| NAYPYITAW, Myanmar, June 12
NAYPYITAW, Myanmar, June 12 In a few months,
impoverished Myanmar plans to start pumping roughly $45 million
worth of oil and gas a day from the Bay of Bengal to China by
pipeline. The vital fuel for China's growing economy will bypass
the Malacca Straits and U.S. ally Singapore.
It will mostly also bypass Myanmar.
Though rich in natural resources, Myanmar has little
capacity to use them for its own development. For decades, its
leaders valued gas for the hard currency it could earn rather
than the economic development it could fuel. Today, only one in
four of Myanmar's citizens have electricity.
Now, two years after sweeping aside six decades of
self-imposed isolation in favor of democratic reforms, Myanmar's
leaders face pressure to deliver tangible results, to appease
voters ahead of 2015 elections and to quell sectarian unrest.
"We're now entering the third year of the reforms," said
opposition leader and Nobel price laureate Aung San Suu Kyi, who
used her appearance at the World Economic Forum's East Asia
summit in Myanmar last week to underline her ambition to run for
president. "What we really want to see now are results in the
form of a real change in the lives of our people."
That, experts say, means giving Myanmar energy.
"Electricity is definitely number-one," said Hans Vriens, a
Singapore-based consultant who advises companies on investing in
Myanmar. "No electricity. No factories."
Making the switch from seller to consumer, however, could
change Myanmar's attitude toward its resources in a way that may
smack of "resource nationalism".
Multinationals vying to drill for gas and oil off Myanmar
will have to negotiate with the nation as a customer instead of
as a partner. And Myanmar's own customers, China and Thailand,
already find themselves re-drawing old purchase agreements.
"We're renegotiating already," said Pailin Chuchottaworn,
CEO of Thai oil company PTT, which imports $2 billion
of gas a year from Myanmar. Last year, Myanmar approached PTT
with a proposal to retain a fifth of the gas its sells Thailand.
"The problem is not the gas, it's the overall capacity."
Myanmar produces gas equivalent to 10.2 million tons of oil
a year, according to a report prepared for the forum by
Accenture and the Asian Development Bank (ADB). All but about 15
percent of it is sold to Thailand.
"Myanmar has a supply deficit," said Stephen P. Groff, ADB
Vice-President for East Asia, Southeast Asia and the Pacific.
"You've already set aside a fairly substantial amount of your
resources for export."
IN THE DARK
As a result, Myanmar only counts on gas for about 12 percent
of the power it generates. Most power comes instead from
hydroelectric plants whose water supply varies so widely between
the monsoon and dry season that they run at roughly 60 percent
of generating capacity. Even in the commercial capital, Yangon,
residents can only count on power for roughly a third of any
given day, according to the report prepared for the forum.
A new offshore gas field near Myanmar's maritime border with
Bangladesh will boost output by 75 percent. The gas is bound for
China, earning state-owned Myanmar Oil and Gas Enterprise (MOGE)
another $1.8 billion annually, the report estimates. Though at
least a portion of the gas has been reserved for domestic use,
Myanmar lacks the onshore infrastructure to make much use of it.
Where MOGE has been putting its money is a mystery, experts
say. Myanmar's government budget accounting remains murky, the
result of antiquated record-keeping and widespread corruption.
As part of its plan to streamline national energy policy,
Myanmar in January put MOGE along with the Ministry of Energy
and the 10 other government institutions involved in energy
development under a single National Energy Management Committee.
Myanmar has also vowed to join the Extractive Industries
Transparency Initiative (EITI), set up in 2002 by then UK Prime
Minister Tony Blair to help reduce the potential for payments to
developing nations to feed graft and conflict.
Following President Thein Sein's visit to the United States
last month, Washington is working with the government to help it
meet EITI's membership criteria. Myanmar and the United States
are drafting a letter of intent to publish at the June 15 launch
of the Group of Eight's new transparency initiative, according
to Julia Nesheiwat, Deputy Assistant Secretary at the U.S. State
Department's Office of the Bureau of Energy Resources.
"They could be in the EITI by December," Nesheiwat said.
That would coincide with the deadline for companies
submitting bids to Myanmar's government to explore for oil and
gas in 30 offshore blocks. Bids are due on June 14, with
contracts due to be awarded by year-end.
Whatever they find and whenever they find it, they will end
up negotiating with a government more determined to lavish most
of these new resources on its citizenry, which already pays less
for the electricity they do receive than it costs to produce.
Energy companies say returns will need to be commensurate
with growing risks, particularly as violence between Buddhists
and Muslims grows in western Rakhine state.
Rakhine stretches along roughly one-third of Myanmar's
coastline, and China's pipelines already traverse the state.
Foreign industry and government officials worry that adding more
oil and gas to this landscape could increase the likelihood that
it becomes a new battle ground for religious extremism.
Drilling for oil and gas produces few local jobs. So keeping
Myanmar from becoming a new Nigeria, Sudan or Iraq will require
making sure that local populations benefit from the investment.
"It's critical that the government makes investments in
health, in education and in agricultural productivity," said
Groff at the ADB.
But the new gas is still years away. For Myanmar to deliver
power quickly to its rural masses, industry executives say, it
must look to Laos and Cambodia where small generators produce
power by burning farm byproducts such as rice husks or pig
An even simpler step would be to fix Myanmar's existing
infrastructure. Aging turbines and transmission losses have cut
the nation's power output to just 44 percent of capacity.
"There are a lot of GE gas turbines running at half their
efficiency," said Stuart Dean, head of General Electric Co.'s
Southeast Asian operations. "By refurbishing them you
could double capacity overnight."