28  June  2017

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 Infopetro -> Industry in Focus


China Opens Delayed Myanmar Pipeline for Faster Mideast Oil

  04/13/2017

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

demand."

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

last month.

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,

he said.

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.



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