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China mulls oil pipelines in Myanmar, Thailand

By Phar Kim Beng
From Asia Times
Sep 23, 2004
link to this article.
Booming China, with its voracious appetite for oil and urgent need for oil security, is considering a China-Myanmar oil pipeline and one through Thailand. These are among 10 recent proposals on alternative strategies to secure China's energy supplies.

China first became an oil importing country in 1993. Its insatiable hunger for oil has since been an important factor in driving up world oil prices. The country's demand for oil is expected to grow by 8.1% or 510,000 barrel per day (bpd) by 2005, according to the International Energy Agency (IEA).

The economy's growth may be severely hindered if the energy needs are not met. This summer saw the worst shortage in over 15 years despite the measures to reduce energy consumption. Throughout China, thousands of factories were asked to halt production for two days a week, shift work to non-peak hours or take mandatory week-long holidays.

Given the fact that China must create some 24 million jobs a year to absorb fresh labor, it just cannot afford such slowdowns. Indeed, with over 54% of the economy reliant on manufacturing, most of which remain energy-intensive, it's little wonder that China is concerned with its energy security.

Figures clearly demonstrate China's energy hunger. According to British Petroleum (BP) statistics, in 2003 China's total energy demand leaped by 13.8% following its GDP growth of 9.1%. China alone accounted for 41% of the growth of the total world oil demand, its oil imports rising 32% to 2.6 million bpd.

These are scary statistics as they show both the magnitude of China's energy appetite and its contribution to environmental hazards caused by excessive energy consumption. And Beijing is quite aware of the problem. "Every increase in revenue we gain at the expense of much higher energy consumption and more serious environmental pollution," says Pan Yue, vice-minister of the state environmental protection administration. According to him, the amount of sulphur dioxide - a major air pollutant - discharged per gross domestic product (GDP) unit in the country is 68.7 times that in Japan, 26.4 times that in Germany, and 60 times that in the United States.

Though China could theoretically avoid the double jeopardy of high energy consumption and environmental degradation by making the switch to high-technology industry, this transition could only take place in the long term. For now, it defines its energy security as gaining access to global energy supplies at competitive prices any time.

Lately, however, echoes of an alternative strategy to reinforce energy security needs are also being heard. On July 30, Li Lianzhong, the vice-director of the economic bureau of China's Central Policy Research Center, listed 10 proposals to protect China's energy safety at the National Energy Development and Investment Forum. Of these, the most interesting one is the construction of a Sino-Myanmar pipeline.

The proposal stands out for two reasons. To begin with, it seeks to reduce China's dependence on oil in Middle East. In addition, China is aware that the US, India, even Japan, are exerting undue weight on the Strait of Malacca. Currently, 60% of China's oil imports are transmitted through the Malacca Strait. Should it ever be blocked, China would suffer enormously.

As Professor Li Chengyang, co-author of the proposal said, "Most of China's oil imports come from the Middle East and Africa. Given the current situation in the Malacca Strait, we feel we should come up with a suitable alternative." The proposal suggested that China should build an oil pipeline from Myanmar's western deep-water port of Sittwe across the country to the city of Kunming, the capital of Yunnan province in southwest China.

Chinese Premier Wen Jiabao and Myanmar Prime Minister Khin Nyunt discussed the plans for an oil pipeline when they met on July 11 in Beijing. The project would reduce the oil route by 1,820 sea miles compared with the Malacca route, estimate experts.

But this is not the only option weighed by China. Plans are afoot to build oil pipelines to China from other Asian countries, including Thailand, Pakistan and Bangladesh. Of these proposals, the one from Thailand has gone the furthest and received enormous support from the Thai government of Prime Minister Thaksin Shinawatra.

Thailand's state energy conglomerate PTT and China's giant oil major Sinopec announced in June that they were looking into the possibility of a new pipeline so that oil tankers from the Middle East don't have to pass through the Malacca Strait. The project was announced in Manila at the business forum of the Association of Southeast Asian Nations (ASEAN). The new pipeline would save as much as a week of voyage time for crude oil shipments to China, Japan, South Korea and the Philippines.

The PTT study estimated that the new pipeline could cost up to US$880 million. The project would include the oil pipeline, tank storage and tanker terminals on both the west and east coasts of Thailand's Kra Isthmus. The project would need to transit a minimum of 1.5 million barrels per day to be feasible. If built, the pipeline would start north of Phuket Island on the west coast and pump the oil across the peninsula to an eastern terminus for trans-shipment to tankers sailing to China and Japan, Asia's two largest oil consumers.

If the Myanmar and Thai proposals do succeed, the one country that would be severely affected would be Singapore. China is one of Singapore's most important oil trading clients, with a substantial proportion of China's oil imports coming via Singapore. Alternative oil routes would undermine that special relationship.



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