The China-Myanmar Energy Pipelines: Risks and Benefits

Summary

EXECUTIVE SUMMARY

1. • In November 2008, China National Petroleum Corporation (CNPC) and the Myanmar Ministry of Energy signed an agreement to build a US$2.3 billion crude oil pipeline and a US$2 billion natural gas pipe-line. The construction is scheduled to be completed this May.

2. • The pipeline project opens a lucrative fourth route for China's oil and nature gas imports, and alleviates the shortage in Myanmar's energy needs.

3. • Beyond its energy strategic value, the oil and gas pipelines will also create other spillover opportunities for economic cooperation and integration between China and Myanmar, and Southeast Asia.

4. • ASEAN member states adopted the ASEAN Memorandum of Understanding on the Trans-ASEAN Gas Pipeline (TAGP) in 2002. Given the ambitious magnitude of the TAGP and the China- Myanmar pipelines, it is possible that the network may be extended into China and beyond.

5. • To what extent this project will strengthen China-Myanmar bilateral relations remains to be seen.

INTRODUCTION

In November 2008, China National Petroleum Corporation (CNPC) and the Myanmar Ministry of Energy signed an agreement to build a US$2.3 billion crude oil pipeline and a US$2 billion natural gas pipeline. Construction started on 31 October 2009 and is scheduled to be completed this May. The dual pipelines will run from Kyaukphu to Muse in Myanmar before entering China at the border city of Ruili in Yunnan Province. In addition to ensuring energy security, the project serves a broader objective of strengthening bilateral relations by deepening regional eco-nomic integration through mutual cooperation.

Analysts are divided on the efficacy of such infrastructure projects in promoting regional economic integration and strengthening bilateral relations. This is especially pertinent when supply countries are experiencing risks and uncertainty associated with structural political transition. Projects such as the China-Myanmar pipelines can generate conflict and local resentment — parties to the project have different interests and motivations, land-use compensation issues abound, and mechanisms exist to encourage both parties to seek a greater share.53 However, energy can also foster shared interests.54 Physical infrastructure such as pipelines are likely to have a lasting impact on interstate relations and create greater incentives for cooperation over time.55