China pips India to sign deal with Myanmar

New Delh | Updated: Dec 30 2008, 06:15am hrs
China has pipped India to sign a 30-year agreement to import natural gas from fields lying in Myanmar offshore where Indias state-owned companies have 25% stake.

Chinas state oil and gas firm China National Petroleum Corp (CNPC) last week signed a Gas Sales Agreement with South Koreas Daewoo International for buying gas from the Shwe field in A-1 offshore block and the adjoining A-3 block, industry sources said.

Daewoo is the operator in the two blocks with 51% stake while Indias Oil and Natural Gas Corp (ONGC) has 17% and Gail 8.5 %. Korea Gas Corp has 8.5% and Myanmar Oil and Gas Enterprise the remaining 15%.

Gail had offered a price of $5.01 per million British thermal unit to buy entire gas from the offshore fields and pipe it to India through the north-eastern states. But the military-rulers of Myanmar have chosen China, which will have to lay a longer pipeline to reach its south-western Yunnan province.

Sources said Myanmar would also be able to tap the pipeline running across its territory to meet its fuel needs once the gas starts flowing sometime in 2013. Under the SPA, which cements a preliminary deal in June, CNPC would buy gas at the landfall point of A-1 and A-3 blocks. Shwe field in A-1 block has reserves between four trillion and six trillion cubic feet.

Besides, another five Tcf of reserves have been estimated in the A-1 blocks Shwephyu field and two Tcf in the Mya field in the A-2 block, with a combined proven reserve of between 5.7 Tcf and 10 Tcf. Sources said CNPC and MOGE plan to build oil and gas pipelines through Myanmar and into Chinas south-western Yunnan province, bypassing the long journey around the Malacca Strait for oil cargoes and solving the problem of getting the gas to market.

Myanmar had in 2004 selected Gail as the preferred buyer of gas from A-1 and A-3 blocks. An MoU to this effect was signed between the two countries on March 9, 2006. As per the terms of the MoU, Gail completed a detailed feasibility report for an onland pipeline from Myanmar passing through the north-eastern states of India.

But on August 9, 2006, Myanmar invited bids from prospective buyers like India, China and Thailand for export of gas. In October that year, the Myanmar government intimated that none of the bids met its expectations. Subsequently, it invited bids for sale of 3.5 million tons of liquefied natural gas from the blocks. GAIL again submitted its bid.

The Myanmar government subsequently informed that a part of gas from A-1 and A-3 blocks was to be used to meet domestic demand and that the export optionLNG project or pipelines to India or Thailand - would be decided only after reassessment of reserves, sources said, adding it was indicated that pipeline to China was not under consideration.

In February 2007, Myanmar Government in principle made up its mind on sale of gas from A-1 and A-3 blocks to China through the pipeline route, they said.

Gail had wanted to lay a 1,573-km line from Myanmar-India border to Gaya in Bihar after passing through Aizwal (Mizoram), Silchar and Guwahati (Assam), and Siliguri (West Bengal). The pipeline was designed for a capacity of 18 million standard cubic meters per day.