April 13, 2017 3:00 am JST

New Myanmar oil pipeline bolsters China's energy security

Overland route bypasses sea lanes under US influence

WATARU KODAKA and YUICHI NITTA, Nikkei staff writers

Myanmar President Htin Kyaw, left, and Chinese President Xi Jinping in Beijing Monday. © Reuters

SHANGHAI/YANGON -- The opening of an oil pipeline through Myanmar is a big step forward for China's energy security, reducing the major importer's reliance on shipments through waters where the U.S. exerts strong influence.

Chinese President Xi Jinping and Htin Kyaw, his counterpart from Myanmar, agreed Monday to activate an oil pipeline stretching roughly 770km from Kyaukpyu, a port city in western Myanmar, to the Chinese border. The project is the crown jewel of economic cooperation agreements the pair signed during talks in Beijing.

The pipeline can carry up to 22 million tons of oil each year, or nearly 6% of China's total imports in 2016. Crude oil shipped via this route will be processed mainly at large refineries in Kunming and Chongqing in western China for use in nearby areas.

State-owned China National Petroleum worked with Myanmar Oil and Gas Enterprise to build the pipeline through a joint venture, in which the Chinese partner holds a majority stake. Offloading of 140,000 tons of Azerbaijan oil from the first tanker to arrive at Kyaukpyu began Monday, according to the Chinese company.

China is growing more reliant on oil imports to meet its needs as the economy continues to grow. Imports accounted for 65% of oil consumed there in 2016, or 5 percentage points more than a year earlier. Middle Eastern oil, which accounts for nearly half of imports, has traditionally arrived on tankers via the Strait of Malacca and the South China Sea. As the Trump administration has amplified criticism of Beijing over its attempts in the South China Sea to expand territorial claims in the South China Sea, China has grown intensely aware of the incalculable damage that route's closure could do to its economy and social fabric.

The government under Xi has already worked to bolster China's oil and natural gas pipeline links to Russia and Central Asia. Adding a third route with the Myanmar pipeline advances China's energy security further, and could boost Beijing's bargaining power with Russia and other current suppliers.

Win-win

Construction on the roughly $1.5 billion Myanmar-China pipeline began in 2010 and wrapped up in 2015. But the project has since sat idle, stalling Beijing's plans to make Myanmar a key piece of its energy policy. Ties between the neighbors were warm during Myanmar's long military rule. But under President Thein Sein, who took office following Myanmar's ostensible democratization in 2011, the Southeast Asian nation sought to escape Chinese influence, instead building ties to the U.S. and Europe.

The wind shifted again in March 2016, when the National League for Democracy took power. Party leader Aung San Suu Kyi, who now serves as state counselor and foreign minister, appears intent on bringing her country and China closer together. China was the site of her first official visit outside the Association of Southeast Asian Nations last August, for example.

China is Myanmar's largest trading partner and a key source of investment. The Southeast Asian nation also seeks its powerful neighbor's assistance in making peace with armed groups active near their border. Stagnation under Myanmar's long military rule has left the country with much ground to cover in infrastructure development and treatment of ethnic minorities. Support from Asia's economic heavyweight could go far in making up for lost time.

Stronger ties with Myanmar also stand to benefit Beijing's Belt and Road Initiative, which aims to create a sphere of Chinese economic influence spanning Southeast, Central Asia and beyond. By supporting emerging nations' infrastructure development, China hopes to build political ties that will be useful down the road.

Htin Kyaw professed Myanmar's support for the initiative at Monday's talks. It was also revealed that Suu Kyi will visit China in mid-May and attend a Belt and Road summit hosted by Beijing.

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