Firms Seek Access to Myanmar Oil
by Thomas Hogue
Just last Sunday - when marches led by
Buddhist monks drew thousands in Myanmar's biggest cities - Indian
Oil Minister Murli Deora was in the country's capital for the
signing of oil and gas exploration contracts between state-controlled
ONGC Videsh Ltd. and Myanmar's military rulers.
The signing ceremony was an example of
how important Myanmar's oil and gas resources have become in an
energy-hungry world. Even as Myanmar's military junta intensifies
its crackdown on pro-democracy protests, oil companies are jostling
for access to the country's largely untapped natural gas and oil
fields that activists say are funding a repressive regime.
China - Myanmar's staunchest diplomatic
protector and largest trading partner - is particularly keen on
investing in the country because of its strategic location for
pipelines to feed the Chinese economy's growing thirst for oil
Companies from South Korea, Thailand and
elsewhere also are looking to exploit the energy resources of
the desperately poor Southeast Asian country.
France's Total SA and Malaysia's Petroliam
Nasional Bhd., or Petronas, currently pump gas from fields off
Myanmar's coast through a pipeline to Thailand, which takes 90
percent of Myanmar's gas output, according to Thailand's PTT Exploration
& Production PLC.
But investing in Myanmar has brought accusations
that petroleum corporations offer economic support to the country's
repressive junta, and in some cases are complicit in human rights
abuses. This week's bloody clampdowns on protests have escalated
the activists' calls for energy companies to pull out of the country.
"They are funding the dictatorship,"
said Marco Simons, U.S. legal director at EarthRights International,
an environmental and human rights group with offices in Thailand
and Washington. "The oil and gas companies have been one
of the major industries keeping the regime in power."
Demonstrations that started a month ago
over a spike in fuel prices have become a broader protest against
the military rulers. Ten people were killed in two days of violence
this week. Soldiers fired automatic weapons into a crowd of demonstrators
in Yangon on Thursday and occupied Buddhist monasteries and cut
public Internet access Friday. The moves raised concerns the crackdown
on civilians was set to intensify.
Myanmar's proven gas reserves were 19
trillion cubic feet at the end of 2006, according to BP PLC's
World Review of Statistics. While that's only about 0.3 percent
of the world's total reserves, at current production rates and
Thailand's contract price for gas, the deposits are worth almost
$2 billion a year in sales over the next 40 years.
"It points to the potential that
Myanmar has," said Kang Wu, a fellow at the University of
Hawaii's East-West Center in Honolulu.
Altogether, nine foreign oil companies
are involved in 16 onshore blocks exploring for oil, enhancing
recovery from older fields, or trying to reactivate fields where
production has been suspended, according to Total's Web site.
A block is an area onshore or offshore in which an oil company
is granted exploratory and discovery rights.
Offshore, nine companies, including Total,
Petronas, PTTEP, South Korea's Daewoo International Corp., Chinese
state-run companies China National Offshore Oil Corp., or CNOOC,
and China Petroleum & Chemical Corp., or Sinopec, are exploring
or developing 29 blocks, Total said.
Despite economic sanctions against Myanmar
by the United States and the European Union, Total continues to
operate the Yadana gas field, and Chevron Corp. has a 28 percent
stake through its takeover of Unocal. Existing investments were
exempt from the investment ban.
Both Total and Chevron broadly defended
their business in the nation.
"Far from solving Myanmar's problems,
a forced withdrawal would only lead to our replacement by other
operators probably less committed to the ethical principles guiding
all our initiatives," Jean-Francois Lassalle, vice president
of public affairs for Total Exploration & Production, said
this week in a statement.
French President Nicholas Sarkozy urged
Total this week to refrain from new investment in Myanmar; the
French concern said it had not made any capital expenditure there
Chevron's interest in the Yadana project
is "a long-term commitment that helps meet the critical energy
needs of millions in people in the region," said Nicole Hodgson,
corporate media adviser for Asia.
Total and former partner Unocal Corp.
were accused of cooperating with the military in human rights
violations while a pipeline was being built across Myanmar to
Thailand in the 1990s. Both companies have denied the accusations
but Unocal settled a related lawsuit in the U.S. in 2005, prior
to being acquired by Chevron.
Always worried that instability on its
border could affect the juggernaut Chinese economy, Beijing has
been gently urging Myanmar's leaders to ease the recent strife.
On Thursday, it issued a plea for calm, asking the government
to "properly deal" with the conflict.
"The Chinese prefer to separate business
and politics," said Kuen-Wook Paik, an energy analyst at
Chatham House, a think tank in London. "They want to take
a neutral stance. They don't want to risk the relationship with
the Myanmar authorities."
But China's chief interest, analysts say,
may lie in its strategic location as a site for pipelines to move
oil and gas shipped from the Middle East to southern China, avoiding
the Malacca Straits, which Beijing worries could be closed off
by the U.S. Navy in a conflict.
By building a pipeline, "you start
stitching together a crisis management capability," said
William Overholt, director of the Center for Asia Pacific Policy
at RAND Corp., an American think tank.
Beyond interests in exploration blocks
in the Bay of Bengal off Myanmar, India also plans to build a
pipeline to eastern India, but disagreements with Bangladesh have
delayed the plans.
India is not facing any diplomatic pressure
to reduce investment in the country, said R.S. Sharma, chairman
of the state-run Oil and Natural Gas Corp.
"There is a trade-off between the
two: That is a moralistic position and these strategic interests,"
said Muchkund Dubey, president of the Council for Social Development,
a New Delhi think tank, and the former top bureaucrat at India's
Thailand's PTTEP, a partner in Total's
Yadana and Petronas' Yetagun gas projects, said in a statement
that production of natural gas is at the normal rate, and should
not be affected by the unrest.
"It is business as usual," said
Sidhichai Jayamt, the company's manager for external relations.
"When we have a contract with the government, it doesn't
really matter who the government is."
AP Business Writers Rajesh Mahapatra in
New Delhi, Elaine Kurtenbach in Shanghai and Malcolm Foster in
Bangkok contributed to this report.