Pipped to the post

Wednesday 31 May 2006

India loses Myanmar's natural gas to China, well almost

-- India has begun re-negotiating with Myanmar for the transfer of natural gas through Bangladesh, after China stole a march over it last year. A delegation of state-owned gail (India) Limited and ongc Videsh Limited was in Myanmar on May 2-3 to present options of several alternative pipelines. They will stay back for detailed discussions after the two-day official meeting.

India's geopolitical strategy took a beating when Myanmar signed a memorandum of understanding (mou) with China for supply of natural gas from its gas-rich A-1 and A-3 blocks in January 2006. India, officially, remained in the dark for months about the deal inked between PetroChina, China's state-owned oil and gas giant, and Myanmar, despite the fact that India had signed a tripartite agreement with Myanmar and Bangladesh in 2005 to transfer gas from the block via Bangladesh, Mizoram, and Tripura to West Bengal.

At stake is one of the biggest natural gas finds in south-east Asia and for India one of the two potential new sources of substantial energy, the other being the stop-start Iran pipeline. The A-1 block lies off the Western coast of Myanmar, in the Bay of Bengal, adjacent to the tribal Arakan region. It holds up to 20 trillion cubic feet (tcf) of gas. Upon this discovery, ongc Videsh bought a 20 per cent stake and gail a 10 per cent stake in the block. The South Korea-based Daewoo International Corporation holds the majority stake of 60 per cent and Korea Gas Corporation holds the remaining 10.

Bugbear

India worked out the shortest route for a terrestrial gas pipeline that would be about 800 km and run through Bangladesh, Mizoram and Tripura, named the Shwe gas pipeline project. But, Bangladesh quickly became India's bugbear, bargaining hard for trade-offs.

In return for letting the pipeline run through its territory Bangladesh asked India for three concessions: duty-free movement of goods through India, a re-view trade deficit that India enjoys against Bangladesh and transit rights to move energy from Nepal and Bhutan to Bangladesh. Hectic parleys began but India's Union ministry of external affairs decided that 'bilateral' issues could not be dealt with in a 'tripartite' agreement. Mani Shankar Aiyer, then Union minister for petroleum and natural gas , tried hard to set things right but failed. Hope of a breakthrough turned into a pipedream as Aiyer was relieved of the ministry, and, bureaucrats in the ministry claim, the project was put on the back-burner as India signed an energy deal with the us.

Alternative route The ministry of petroleum and natural gas (mopng), gail and ongc Videsh meanwhile began looking for alternatives but far more expensive routes excluding Bangladesh for the pipeline. The alternative via Assam is 500 km longer and is very expensive.

Impatient that India was making no headway with Bangladesh, Myanmar found a ready customer in China. The mou is not a commercial contract and there is still hope for the Indian government. While on other fronts India and China have begun to bid together for other gas and oil finds, the Shwe gas project has clearly shown India that on energy security issues governments always go alone.

What seems to have gone unheard in the din of these negotiations is the voice of the Arakan tribal people who are protesting against India's deal with a military-run Myanmar. The Myanmar 'government in exile' with its representatives in India have appealed to the Indian government to review its plans to purchase gas from the 'junta'. They cited the case of Unocal, the us-based energy giant being successfully sued in us for human right violations on the Yadana pipeline built earlier with the Myanmar army's support through another tribal area. In a meeting in Delhi, they recounted the recent movement of 56 army battalions into the Arakan region for the pipelines.

But, with its own requirements and the Look East policy in place, India has presented Myanmar with eight alternative routes, all avoiding Bangladesh's territory. India's voracious growth rate needs the gas but will it find a convenient and cheaper route remains to be seen.

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