New China-Myanmar oil pipeline bypasses Malacca trap

January 30, 2015 05:37 pm | Updated 05:37 pm IST - BEIJING

China has taken a firm step to beef up its energy security by inaugurating a pipeline that will bring crude oil from a deepwater port in Myanmar, along a transit route that will bypass the strategic Malacca Straits.

The first tanker that will offload 300,000 tons of oil is expected to arrive on Friday at Maday Island – a deep water port developed by China in the Bay of Bengal. From there, oil, mostly brought from West Asia and Africa, will be pumped into a 2402-kilometre long pipeline that will stretch for 771 kilometres in Myanmar and another 1631 kilometres in China. A gas pipeline, next to the Maday Island terminal, already runs from Myanmar’s port of Kyaukpyu. China also finalised plans to establish a rail corridor from Kyaukpyu to its Yunnan province.

The strategic oil pipeline will service China’s two major growth centres — Kunming and Chongqing, an industrial hub along the Yangtze River delta. Both cities are pivotal in the development of China’s Silk Road Economic Belt the 21st century Maritime Silk Road.

Kunming is one of the starting points of the Maritime Silk Road, because it connects with three ASEAN countries — Myanmar, Vietnam and Laos. Landlocked Laos in turn becomes the gateway to ports in Thailand, and a wider transportation network covering Malaysia and Singapore as well.

Chongqing is already a well-established junction along the Silk Road rail corridor, which begins at the coastal city of Yiwu, and heads to Duisburg - a major destination in Germany’s Ruhr industrial belt.

Significantly, the new oil pipeline bypasses the Malacca Straits — a narrow channel that connects the Indian Ocean with the Pacific. The Chinese are concerned that their access to the Malacca Straits — the main channel of their trade and energy supplies — can become compromised on account of Beijing’s growing rivalry with the United States, and maritime disputes with neighbours in the South China Sea.

China Daily quoted Li Li, strategy director at the energy consultancy firm, ICIS-C1, as saying that the “safety level of pipelines is much higher than for sea shipments, which will ensure a stable energy supply to China". "The economic benefits will grow as deliveries increase," she observed.

As oil begins to flow, the Chinese are also building a refinery in Kunming that can process 10 million tons of crude annually.

Part of the shipments received will also be delivered to Myanmar, said the country’s Vice-President U. Nyan Tun. China and Myanmar have jointly funded the project, including the construction of the Maday oil unloading terminal.

Analysts say that apart from enhancing energy security, the construction of an oil and gas pipeline from Myanmar is driven by environmental considerations, as China works to limit carbon emissions resulting from its over-dependence on coal. Consequently, China has signed a long-term $400 billion gas deal with Russia, which will deliver energy supplies, which will be routed for consumption towards the Beijing-Tianjin-Hebei metropolitan area in the north, and the Yangtze River delta in the east. Russia and China have also signed an agreement for gas supplies along the western Altai route, which China hopes will also help reduce its carbon footprint.

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