When China’s top energy officials decided to build a multi-billion dollar oil and gas import pipeline through neighbouring Myanmar (Burma), they certainly weren’t expecting to have to report back to Nobel peace prize winner Aung San Suu Kyi.
When China’s top energy officials decided to build a multi-billion dollar oil and gas import pipeline through neighbouring Myanmar (Burma), they certainly weren’t expecting to have to report back to Nobel peace prize winner Aung San Suu Kyi.
In 2009, when Chinese state-owned oil firm CNPC reached a final deal with Myanmar’s military rulers to begin work on the project, Suu Kyi — known simply as The Lady — was about to start her 15th year under house arrest in Yangon. Protests by Buddhist monks two years earlier had sparked a violent clampdown, reinforcing the country’s international isolation and seemingly leaving the government even more reliant on its main backers in Beijing.
CNPC was ready to take advantage. Construction of the 440,000 b/d cross-border Burma Road pipelines, stretching from Kyaukpyu port on the Bay of Bengal to Yunnan province, would help cut China’s dependence on oil shipments through the piracy-prone Malacca strait, slash the time it took to move Mideast Gulf crude to energy-short southwest China, and open up a direct transport link to the Indian Ocean for the first time. With Chinese oil demand growing strongly, supported by a massive economic stimulus programme in the wake of the global financial crisis, the project’s future looked assured.
How quickly things change. Just a year after the pipeline deal was finalised, Myanmar president Thein Sein took the shock decision to release Suu Kyi, open up the economy and invite global investors into Myanmar’s gas-rich energy sector. The country’s political reforms reach a milestone today as Suu Kyi’s National League for Democracy (NLD) forms a new government after winning a landslide victory in November elections. Suu Kyi, who is still constitutionally barred from the presidency because of her marriage to a UK national, has taken control of the energy ministry — underscoring the importance of the sector to the country’s future. But it is clear that she will also be the real power behind the NLD government.
The world looks very different from CNPC’s Beijing headquarters, too. Crude has yet to begin flowing through the pipelines, as the 260,000 b/d Anning refinery that they are meant to supply sits idle, caught up in the government’s environmental crackdown and corruption probes. A parallel gas pipeline is operating well below capacity with no immediate prospect of being filled. Myanmar has soured on Chinese investment, cancelling a major China-backed hydropower dam project with little warning. And Chinese firms were conspicuous by their absence from the country’s historic offshore licensing round in 2013, which marked the entrance of many international oil companies into Myanmar’s upstream.
So what does the future hold for China’s opaque oil industry in Myanmar, now that investments will be scrutinised by the woman that its government was once happy to see locked up? The NLD has revealed almost nothing about its economic vision for the impoverished country. But Suu Kyi’s pragmatism since re-entering politics has surprised many, and disappointed some. She met with Chinese president Xi Jinping last year, has defended a controversial Chinese copper mine investment and stayed largely silent on human rights abuses against the Rohingya population in Rakhine state, where the Burma Road pipelines start.
Myanmar will receive a transit fee once the oil pipeline starts up, meaning that the government may be keener even than CNPC to get the crude flowing. And Suu Kyi likely recognises that Chinese investment is every bit as essential to Myanmar’s future as it is to other countries in the region. The democracy activist and China’s state oil sector make strange bedfellows, but an accommodation might be closer than many would expect.