17 January 2005

Inside Myanmar I: India, China vie for energy, influence

January 17, 2001
The Hindu

Inside Myanmar- I

India, China vie for energy, influence

By Siddharth Varadarajan

Sittwe: Dressed in an orange jumpsuit with calf-length boots and the salt-and-pepper mane of a man who has spent long years at sea, Captain Ajay Chadha is floating along the newest frontline in India's quest for energy security.

We are on the deck of the `Frontier Duchess,' a drill ship anchored securely more than 50 miles off the coast of Rakhine, or Arakan, on Myanmar's Bay of Bengal littoral. As the waves crest and fall, a drill runs gallantly through a hole in the ship down several hundred metres below the seabed prospecting for the natural gas that geologists say lies trapped in abundance between sand and sediment in the belly of the earth.

The ship is Norwegian but operated by Daewoo. The Korean company, along with ONGC Videsh Ltd and GAIL, owns the concession to exploit the energy-rich offshore block known to oilmen simply as A-1. The crew is international, with a generous sprinkling of Australians and Canadians. The fact that their captain is an Indian — who came here via Bombay High — is, of course, a happy coincidence.

Pipeline to Bengal

If the geologists are right, a permanent rig will eventually replace the `Frontier Duchess.' And four years from now, a network of undersea pipelines from A-1 and other offshore blocks will carry the gas produced all the way up to the coast and then onwards to Bangladesh and eventually West Bengal. The Petroleum and Natural Gas Minister, Mani Shankar Aiyar, believes Myanmar could supply as much as 10 to 15 per cent of India's gas consumption by 2025. In turn, OVL and GAIL have been asked aggressively to bid for fresh exploratory offshore and deep-sea blocks being offered by the authorities here.

Rakhine was once one of Myanmar's most prosperous provinces and Sittwe, formerly Akyab, a rich port with connections to Bengal. India's independence and partition in 1947 broke these links and Rakhine slowly withered. Gas is one way to revive the old geographical synergies.

As Indo-Myanmar ties grow, however, one of the concerns Indian officials have is the aggressive presence of China in Myanmar's growing energy sector. Apart from several onshore blocks, Chinese companies have picked up offshore blocks A-4, D, M and M-10 and are likely to get C-1, C-2 and M-2 as well. But more than the gas prospecting, it is the Chinese proposal to run a 1,200 km pipeline from Sittwe all the way northwards up to Kunming in Yunnan that provides some indication of Myanmar's strategic significance for both Beijing and New Delhi.

Chinese proposal

The Chinese pipeline proposal is still at the idea stage but its utility both for gas and oil is self-evident. Apart from being the cheapest way to get hydrocarbons in to southern China, the Sittwe route would also reduce China's dependence on the Straits of Molucca, through which more than 80 per cent of its oil imports currently pass.

While Myanmar is open for business with literally any country — Korea's Daewoo and Malaysia's Petronas are also aggressive players — the Chinese have successfully leveraged their proximity to the country's military rulers to build strong economic links. The sudden removal of military intelligence chief Khin Nyunt as Prime Minister last year was a setback for Beijing as it had developed a close relationship with him. But China has moved quickly to build bridges with the new incumbent, Soe Win, a man with whom India also has a good relationship.

Strategic cooperation

Acknowledging that there is an element of strategic competition between China and India on the energy front, Mr. Aiyar also feels the two Asian powers could enhance their energy security by working together.

If the Iran-Pakistan-India and Myanmar-Bangladesh-India pipelines eventually go through — as Indian oilmen fervently believe they should — the next idea bubbling on the surface is a gas pipeline from Iran to China via India. The Chinese have begun work on a 3,000-km pipeline from Kazakhstan to western China but are still relying on costly tankers to transport LNG (liquefied natural gas) out of Iran. If the Iran-Pakistan-India and Turkmenistan-Afghanistan-Pakistan-India pipelines become a reality, New Delhi and Beijing could work together to run an extension pipeline across the Gangetic valley into Assam and then Myanmar and Kunming in China.

According to Mr. Aiyar, a trans-South Asian pipeline would let China tap into Iranian and Central Asian gas. In turn, India could recoup the transit fees it pays to Pakistan from China. Moreover, the fact that the same pipeline which supplies India would also go on to feed China would provide a virtually iron-clad guarantee against Pakistan turning off the tap.

Outlandish though such a pipeline sounds, perhaps the way to an energy secure future lies in cooperative projects of this type.

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