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Myanmar: A Middle Man in Oil Politics

 

Myanmar's natural gas exports rose at a 22.7% year over year in fiscal year 2011-12, to 2.926 billion USD.  That number is only set to increase as the country has handed out offshore licenses to 10 offshore blocks and is set to license another 8 soon.  They have the 10th largest proven natural gas reserves in the world at 90 trillion cubic feet in both on and offshore fields.

From the report at Reuters:

Myanmar awarded 10 onshore oil and gas blocks to eight firms in its biggest energy tender in years and is now offering nine offshore blocks, two Yangon-based sources with direct knowledge of the deals told Reuters last week.

The winning firms were mostly from Asia, including Malaysia’s Petronas and Thailand’s PTT Exploration and Production, as Western firms have shied away from the country.

FDI into Myanmar's oil and gas industry totaled $13.8 billion USD in 2011-12, or about 31% of GDP.  Development of both electricity and oil and gas production are the foci in Myanmar right now and it's global politics that is driving it. 

This aversion by U.S. and European companies is likely to end soon when they finally decide to end their sanctions against Myanmar, but they are operating at a distinct disadvantage to China.  One could make the cynical argument that it was the strengthening of ties between China and Myanmar which has the U.S. looking to lift sanctions and re-establish relations after decades of the self-righteous policy of isolation.

China is investing a ton of money into Myanmar's oil and gas industry.  The $1.5billion USD, 2000 km pipeline is due to be completed in 2013, which will allow Chinese oil tankers to bypass the Malakka Straits and make it much harder for the U.S. Navy to restrict the flow of goods to China should relations between the two countries deteriorate.   Currently only Russia supplies oil to China via pipeline, 400,000 barrels per day. 

China's trans-Myanmar oil and gas pipelines

This is very likely if China, along with Russia and India, go forward with plans to buy oil directly from Iran off the soon to be re-opened Iranian oil bourse and bypassing U.S. and European attempts to isolate Iran economically.  Make no mistake this is a major turn of events that is getting very little play in the U.S. media, instead focusing on Iran's nuclear program.  If the Iranians are successful in creating a new bourse for the international sale of oil it would be the 4th in the world and the only one that does not accept U.S.Dollars.

One quick look at a map can tell you how these issues all come together and how Myanmar is caught in the middle of it.  Completion of the SKRL (Singapore-Kumming Rail Line) spur from Kumming to northern Mynamar NW of Mandalay is part of the Chinese strategy as well.   Myanmar's oil production has not increased significantly in 2008-10, hovering near 20,000 barrels per day.  Data for this year is not available 2011 yet.  But, it is obvious that that number is going to increase significantly in the next few years.  Many of the oil field licenses that have been granted in recent years lie near the SKRL and pipeline. 

The port town of Kyaukpyu, population around 20,000, will be the recipient of a lot of this investment now designated as a Special Economic Zone.  There is another railroad being built by the Chinese between Kyaukpyu and Mandalay as well as the deep sea port that will offload the oil coming across the Bay of Bengal. 

For the numbers on Mynamar's oil deposits, take a look at the slideshow below.

 

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  1. [...] the huge investiture that China has made to develop Myanmar's extensive oil and gas reserves, including the 2000 km pipeline to Kunming.  It should be no wonder to anyone that the minute there is a move by China to include Myanmar [...]

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Peter Pham is a capital market specialist and entrepreneur.  With expertise as a Head of Institutional Sales and Trading he closely watches the market and probes for investment opportunities utilizing a unique blend of quantitative trading experience and macro trend analysis… (read more)

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