A taxicab makes its way through Mumbai traffic. Photo courtesy of HIR/Jessica Caplin.

This article examines Burma’s energy market and Sino-Indian competition to gain access to its vast reserves while seeking to highlight continued Indian shortcomings. This article argues that although India may be able to make significant headway with the Junta and obtain a greater stake in the development of Burma’s oil and natural gas fields, attempting to undercut and dislodge the Chinese will prove to be an ultimately fruitless task that damages India’s long-term interests and ties with ASEAN, other Asian democracies, and the West. As such, India must re-evaluate its current policy towards the Junta.

Burma’s Energy Market – Few Open Doors for India

The competition between India and China for influence in Burma reflects a larger jockeying for power between the two Asian giants. Burma’s recoverable gas reserves are around 51 trillion cubic feet due to the discovery of a large offshore field opposite Thailand and another opposite Bangladesh. This gas commands a premium for both India and China, as current crude oil prices consistently rise above US$120 a barrel with some predicting this figure to possibly even reach US$200. China undoubtedly uses it political influence in Burma to swing the Junta in favor of some of its major companies, such as PetroChina, as business and political interests often intersect in this region and the Junta has a monopoly over Burma’s natural gas sector as well as nearly all other economic activity. Given India’s clear limitations in lobbying for its state-owned firms, it cannot expect major victories over the Chinese in securing natural resources in Burma, especially since India recently lost its “preferential buyer” status on several fields, likely a result of Chinese pressure on the Junta.

Military planners in China fear an embargo in the event of a war or crisis with the United States and are keen to reduce China’s dependence on tanker transports through the Malacca Strait and South China Sea. In December 2005, China was awarded rights to natural gas from the biggest fields in Burma, beating out India. Korean-owned Daewood International, the operator of the field, selected PetroChina to extract the natural gas, while state-owned Indian companies control 30 per cent of the field, which holds as much as 7.7 trillion cubic feet, or 218 billion meters, of gas. Further, the China National Offshore Oil Corporation (CNOOC) signed six contracts on production and sharing with the Burma Oil and Gas Enterprise (MOGE) of the Ministry of Energy from October 2004 to January 2005. The China Petroleum and Chemical Corporation (SINOPEC) and its subsidiary Dian Quiangui Petroleum Exploration also work on inland fields, while the China National Petroleum Corporation (CNPC) and its subsidiary Chinnery Assets also won contracts to upgrade four old oilfields in central Burma. As of 2006, these projects lead to a total financial commitment of US$163 million. However, this figure is expected to grow considerably as China has begun to heavily invest in Burma’s oil and natural sector.

China’s Aim

PetroChina plans to build a gas pipeline from the A-1 block in the highly promising Shwe field off the coast of Rahine state to Yunnan. The Shwe field consists of seven blocks of unconfirmed size with the largest being A-1, estimated to contain between 2.88 trillion to 3.56 trillion cubic feet of gas. PetroChina has signed a memorandum of understanding with MOGE to buy gas from A-1 for 30 years, commencing 2009. Further, plans for an oil pipeline linking Burma’s deep water port of Sittwe with Kunming in Yunnan were approved by China’s National Development and Reform Commission in April 2006 and CNOOC has taken a stake in a Bay of Bengal gas field in Burma while CNPC is reportedly looking into building a more extensive pipeline network. With these deals underwritten by arms sales, unwavering political support, and protection from international pressure to engage in meaningful reforms, China’s energy interests in Burma are unlikely to be jeopardized anytime soon. On the contrary, if the Junta continues to become more isolated, China will capitalize upon the development and expand its base in the country.

Chinese enterprises as well as the Chinese government have financed and constructed many infrastructure projects in Burma, especially electric power generation. Between 1996 and 2005, Chinese companies constructed six hydro-power plants and one thermal power station, with these projects accounting for about one-third of the entire national capacity. Also, as of March 2006, there are 11 major ongoing hydro-power projects in Burma with a total generating capacity of 1734 megawatts. Contracts were signed for seven of these projects and all were Chinese enterprises. Further, China has strongly supported the construction of massive state-owned factories such as textile mills, plywood plants, rice mills, pulp and paper mills, sugar mills, agriculture equipment factories, and other light manufacturing facilities in Burma. These factories would not have been possible without Chinese government financing. However, many of the factories are racked by corruption and inefficiency, thus potentially placing a burden on the Burmese government budget and eventually resulting in bad loans to Chinese stakeholders. These moves made in Burma by the Chinese have undoubtedly contributed to the preferential access to oil and natural gas that China enjoys in Burma. Through assisting the Junta in the provision of vital services such as electricity generation, China is assisting the Junta in ensuring regime survival. In addition, by demonstrating a willingness to support what are essentially loss-making enterprises in Burma, Beijing has demonstrated that it views its presence in Burma as a long-term one. Given the lack of accountability in China’s authoritarian system, Beijing will continue to invest in high-risk projects in Burma in order to further solidify its presence without sparking a major public outcry domestically. This is a luxury that India does not have.

India’s Position in Burma

India has recently been posting growth rates of around 7 to 8 percent per annum and aims to increase this growth to 10 percent. If this is to occur, India will need to secure energy resources quickly, especially since India’s population is expected to reach 1.18 billion by 2010, 1.36 billion by 2020, and 1.57 billion by 2030. India’s demand for fuel will rise even faster than its population growth and although much demand is met through the use of coal, India’s coal reserves are not adequate to support power development on their own. At present, India only relies on natural gas for 13 per cent of its power generation, but this is bound to change as India’s gas requirements for electricity are predicted to rise to as high as 199 billion cubic meters by 2030 (India currently consumes roughly 34.5 billion cubic meters). It is also of note that India only produces half of the natural gas it uses and imports 70 per cent of its crude oil, with most source nations found in the Middle East and North Africa, both regions that suffer from much political instability and violence. As India still lacks a blue-water navy that is capable of safeguarding far-flung sea lines and the tankers and other vessels that transport these resources, India is keen to exploit reserves closer to home.