* Construction on China side faces 2-3 month delay
* Myanmar looks to coal to meet acute power shortages
* New gas discoveries to be put to domestic use first
By Jason Szep
NAYPYITAW, Myanmar, June 12 A pipeline
connecting western Myanmar to China is ready to carry gas from
July, but it won't be fully operational for about three more
months due to construction delays in China, Myanmar's energy
The multibillion-dollar pipeline stretches 870 km (540
miles) from the Indian Ocean to the Chinese border and will
deliver oil and gas to energy thirsty western China and generate
much-needed revenue for Myanmar's new reformist government.
"The pipeline construction inside Myanmar is 100 percent
finished. But the China portion that is over 1,600 km (990
miles) long, they are not able to finish in time," Than Htay
said in an interview in the capital, Naypyitaw, estimating a
delay of two or three months.
Despite the delay, gas will begin flowing in the $2 billion
pipeline from July but it will be used domestically until
construction in China is completed, he told Reuters. "For
Myanmar's domestic utilisation, we can take (gas) starting from
July," he said.
A parallel $2.3 billion 770 km oil pipeline would be
completed in September, he added.
China National Petroleum Corp (CNPC), the country's top oil
and gas producer, owns the pipelines, which will channel natural
gas from the Shwe fields off the coast of Western Rakhine State
along with oil originating from the Middle East and Africa.
CNPC said last week it had completed construction of the gas
pipeline and 94 percent of the crude pipeline was finished. It
also said has completed six oil storage tanks on an island off
western Myanmar, with six more due to be finished soon. CNPC
could not provide further comment on Wednesday.
The pipelines are China's most strategically important
investment in Myanmar, a vital energy security asset that will
reduce Beijing's reliance on shipping through the narrow
choke-point of the Malacca Strait. Thousands of Chinese workers
were enlisted to build them. In some areas of Myanmar, the
pipelines have stoked anti-Chinese sentiment, raising security
In May, ethnic minority guerrillas attacked a compound of
the state-owned Myanma Oil and Gas Enterprise near the pipelines
in northern Shan State not far from the Chinese border, killing
two people and wounding three, according to state media.
That incident added to debate over how well authorities can
secure the pipelines, which are capable of carrying 440,000
barrels of oil a day and 12 billion cubic metres of natural gas
a year to China's southern Yunnan province, one of its most
"The security will be strong," said Than Htay. "If
necessary, in some areas the armed forces will take charge. In
some areas, the police will take charge. In some areas, the
pipeline company security personnel will take charge."
DOMESTIC ENERGY SHORTAGES
The project was agreed with Myanmar's former military junta
as a way to generate much-needed foreign exchange while the
country was under Western economic sanctions. In March 2011, the
generals ceded power to a quasi-civilian government that has
embarked on a series of democratic reforms including an economic
transformation that is projected to vastly increase energy
Than Htay repeated that new energy discoveries would be used
to address acute domestic energy supply shortages in Myanmar, a
break from the past when the vast majority of Myanmar's energy
resources were exported to neighbouring Thailand and China.
At present, just a quarter of Myanmar's estimated 60 million
people have regular access to electricity.
Hydroelectric plants have proved unreliable due to seasonal
rain patterns and only 12 percent of power generated by Myanmar
comes from gas.
"Any new discovery we will use that for our domestic
utilisation first ... if we have excess hydrocarbon, it will be
considered value-added for selling to other buyers," Than Htay
"Power is very much crucial to our transformation process,"
he said, adding that gas sales contracts signed by the previous
government still need to honoured.
Than Htay said Myanmar's domestic requirements for natural
gas were 500 million cubic feet per day, but the current supply
available after exports was just over half of that, or 270
million cubic feet.
Myanmar would therefore consider following China and
Thailand in using coal power in addition to hydro power and gas,
"We need to turn to that option. we need to produce
electricity from coal, he said, adding that in terms of fuel,
Myanmar had "a huge gap between supply and demand."
Coal is cheaper than natural gas and other Southeast Asian
countries, including Thailand, Vietnam and Indonesia, have been
turning to the dirtier fuel for power generation despite its
higher levels of carbon emissions.
Myanmar is now using nearly 100,000 bpd of liquid fuels such
as diesel and motor oil, he also said. Its crude production from
both onshore and offshore was a fifth of that, or about 20,000
(Additional reporting by Aung Hla Tun; Editing by Martin Petty,
Tom Hogue and Ed Davies)