BEIJING: China will start building oil and gas pipelines through Myanmar next year, which will enable it to bypass the Strait of Malacca for crude oil imports from the Middle East, state media said yesterday.
The pipelines running into China's south-western Yunnan province will also strengthen the country's access to the rich energy reserves in Myanmar, reports said. 

Yunnan will start constructing the pipelines in the first half of next year. Mr Mi Dongsheng, head of Yunnan's Provincial Development and Reform Commission, was quoted by the China Daily as saying that the move was part of a plan to spend 72 billion yuan (S$16.1 billion) on energy projects next year.

Running from the Myanmar port city of Kyaukphyu on the Bay of Bengal to Yunnan's provincial capital Kunming, the pipeline for gas will cost US$1 billion (S$1.53 billion), and the one for oil US$1.5 billion, Japan's Nikkei newspaper reported.

State-owned China National Petroleum Corporation (CNPC), China's biggest oil producer, will hold a 50.9 per cent stake in the project, which it co-manages with the other stakeholder, Myanmar Oil & Gas Enterprise, the paper said.

In May, CNPC said it would jointly explore for oil and gas in Myanmar and the country's seabed with South Korea's Daewoo International, but gave no details.

Analysts said that in addition to Yunnan, the other provinces and regions in south-western China would also benefit from the pipelines.

The pipelines had been discussed in Yunnan, as well as between the province and Myanmar, for at least five years, but were put on the back-burner. The reason the project has been revived could be China's drive to boost its economy to withstand the fallout from the global financial crisis.

China's demand for oil has also expanded rapidly in recent years to fuel its double-digit economic growth, with imports coming close to 200 million tonnes last year, up more than 10 per cent from 2006, the China Daily said.

'Geopolitically, having alternative routes for energy supplies into China is attractive,' said Mr Jason Feer, a Singapore-based analyst with Argus Media, an energy market research firm.

'The Strait of Malacca is a very busy waterway. It's a quite narrow one. There's always been concerns that it could be disrupted because of terrorism or piracy.'

Around 80 per cent of China's oil imports, from areas such as the Middle East and Africa, are currently transported through the strait, earlier Chinese media reports said.

But some analysts doubt the Myanmar project will take off, as the investment is so huge that it may be a better option to continue depending on the Malacca Strait.

The major sea route has maintained a good security record in recent years, although imports would take at least seven days longer to reach China.

Few Western companies invest in Myanmar because of its poor human rights record and continued detention of Nobel Peace Prize laureate Aung San Suu Kyi, which has led to a broad range of United States and European sanctions.

China, typically wary of supporting or imposing sanctions, is one of Myanmar's few diplomatic allies, and has shown no reservations about investing in its military-ruled neighbour, eyeing its natural gas, oil, minerals and timber.

(CHINA DAILY/ASIA NEWS NETWORK, REUTERS, AGENCE FRANCE-PRESSE, Nov 20, 2008)