relations matter? It might be tempting to see problems that Chinese projects have as just desserts for not taking account of a broad range of stakeholder interests.

But Myanmar and China share a long border and, despite a slowdown in its growth, China is still an economic powerhouse. Its influence in Myanmar will continue to be large. Support from China and Chinese companies for Myanmar’s reforms and development will help quicken and deepen their implementation.

Opposition could contribute to their stagnation.

What should President Obama do on his visit to Myanmar to assuage Chinese anxiety? First, he should make clear that China-US-Myanmar relations are not a zero-sum game in which any gain for the US is a loss for China. Myanmar needs support from the US, China, ASEAN and its other neighbours to successfully implement sustainable and equitable reforms.

Second, President Obama should frame US support for reform in terms that the Chinese use: stability and “win-win” outcomes. Reform in Myanmar will make the country more stable and a more stable Myanmar will better protect China’s long-term interests by pushing Chinese investors to reach out to stakeholders.

Chinese support for reform in Myanmar will result in a “win-win-win” situation which benefits Myanmar, the US and China.

Josh Gordon is a PhD candidate in anthropology at Yale University and his dissertation research is on Chinese identity in the China-Myanmar borderlands. Josh has been conducting research in Myanmar since 2003, and has conducted fieldwork both in Myanmar and on the China-Myanmar border. He has also worked as a project consultant for Chinese companies researching investments in Myanmar’s energy sector.

Myanmar Times

Construction work for the Chinese-backed Shwe Gas pipeline taking place in Naung Cho Township, northern Shan State. (Photo: The Irrawaddy)

Burma’s strategic importance to China will grow as Beijing’s dependency on the Middle East increases and the United States’ declines. That’s the message in a new assessment of trends in oil production and consumption over the next two decades by the International Energy Agency (IEA).

Iraq supplied only five percent of China’s oil imports in 2011—around 275,000 barrels per day—but this will increase to more than eight million barrels per day by 2035, IEA Chief Economist Fatih Birol forecast in a study on consumption trends. This will come on top of rising Chinese imports from Saudi Arabia.

Burma’s significance in this is as a conduit for Middle East oil bound for Chinese refineries.

One oil pipeline now being built through Burma into neighboring China’s southwest Yunnan Province by China National Petroleum Corporation (CNPC) will begin pumping Middle East oil from around the middle of next year.

When it reaches full capacity the pipeline will carry up to 23 million metric tons per year, Beijing’s Global Times newspaper reported. That’s not a huge amount per se but could be the vanguard of much bigger transshipments of Middle East crude through Burma in the future.

CNPC is spending a total of US $4.7 billion on the current pipeline and a dedicated transshipment terminal at Kyaukphyu, Arakan (Rakhine) State, to handle oil tankers from the Middle East.

“If the Burma pipeline scheme isn’t undermined by armed turmoil by militias operating in some of Burma’s northern regions then it is quite likely that the Chinese NOCs [National Oil Companies] will want to build more pipelines through the country,” regional independent energy industries analyst Collin Reynolds told The Irrawaddy.

“If China is going to increase its imports of oil from Mideast countries it also is going to want to take whatever steps it can to limit the risks of using the sea route through the Malacca [Melaka] Strait. That’s why the Chinese have invested in Burma as an alternative and they are also going to want to protect that route also.”

India has also been expressing concerns about the increased presence of Chinese Navy vessels in the Indian Ocean.

The CNPC and the China National Offshore Oil Corporation are investing billions of dollars in Iraqi oil fields, said the IEA, leading Iraq to soon emerge as the world’s biggest oil producer after Saudi Arabia—with China its biggest customer.

“Increasing oil imports from Iraq is very possible and beneficial for China. Compared with other countries in the Middle East, Iraq is relatively stable at present, but we still should be aware of the risks,” Lin Boqiang, the director of the China Center for Energy Economic Research at Xiamen University, told the China Daily.

China’s domestic oil production is expected to peak at 220 million tons per year by 2020, but if China’s economy continues to expand at seven percent or more a year its oil consumption would then reach over 650 million tons a year, the Sinopec’s Economics and Development Research Institute has forecast.

The IEA report said China’s growing emphasis in Middle East oil will force it and other countries of the region to “focus on the security of the strategic routes” those tankers take.

Beijing is especially concerned with the narrow bottleneck of the Malacca Strait between Malaysia and Indonesia through which all its vessels must navigate via Singapore en route to East Asia. The Chinese are worried that the Strait could easily be blocked in a political crisis.

Beijing’s emerging geopolitical reliance on Burma is becoming a concern as anger grows within the Southeast Asian nation over a perceived view of Chinese firms riding roughshod over local interests.

In the case of the oil pipeline, Burma would receive a maximum of $36.8 million a year in transit fees, according to CNPC’s partners Myanmar Oil & Gas Enterprise (MOGE) and the Ministry of Energy. A flat right-of-way fee of $13.8 million will be supplemented by $1 per ton of oil pumped—a deal criticized by human rights groups as far too cheap.

NGOs allege numerous cases of social disruption, forced community relocations and land theft along the pipeline route which runs in tandem with a separate natural gas pipeline.

CNPC claims to have donated $6 million to “help the locals improve education and healthcare standards,” Global Times reported. CNPC has also agreed to contribute $2 million per year of the pipeline’s life to “further help develop villages along the pipeline.”

However, Chinese firms—mostly NOCs—have not endeared themselves to Burmese communities where they operate on contracts agreed secretly with the likes of MOGE or front firms belonging to the Burmese military leadership.

These are contracts which could cost Burma dearly in compensation if they are canceled, Burma’s President’s Office Minister Aung Min admitted this week during meetings with objectors to an expansion of the Monya copper mine in Saigaing Division.

The mine is jointly owned by Wanbao Company of China and the Union of Myanmar Economic Holdings.

Aung Min was seen telling protestors that the Burmese government was “afraid” to upset Chinese businesses because of the possible financial consequences. This applied in particular to the Myitsone hydroelectric dam, construction of which has been officially suspended by President Thein Sein on environmental grounds.

“It would need a stronger Burmese government to take on CNPC and its oil shipments strategy,” said Reynolds.

Time

Woodside Petroleum, headquartered in Perth, bought the stake in Myanmar Petroleum Resource Limited Exploration and Production’s (MPRL E&P) A-6 offshore block. The block is located in the Rakhine Basin off Myanmar’s western coast in the Bay of Bengal.

The A-6 block is about 250 kilometres south of the giant Shwe Gas Field, according to MPRL E&P, and covers about 9830 square kilometres.

“The offer is for a 50pc interest in the block and is subject to certain conditions including execution of fully-termed agreements, completion of due diligence, and necessary government and other approvals,” Woodside said of the farm-in agreement in a statement.

“The proposal provides the opportunity for Woodside and MRPL E&P to undertake a 3D seismic survey program in the block and also provides an option for future drilling.”

Figures on the deal remain “confidential” according to a Woodside spokesperson.

MPRL E&P signed a production sharing contract with Myanma Oil and Gas Enterprise (MOGE) for the A-6 block in January 2007. In March 2012 the company announced that gas had been discovered in the test wells it had sunk.

Woodside made its initial foray into Myanmar in October with the acquisition of a 40pc stake in the AD-7 block from South Korea’s Daewoo International Corporation through a production sharing contract. The AD-7 block is also located in the Rakhine Basin.

“The Rakhine deep water basin is an exciting frontier exploration area and Block AD-7 is adjacent to the Daewoo-operated Shwe field development,” said Peter Coleman, Woodside’s chief executive officer, of the project.

Like Daewoo in the AD-7 block, MPRL E&P will remain the operator of the A-6 block during the exploration period.

According to a company spokesperson the A-6 block fits with the company’s deep water capabilities and Woodside views the project as an opportunity to complement its portfolio.

“Myanmar is our focus at the moment. We are looking at other countries in the region,” Mr Coleman said in an interview with Bloomberg Television on Monday, November 19. However Woodside does not currently operate an office in Myanmar.

Woodside has looked to aggressively diversify outside of its massive liquefied natural gas projects in its homeland of Australia, where costs are on the rise. Mr Coleman has been highly critical of Australia’s industry regulations and high taxes.

On Monday, December 3, seven days prior to their Myanmar project being made public, the company announced that it had bought a 30pc stake in the Leviathan field off the coast of Israel from Houston, Texas-based Noble Energy.

The deal is valued at US$1.2 billion.

Myanmar Times

In a daytime stop expected to last only six hours, Obama is set to meet with Myanmar President Thein Sein in the former capital of Yangon. He’ll also visit opposition leader Aung San Suu Kyi, Myanmar’s most popular political figure, at her lakeside home where she spent more than 15 years confined under house arrest.

“I recognize this is just the first steps on what will be a long journey,” Obama told reporters with President Thein Sein at his side, breaking with the U.S. practice of referring to the country as Burma. “But we think a process of democratic and economic reform here in Myanmar that has been begun by the president is one that can lead to incredible development opportunities.”

Locals chanted “Obama, Obama” as the president met with opposition leader Aung San Suu Kyi at the lakeside home where she spent more than 15 years confined under house arrest. The daytime trip to the former capital of Yangon, also known as Rangoon, is sandwiched between stops in Thailand and Cambodia, where Obama will join a regional summit later today.

The U.S. relaxed sanctions on Myanmar this year after Thein Sein engaged with his political opponents and eased media restrictions following his party’s victory in a 2010 election that ended five decades of direct military rule in the country. The visit also reflects a legacy-building goal for a president about to enter a second term whose early efforts at engagement and democratization have yielded mixed results.

Myanmar will “redouble our efforts” to develop democracy and “bring prosperity to our country,” Thein Sein, wearing a purple sarong known as a longyi and black flip flops, said in a joint briefing with Obama.

‘Disappointments, Obstacles’

“For the past 20 years there were some disappointments and obstacles in our diplomatic relations,” Thein Sein said during their meeting. “Our bilateral relations are progressing and I would like to indicate our commitment to strengthening bilateral relations in the years to come.”

Well-wishers lined the streets of Yangon as Obama arrived, taking pictures of his limousine with smart phones and iPads. He later visited the Shwedagon Pagoda, which has a gold-plated, 325-foot (99-meter) tall spire encrusted with diamonds and rubies that towers over Yangon.

“Today I have come to keep my promise, and extend the hand of friendship,” Obama will say in a speech in Yangon later today, according to excerpts released by the White House. “America now has an ambassador in Rangoon, sanctions have been eased, and we will help rebuild an economy that can offer opportunity for its people, and serve as an engine of growth for the world.”

Myitsone Dam

Obama will praise the government for allowing protests against the $3.6 billion Myitsone hydropower dam across the Irrawaddy River being built with China Power Investment Corp., which Thein Sein halted last year because it was against the “will of the people.” He will also call for civilian checks on the military, more freedom of expression and an end to religious and racial discrimination.

Thein Sein’s government yesterday vowed to find a solution to end violence between Rakhine Buddhists and Muslim Rohingya that has killed about 180 people this year and displaced more than 100,000. Many of Myanmar’s 64 million people view the country’s 800,000 Rohingya, who are denied citizenship and cannot travel freely, as illegal migrants from what is now Bangladesh. Obama will meet with an advocate for the Rohingya population while in Yangon.

“The government will take decisive action to prevent violent attacks against civilians,” according to the Myanmar statement. “It will hold accountable the perpetrators of such attacks; it will work with the international community to meet the humanitarian needs of the people; and it will address contentious political dimensions, ranging from resettlement of displaced populations to granting of citizenship.”

U.S. Aid

Obama will announce the re-opening of a U.S.-government aid mission in the country and pledge to give $170 million over two years, according to an administration official who spoke on condition of anonymity. That money and future funds are contingent on further progress on political reforms, the official said.

“We understand that this is going to be a work in progress,” Obama told reporters yesterday. “If we see backsliding and slipping, we are in a position to respond appropriately.”

While Myanmar said before Obama’s visit that it granted amnesty to 452 prisoners, the advocacy group Human Rights Watch said an undetermined number of political prisoners remain behind bars. Authorities released 66 more prisoners on Nov. 16, according to a statement late yesterday from Thein Sein’s office.

‘Undeserved Seal’

Obama’s trip “risks providing an undeserved seal of approval to the military-dominated government that is still violating human rights,” Brad Adams, the group’s Asia director, said in a statement.

The decision to visit Myanmar reflects Obama’s belief that his presence can “lock in” progress there, White House National Security Adviser Tom Donilon said on Nov. 15. The visit also has the backing of key Republicans in Congress.

“I want to commend him for going,” Senate Minority Leader Mitch McConnell, a Kentucky Republican.. “I think it is an important step for him to take.”

The U.S. on Nov. 16 began easing a decade-long ban on imports from Myanmar, while still blocking jadeite and rubies. The administration is also taking initial steps to resume military relations, through discussions about humanitarian aid and non-lethal military ties, a senior U.S. defense official said a day earlier.

Untapped Market

Thein Sein adviser Nay Zin Latt said in an e-mail that Obama’s visit “will become a pull factor to attract foreign investments from the Western world.”

Situated on the Indian Ocean between China and India, Myanmar represents one of Asia’s last untapped frontier markets. The nation’s economy will expand 6.2 percent this year, the International Monetary Fund said last month.

The U.S. sees the shifting political climate in Myanmar as an opening for new investments, exports and relations as Obama looks to reassert power in a region increasingly reliant on China, the world’s second-largest economy.

The oil and gas industry accounted for 77 percent of the $3.8 billion in foreign investment in Myanmar from 2005 to 2010. ConocoPhillips and Chevron Corp. (CVX) are scouting opportunities and Coca-Cola Co. (KO) and PepsiCo. Inc. are returning to the country for the first time in about 15 years. MasterCard Inc. last week reached an agreement with a local bank to accept international ATM cards for the first time.

Obama Legacy

China accounts for about half the total foreign investment Myanmar has attracted since 2008, according to the Naypyidaw- based Central Statistical Organization. China National Petroleum Corp., the country’s biggest energy producer, is building pipelines in Myanmar, and China Nonferrous Metals Co. is developing a nickel mine.

China has signaled that “its position is pretty secure and that there is no need to throw a temper tantrum over the fact that Myanmar is now closer to the West,” said Michael Montesano, a visiting research fellow with the Institute of Southeast Asian Studies who studies Myanmar. Obama can’t take too much credit for Myanmar’s shift, he said.

“At best what he can claim is that the U.S. has long been well-disposed to the reformers, and the U.S. has made an extra effort to ease Myanmar’s transition,” he said.

Even so, Myanmar’s progress gives Obama “a good story to tell,” said Suzanne DiMaggio, vice president of global policy programs at the Asia Society in New York. “When we talk about Obama’s legacy it’s probably not going to be the Middle East and events there. It’s going to be Asia.”

bloomberg

China, and local people affected by the project will be compensated, the energy minister said in parliament on November 9.

Myanmar to lease 5,600 acres of land for gas pipelines with China

The project will use about 879.75 (880) acres of land in Rakhine State, 1121.47 (1,121) acres in Magway Region, 1707.93 (1,708) acres in Mandalay Region and 1929.44 (1,929) acres in Shan State. Moreover, compensatory payments have been made for the houses in the project areas.

Over 27 billion Kyats (US$31.75 million) have been paid for five years in compensation for farmlands and crops, according to Minister Than Htay.

“We have formed teams to pay compensations for the local people for the loss of their land and crops. We made the

calculations according to the current prices. The compensations will be paid for a five-year term,” the minister said.

Up to November 7, Rakhine State has received about 3.9 billion Kyats for the loss of land and crops plantations, Magway Region over 5.2 billion Kyats, Mandalay Region over 8.4 billion Kyats and Shan State over 10 billion Kyats.

the daily eleven

Spotlight: Myanmar’s controversial oil and gas industry

Myanmar ended 15 years of military rule in 2010 with an election that was seen internationally as a step towards political reform and democracy. This prompted the US and other Western countries to this year lift 15 years of sanctions forbidding companies to engage in economic activity in Myanmar, essentially opening up its rich oil and gas reserves for business.

The military junta that previously ran Myanmar, formerly known as Burma, was constantly accused of corruption and breaching human rights, including forcing opposition party leader Aung San Suu Kyi to be kept under house arrest for 15 years.

Some critics of the current government believe nothing has fundamentally changed, especially within Myanmar’s state run oil and gas industry, which is accused by activist groups of being rife with corruption and responsible for carrying out human rights abuses, leaving many concerned that very few of the country’s people will benefit from an open energy market.

Current projects, investments and income

Up until the sanctions were lifted, Myanmar’s offshore oil and gas industry has been dominated primarily by Asian companies, most notably China, who purchase gas from the Shwe Gas offshore project run by South Korea’s Daewoo. China are currently building a 1,800km pipeline from Kyauk Phyu in Arakan to Kunming, which will be active from next year, 2013.

“Critics of the current government believe nothing has fundamentally changed, especially within Myanmar’s state run oil and gas industry.”

Other significant offshore projects include the Yetagun gas field in the Gulf of Martaban, which contains reserves estimated at 3.2 trillion cubic feet of gas and is run by PTTEP, Thailand’s national energy company, and the Yadana gas project in the Andaman Sea, which is estimated to contain more than 150 billion cubic metres of natural gas and is run by Total SA, PTTEP and Chevron.

According to a presentation published by Myanmar’s national oil company, Myanmar Oil and Gas Enterprise (MOGE), last year it signed contracts with 14 foreign companies for 30 offshore blocks, with a further 22 blocks up for grabs. Countries currently interested in these blocks include ConocoPhillips, Hess Corp, Royal Dutch Shell, BP, BG Group and Australia’s Woodside Petroleum.

Although a tremendously poor country, Myanmar’s oil and gas industry is one of the oldest in the world and, besides allegations of atrocities, it apparently runs efficiently. The MOGE runs the industry on behalf of the Ministry of Energy and all international companies working in Myanmar must partner with the MOGE.

According to John McClenahan, who acted for the lenders financing MOGE participation in the Yutagan gas project and has, since 2006, been working for the sponsors on the Shwe Gas project, Myanmar’s oil and gas industry is the most sophisticated sector in the country.

Is it too soon for Western investment?

Although Myanmar’s Government, which is still headed by Thein Sein who also ran the former military junta, may be gaining the trust of international energy companies through its new reforms and legislations – it recently updated its Foreign Investment Law – there is much scepticism as to whether it is morally right for Western companies to invest in Myanmar and partner with the MOGE when it has been accused of corruption, displacing people along the Shwe Gas project and conducting human rights abuses.

“Myanmar’s oil and gas industry is one of the oldest in the world and, besides allegations of atrocities, it apparently runs efficiently.”

Jockai Khaing, who works for the Arakan Oil Watch, an independent, community-based NGO, says: “Oil and gas extraction activities in Burma lack revenue transparency standards, as well as protection laws for human rights and the environment.

“Under the former Than Shwe military regime, the people of Burma didn’t know where the gas money was kept or how it was spent. The situation is still the same.”

However, James Finch from DFDL Mekon Group, who has legally advised in Myanmar for 15 years, believes there has been an improvement: “The offshore contracting process has just changed over to an open-bidding process. The Ministry of Energy (MOE) is trying hard to set up procedures that will satisfy the world that the process is transparent.”

Although the evidence seems point to the contrary; the MOE has not signed up to international transparency agreements, such as the EITI, and the country is also ranked third on the Corruption Perception Index. Also, Aung San Suu Kyi requested in June that Western countries not allow their companies to partner with the MOGE until it ‘apply internationally recognised standards’.

It is not just transparency that is an issue. According to a report from the Ta’ang Students and Youth Organisation (TSYO), construction of the Shwe Gas project has resulted in land confiscation, forced labour, heightened drug use and security concerns for women and girls, in addition to fighting and displacement.

Oil and gas industry and local people

In response to claims that locals are vulnerable to losing their homes and communities along oil and gas construction routes, McClenahan, who has worked on the Shwe Gas project, says: “In the [legal] documentation we put in requirements for adequate compensation to be paid to land holders.”

He says “that [it] was the responsibility of the Myanmar Government for the land holders to be adequately compensated.”

Khaing is frustrated that local people may never benefit from this burgeoning industry.

“The MOGE runs the industry on behalf of the Ministry of Energy and international companies working in Myanmar must partner with it.”

“If the situation in Burma’s onshore and offshore oil and gas industry remains the same, so will major problems…Cronies and military companies will be the only groups to benefit from this industry, while local communities in the projects areas lose their livelihoods and suffer abuses, and the country as a whole deteriorates under the resource curse.”

Khaing also says the AOW are concerned by offshore environmental factors, such as small fish species being killed and bigger fish moving territories, which is “compounded by the fact that there are not clear laws for protection or guidelines for who will take responsibility if an accident happens.”

There is also the issue of exportation of natural resources. According to Revenue Watch, only a quarter of the population has access to electricity and the country meets only one-third of its crude oil demand and half of its natural gas needs, while exporting around 80% of the gas produced to neighboring countries, which it has been criticised for.

However, domestic demand is something the government says it plans to address with further oil and gas production. McClenahan says this could be a positve: “…this should hopefully promote the development of further infrastructure and in turn manufacturing agriculture job opportunities and so forth, so I think if they use their energy resources wisely the prospects are very, very good.”

Current issues must be addressed

Myanmar’s Government, international companies and their governments must address these accusations and ensure energy reserves benefit the country as a whole, as well as working on improving infrastructure and the banking system. McClenahan says there is a need for “vocational schools to teach basic trades.”

Khaing goes further, saying as the government reforms, international companies need to do more: “Oil companies must demand laws and mechanisms to properly protect human rights and the environment, and ensure revenue transparency in Burma’s oil and gas sector before they make their investment.”

Looking back at history, oil and gas companies have never been entirely in favour of full transparency. However, there is a possibility that with the international spotlight now resting on Myanmar’s oil and gas industry in itself, along with a planned visit from America’s President Barack Obama, it may promote a move towards better practices and human rights, as well as its growing tourism industry which will further bring international attention on the country.

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