Myanmar-China crude oil pipeline to commence next month

After a two-year delay, the Myanmar-China crude oil pipeline is expected to begin operating in May, officials said.

The respective parties of Myanmar and China were discussing the terms and conditions on the crude oil pipeline operation since its soft opening launched in early 2015, according to officials.

“The crude oil pipeline is getting ready for operation. We are awaiting instructions from the higher ups and we expect it will begin in May,” said an official from Southeast Asia Crude Oil Pipeline (SEAOP) which is responsible for the pipeline’s operation.

The contract to transport crude oil was signed in Nay Pyi Taw on March 28 but the operation of utilising Made Island in Rakhine state is yet to be finalised, said an official from Myanmar Oil and Gas Enterprise (MOGE).

Kyaw Nyan Tun, director (offshore) of MOGE told the Myanmar Times on Wednesday that “the contract between China Oil and SEAOP has been signed. MOGE witnessed the signing as the investment partner of the project. But they have to negotiate with the Myanmar Port Authority for operation.”

A larger amount of crude oil is going to be imported to Made Island in the coming week but they are unsure where to start in pumping crude oil to China through the pipeline, he added.

SEAOP authorities invited some local and Yangon-based Chinese media last week to observe control and gas pumping stations near Mandalay. The firm also introduced some corporate social responsibility activities in the trip.

The crude oil pipeline project is a controversial project in Myanmar, provoking serious opposition among the public and non-governmental organisations.

In 2011, the new National League for Democracy Party-led government suspended Myitsone dam project in Kachin state because the Chinese-built hydropower project was accused of potentially damaging the environmental and community.

A 771 kilometre-long crude oil pipeline from Made Island in western Myanmar to China’s northwest province Yunan is to be constructed across the central part of Myanmar. The pipeline is parallel to the natural gas pipeline which was fully operational since 2014.  

China National Petroleum Corporation (CNPC) and the Myanmar government signed an agreement for a crude oil pipeline project in 2008, and construction was completed in early 2015.  Myanmar will directly obtain a road-right fee of US$13.81 million from both gas and oil pipeline projects annually and a transit fee of $1 per tonne of crude oil under a 30-year concession agreement.

A trial operation of the pipeline had been launched in January 2015 but full operation has been delayed as both sides were unable to reach an agreement on the commercial terms of the pipeline project, according to the official.

The pipeline will provide a shortcut for crude oil from the Middle East to reach China, rather than being shipped southwards and passing through Singapore. Crude oil can be offloaded on Made Island and transported via a pipeline across Myanmar to its terminus in Yunnan.

The total investment of the pipeline project amounts to US$2.45 billion and CNPC controls 50.9 percent of the project while the rest of the shares belongs to Myanmar, according to officials.

The crude oil pipeline is designed to transmit 22 million tonnes of crude oil annually. The country’s first international oil unloading terminal in Made Island is a vast project site featuring oil storage, a dockyard, and a seaport with a 38-km vessel route and a 480-metre loading terminal. A total of 12 crude oil tanks with an individual storage capacity of 22 million gallons were also built.

Get full Bangkok Post printed newspaper experience on your digital devices with Bangkok Post e-newspaper. Try it out, it’s totally free for 7 days.