China Opens Delayed Myanmar Pipeline for Faster Mideast Oil
A crude pipeline to southwestern China through its
neighbor Myanmar began operations after years of delays,
allowing the world's second-biggest oil user to receive
supplies faster from the Middle East and Africa.
A Suezmax-sized tanker, which can hold 140,000 metric
tons (about 1 million barrels) of crude, began offloading
oil for the pipeline on Monday at Myanmar's Made Island,
according to China's official Xinhua News Agency.
Operations on the line, which was completed in 2014 and
originally scheduled to start the same year, are
beginning after the government of Myanmar agreed to lower
transit fees, Wang Dongjin, president of PetroChina Co.,
said last month.
The link, which allows China to import crude from the
Middle East and Africa without having to ship through the
Straits of Malacca and into the South China Sea, is part
of President Xi Jinping's "One Belt, One Road"
infrastructure and trade development plan stretching
across Asia to Africa and Europe.
"It may send a message to those countries that are still
hesitating about whether to participate that the
initiative is China's top national strategy and can
bring economic benefits to participants," said Fan
Hongwei, an international relations professor at Xiamen
University who specializes in Myanmar.
Trial operations began in 2015 on the 771-kilometer (479
-mile) pipeline, which is designed to carry 22 million
tons of crude a year (about 442,000 barrels a day).
Myanmar can take 2 million tons of crude annually from
the line, Xinhua reported.
For Myanmar, the initial benefits are probably minimal,
said Suresh Sivanandam, a senior research manager for
Asia refining at Wood Mackenzie Ltd. The country may get
a small amount of oil and some revenue from oil storage
and pipeline tariff fees, while experience from China in
building energy infrastructure will be a boon for the
country later, he said.
"Myanmar is growing very fast, and sooner rather than
later they might need more oil refineries," Sivanandam
said. "The process of building energy infrastructure
should help them in the long run to meet growing domestic
The Suezmax tanker United Dynamic arrived at Myanmar
around April 9 after loading oil from the Baku-Tbilisi-
Ceyhan terminal in Turkey on March 5, according to ship-
tracking data compiled by Bloomberg.
The pipeline ends in China's Yunnan province, where
PetroChina has built an oil refinery with the capacity to
process 13 million tons a year (about 261,000 barrels a
day) of crude. China's biggest oil and gas company is in
talks with Saudi Arabian Oil Co. about investing in the
plant, which will begin operations in June, Wang said
PetroChina finished building the refinery in the
provincial capital Kunming about six months ago and has
been waiting for pipeline deliveries to start, according
to Sivanandam. It will take about 12 million barrels of
crude to fill the pipeline before deliveries can start,
Once the refinery begins, it will sell products in
southwest China, displacing gasoline and diesel from
refineries in central and southern China, he said. That
will likely increase the country's net exports of
refined products, which rose to a monthly record of 2.85
million tons in November.
China and Myanmar on Monday signed an agreement on the
pipeline, as well as eight other cooperation documents,
after talks between Xi and Myanmar President Htin Kyaw,
who is visiting China from Thursday to Tuesday, state-run
China Daily reported.
China's crude imports rose almost 14 percent last year,
the fastest annual pace since 2010, and touched a record
in December of 8.6 million barrels a day.
"It opens another channel for China to diversify oil
imports," said Tian Miao, an analyst at North Square
Blue Oak Ltd. in Beijing.
China is also fed by a parallel natural gas pipeline that
runs through Myanmar to Yunnan province, designed to
carry 12 billion cubic meters annually. PetroChina's
parent company, China National Petroleum Corp., began to
import gas from Myanmar in 2013, according to a statement
on its website. Shipments totaled 2.86 million tons last
year, customs data show, accounting for about 5 percent
of the country's total imports.
Companies including Total and Woodside Petroleum are
exploring for resources offshore Myanmar. The country had
about 18.7 trillion cubic feet of proven gas reserves as
of 2015, or about 3.4 percent of the Asia-Pacific total,
according to BP data.