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The Achilles’ heel in China’s energy plan: Part Two

Hydrocarbon Engineering,

Another consortium, South-East Asia Crude Oil Pipeline Company Ltd (SEAOP), comprising CNPC and MOGE is building a separate 771 km pipeline to deliver 22 million tpy of crude oil from the new deepsea port and terminal on Maday Island.CNPC has also built six oil storage tanks on the island to support trade and infrastructure development in southwestern Myanmar.

Eager to win over the local population, Chinese and Myanmar officials have focused on the project's immediate economic impact and its long-term potential in lifting the living standards of local communities.

In the long-term, the completion of the Myanmar-China Oil and Gas Pipeline and the promise of more investments to follow could alter the pattern of international trade in Asia. Singapore’s traditional position as Southeast Asia’s focal point may face long-term competition from the Maday Island terminal if China and Myanmar succeed in jointly developing it into a major transshipment hub.

The straits of Malacca, leading to Singapore as the region's main transshipment point, remains East Asia's only major access to conduct shipping trade with the Middle East and Africa.

Since the late 1700s, generations of Tha, Myanmar, British and Malaysian officials had examined proposal to build canals and pipelines as the basis for overland routes to tap the trade and military potential of the Bay of Bengal and the northern part of the Straits of Malacca.

Kyrgystan seals watershed deal

Kyrgyzstan has officially approved a set of agreements with China worth US$ 3 billion that includes the construction of a vital 225 km pipeline through the landlocked country for the export of natural gas from Turkmenistan.

President Almazbek Atambaev signed the agreements into law in December 2013 after they were approved by Parliament. In exchange for allowing the pipeline to be built over Kyrgyz territory, China will construct a heating plant in the capital city of Bishkek, expand an oil refinery, build a new major highway to link northern and southern Kyrgyzstan, and provide a US$ 10 million loan to its cash-strapped government.

Atambaev secured the deals during Chinese President Xi Jinping’s visit to Bishkek in September 2013 as energy-poor Kyrgyzstan looks to both jumpstart its underperforming economy and counter Russia’s suffocating grip on the Central Asian state.

Just weeks earlier, Parliament was practically forced to approve Gazprom’s takeover of heavily indebted state-owned gas monopoly Kygrzgaz for a nominal price of US$ 1. Many Kyrgyz politicians, who resisted the proposed sale, believe Russia played a role in the violent protests of 2010 that overthrew the government of former President Kurmanbek Bakiyev.

In approving the China-funded pipeline, Kyrgyzstan will collect a toll as well as will gain access to some of Turkmenistan's natural gas while in transit to the world's largest energy consumer.

With the added connection, China will have sewn up a network of pipelines running through Turkmenistan, Uzbekistan and Kazakhstan to tap Central Asia’s vast natural gas resources. For now, the existing pipeline exporting Turkmen gas to China bypasses Kyrgyzstan in going through the Alataw Pass in Xinjiang where it is connected to the main West–East Gas Pipeline ending at Shanghai.

Turkmenistan, which holds the world’s fourth largest natural gas reserves estimated by BP at 17.5 trillion m3, is looking to build on its China sales as it plans to export to Afghanistan, Pakistan and India.

Planners from various countries are now working on the proposed 1735 km Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline to tap the 26 trillion m3 gas field at Galkynysh which started production during last September’s visit by Chinese President Xi.

Written by Ng Weng Hoong and edited by Hannah Priestley-Eaton

The full article can be found in the March issue of World Pipelines.

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