Two countries linked by an energy source, China and Myanmar have become closer partners over the last few years due to their connection via an oil pipeline. Having seen the success of energy transportation between the two states, China plans to invest further in Myanmar in the coming years. In 2019, the China-Myanmar pipeline carried 10.8 million tonnes of crude oil. Two countries that previously had few connections beyond their border have relied on the pipeline to transport energy, seeing an increase in movement of around 6.3 percent year on year and valued at around $5.5 billion.
China also imported around 3.4 million tonnes of natural gas from Myanmar in 2018, an increase of 54 percent from 2018.
The 1,420-km China-Myanmar oil pipeline was constructed in 2017 to transfer the energy source, following the prior construction of a natural gas pipeline between the two countries in 2013.
China announced plans this week to expand gas and oil infrastructure with Myanmar’s port of Kyaukpyu as part of its Belt and Road Initiative (BRI) investment to link China to markets in Asia, Europe, and Africa. Both governments signed a deal to carry out a feasibility study for the construction of a 650km railway which would link a deepwater port in Rakhine state with Mandalay state this January. Mandalay, home to Myanmar’s second-biggest city, would then be linked via rail to Muse on the Chinese border.
The railway project would follow the same trajectory as the existing oil and gas pipelines. At present, the oil pipeline transports crude from the Indian Ocean to state-controlled PetroChina's 260,000 bpd Anning refinery in the Yunnan province. An average of 203,000 bpd of this crude oil comes through the Burma Road pipeline.
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The railway plan comes following a 2020 official visit by China's President Xi Jinping to Myanmar which resulted in several investment plans. The China-Myanmar Economic Corridor project is just part of China’s BRI plan.
Following years of political instability, Myanmar is slowly winning back trust and investment from China. Armed conflicts in the country have so far not affected the oil and gas pipelines, which continue to show promise for the energy connection between the two states.
At present, China receives 95 percent of its energy imports by sea, with Myanmar offering a vital energy alternative link via land. The country also offers a substitute for China’s reliance on Middle Eastern oil, particularly from Saudi Arabia and Iraq, as the home of 104 oil and natural gas blocks, the most of any ASEAN member.
Continuing to invest in improvements in the pipeline to bring it to full capacity could see an increase in oil imports from Myanmar by 4.3 percent of China’s total. The existing pipeline has already changed the face of Myanmar, leading to the construction of roads across the country and benefiting the economy as a whole. The connection between the two states has led to the development of Myanmar's petrochemical industry, as well as enhancing industrialization and providing vital job opportunities for the Burmese population.
Overall, greater investment from China in the Myanmar energy sector could see a shift in the country, leading to greater industrialization and economic stability. In addition, this link via land to the Indian Ocean provides China with greater energy security, ultimately helping the country to decrease its reliance on Middle Eastern oil and sea links.
By Felicity Bradstock for Oilprice.com
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Two quintessential objectives occupy China’s strategic thinking. The first is securing its oil and energy needs peacefully. The second is ensuring its energy security. The two objectives are directly connected with oil and energy.
The growing dependence on oil imports has created an increasing sense of ‘energy insecurity’ among Chinese leaders. More than 50% of China’s crude oil imports come from the Arab Gulf and have to pass through the world’s two most important chokepoints, namely the Straits of Hormuz and Malacca. Moreover, 80% of China’s imported oil imports have to pass daily through the Strait of Malacca. The former President of China, Hu Jintao, has referred a number of times to what he describes as the ‘Malacca dilemma’. ‘Certain powers, ‘he has declared, ‘have all along encroached on and tried to control the navigation through the Strait’. There is no mistaking whom he means. China’s answer to the “Malacca Dilemma” was the newly-opened China-Myanmar crude oil pipeline.
China and Myanmar have become closer partners over the last few years due to their connection via an oil pipeline. Having seen the success of energy transportation between the two states, China plans to invest further in Myanmar in the coming years.
In 2019, the China-Myanmar oil pipeline carried on average 217,000 barrels a day (b/d). Both countries are now planning to expand gas and oil infrastructure at Myanmar port of Kyaukpyu and also carry out a feasibility study for the construction of a 650km railway which would link a deepwater port in Rakhine state to the Chinese border to be financed under China’s Belt and Road Initiative (BRI).
The BRI is helping developing countries get finance from China to modernize their infrastructure and start wealth-creation projects while at the same time enabling China's economy to benefit from expanding markets around the world.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London