China ramps up energy security with new pipelines

MYANMAR–China has constructed a pipeline to pump crude oil from the Bay of Bengal to southern China through Myanmar as part of an effort to ease its reliance on the pirate-ridden Malacca Strait.

China also constructed a deep-water port in Myanmar so it can annually transport 22 million tonnes of crude, the equivalent of 8% of China’s total oil import in 2013, through the pipeline.

Countries in the region view with alarm the inroads China is making through such infrastructure projects.

To mark the start of trial operations, a massive Chinese tanker measuring 330 metres from bow to stern and 60 metres in width entered a port at Maday Island near the western Myanmar city of Kyaukpyu on Jan 24.

The tanker unloaded 136,000 tonnes of crude oil at the newly constructed port, which has deep water facilities and 12 massive oil storage tanks. The ceremony on Jan 30 was attended by Chinese and Myanmar government officials and business executives.

The large pipelines will transport oil from the port to Myanmar’s border with China about 800 km north to meet the needs of growth centres in southern China, including Kunming, Chongqing and Guigang.

A gas pipeline from Kyaukpyu to China was completed in 2013. The new oil pipeline will start full-fledged operation later this year to move crude shipped in by tankers from the Middle East and Africa.

Significantly, the new oil pipeline bypasses the Malacca Strait–a narrow channel that connects the Indian Ocean with the Pacific and is rife with pirates.

China’s crude oil needs jumped 2.3-fold over a decade from 2004, while its share of imported oil rose from 43% to 56% during that time. As domestic oil production has already peaked out, the share of imported crude is set to keep rising.

Currently, about 80% of China’s imported oil is transported through the Malacca Strait and South China Sea. The Chinese government is keen to diversify its oil import routes as part of a revamp of its energy security strategy because of rampant piracy in the Malacca Strait and growing diplomatic tensions over territorial disputes in the South China Sea.

In a bid to develop energy import routes that circumvent the Malacca Strait, President Xi Jinping also reached an agreement with Russian President Vladimir Putin to expand oil imports through pipelines during summit talks in March 2013.

The Xi administration also reached an agreement with Kazakhstan to expand oil pipelines that connect the two countries.

As oil begins to flow through the new Myanmar pipeline, the state-run China National Petroleum Corp (CNPC) is accelerating construction of refineries in Kunming and Chongqing. It also plans to make Chongqing the production hub of oil-related industry.

The overall project is viewed as a touchstone for China’s Maritime Silk Road initiative, which aims at building an infrastructure network stretching from China across Southeast Asia and other regions.

Beijing also aims to obtain rights to develop industrial parks in the planned special economic zone in Kyaukpyu.

India is viewing with concern China’s involvement in infrastructure projects in Sri Lanka, Bangladesh and other countries bordering the Indian Ocean.

To contain China’s influence in Myanmar, India is constructing a port in Sittwe, some 100 km north of Kyaukpyu, and a highway connecting the country with northeastern India.

In attempt to break away from its traditional dependence on China, the Myanmar government has commissioned India, Japan and other countries to develop infrastructure and special economic zones.