Home MMBIZ News China-Myanmar Gas Pipeline Becomes Fully Operational

China-Myanmar Gas Pipeline Becomes Fully Operational

The China National Petroleum Corp (CNPC), China’s state-run oil and gas firm, said last week that the China-Myanmar gas pipeline has gone into full operation after it completed the section connecting the cities of Lufeng and Guigang in southwest China.

The pipeline, also known as Shwe Gas Project, is China’s fourth strategic energy supply channel, following the Russia-China oil pipeline, the Central Asia gas pipeline and the sea route through the Malacca Strait.

As well as diversifying the world’s second-largest economy’s fuel sources, the pipeline will ease the energy-hungry nation’s gas owes during peak season, experts say.

Nomita Nair, partner at law firm Berwin Leighton Paisner, told Myanmar Business Today: “The pipeline is part of a strategic play for China to escape depending on the Straits of Malacca and bolster its energy security.

“By providing a direct access to energy via the Indian Ocean, China is also able to develop further its Western provinces.”

The 2,520-kilometre (km) pipeline starts at Kyaukpyu on Myanmar’s western coast, enters China at Ruili in Yunnan province and ends at Guigang in the Guangxi Zhuang autonomous region. It will provide natural gas to the southwestern provinces of Guangxi, Yunnan and Guizhou. Some 793km of the trunk line are in Myanmar.

The three provinces have not had access to a natural gas pipeline until now, relying instead on liquefied natural gas from Sichuan province. The benefits will include cheaper domestic prices and greater energy supplies to the fuel industry.

By the end of 2014, industrial power consumption in Guangxi is expected to grow to around 100 times its current level, China National Radio reported. The average price of natural gas for residential use, meanwhile, will drop by 13 percent, which means a cut of around 0.5 yuan ($0.08) for each cubic metre (cbm).

Yunnan has been short of oil and gas for years, hindering the province’s economic development. The new pipeline is expected to change the energy structure of the province, greatly improving the situation for industry.

Under the local government plan, by the end of 2015, Yunnan’s natural gas sales volume is expected to reach 3 billion cbm, and the figure will grow to 7 billion cbm in 2020.

The pipelne send 12 billion cbm of natural gas annually to southwest China, which will reduce coal consumption by 30.72 million tonnes per year, according to the CNPC.

Wu Hong, general manager of the CNPC’s pipeline construction department, said the pipeline will be linked with the pipeline that sends gas from China’s remote northwest to the east coast, increasing the reliability of supply to customers, particularly in case of emergency.

Construction of the gas pipeline began in 2010 and the Myanmar section of the gas pipeline started to deliver gas to China in late July. An oil pipeline is also under construction alongside the gas pipeline, and it will be completed by the end of the year, according to CNPC.

China is expected to import around 22 million tons of crude oil from the Myanmar channel each year.

The pipeline will supply urban areas and industrial plants in Myanmar, boosting industry with cheap fuel. In July, vice president U Nyan Tun said it will have a positive impact on Myanmar’s long-term development.

Myanmar will draw 2 million metric tonnes of crude oil and 2 billion cbm of natural gas from the pipelines annually.

However, the project was mired with allegations of land confiscation, displacement of local communities and environmental risks. A number of protests in Myanmar and abroad took place against the construction of the pipeline, which along with protests against the Letpadaung copper mine and the Myitsone dam strained the China-Myanmar “fraternal” relationship significantly.

“The Myanmar-China relationship is quite an established and historical one and it will be interesting to see how the Myanmar government balances that with relationships they are cultivating with newer investors such as the Japanese,” Nomita said.

The project is also part of a larger Chinese programme to lay a road connecting the country’s Yunnan province to the Indian border through Myanmar although New Delhi has not yet accepted the road connectivity plan. China also plans to transport crude oil across the Myanmar border and complete an irrigation project in Myanmar which Nay Pyi Taw has stalled.

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