What's the Deal with Myanmar?

Fuel Ghoul wonders, what’s up with Myanmar? Even the country's name is controversial. The ruling junta calls their nation ‘Myanmar’, which is a close approximation of its 13th century name, while all others, including the USA still officially recognize the country as ‘Burma’ – the nation’s ruling generals changed the state name in 1989 and then promptly dissolved parliament before the change could be properly ratified by its people.

Exports of natural gas from Myanmar (which generates twenty percent of all electricity in Thailand and keeps the lights on in Bangkok) fuels one of the world’s most oppressive military governments. This valuable gas, and the $2.8 billion US dollars it costs Thailand, is the largest single contribution to Myanmar's otherwise impoverished economy. Largely because of the gas deal, Thailand is Myanmar's biggest trade partner, not China, as is widely reported. 

Thailand's natural gas deal highlights the dilemma facing China, India, Singapore and Malaysia, among other countries, as they vie for Burma's hardwoods, minerals, gems - and access to its market of 47 million people.

At a time of spiraling energy prices, the prospect of extracting such resources appears to override the ignominy of dealing with a despicable military government that has attracted world wide notoriety. The countries that have the most leverage over Burma seem the most reluctant to use it, Fuel Ghoul notes.

Fuel Ghoul understands exactly what’s going on here - from the perspective of Myanmar's leaders, the gas purchases by Thailand are only the beginning of what could be a massive infusion of cash; the country will soon announce the winner of a concession in the large Shwe gas fields off its western coast. Companies from India, China and South Korea have placed bids for those contracts.

The latest protests began Aug. 19 in response to sharp, unannounced fuel price increases of up to 500 percent, immediately raising the prices of goods and transportation.

They were led at first by former student protesters and other activists, but most of the leaders had been arrested or were in hiding when the monks began their protests last Tuesday. 

The monks were apparently motivated at first by an attack on a small demonstration at which security officers fired shots into the air and beat protesters with clubs.

 
At a recent academic seminar in Singapore, while his fellow Burmese reeled from the shock of fuel price increases of between 100 and 500 percent, Soe Myint waxed eloquently about Burma’s future as an energy “bridge.”

 
“We hope to become a sort of [energy] bridge between Southeast Asia and South Asia,” he told a select gathering at the Institute of Southeast Asian Studies in late August. “Our dream is that Myanmar will eventually become a major energy supplier in this region.”

Burma also plans to become a major biofuel producer and exporter, said Soe Myint. Without giving specific details, Soe Myint told the Singapore seminar that Burma has oil reserves of more than 500 million barrels and another 100 million barrels off shore.

Natural gas reserves are much higher, he said—about 16 trillion cubic feet.  If true, this would put
Burma among the world’s top 10 holders of known gas resources.

Unfortunately, the rich natural resources of the country are nowhere near helping fuel
Burma’s energy needs, or delivering hard currency income which could enable the government to import larger amounts of refined oil fuels at affordable domestic prices.

The A-1 and A-3 blocks of the Shwe field, about 60 kms off the Arakan coast near the port of Sittwe, hold as much as 7.7 trillion cubic feet (220 billion cubic meters) of recoverable gas, says South Korea’s Daewoo International, the main developer.

But behind-the-scenes political and financial wrangles over who will be allowed to buy this gas have been going on for more than a year, with at least five countries bidding for the rights. Both India and China want to build pipelines costing more than $1 billion to import the gas to power their growing economies.

“The signals coming out of the Burma government on this Shwe gas are very confused and not good for the international energy industry that might be looking to invest in the country,” said Bangkok commodities researcher Sar Watana. “Add to this Daewoo’s issuing statements that it is in charge of picking a buyer—it’s a mess.”

 
In the murky world of the Burmese government, it’s unclear who really has the final say on the Shwe gas field, although it is expected that the state owned and operated Myanmar Oil and Gas Enterprise will partner with whoever wins the prize.

 
Whatever the difficulties and risks of dealing with the junta, it clearly hasn’t discouraged a string of foreign investors from seeking a portion of Burma’s riches. A range of small, sometimes obscure companies, from Singapore to Russia, have also won both onshore and offshore exploratory drilling concessions.

 
Burma’s future role as a key energy supplier to Asian countries is not in doubt. The question is can the regime put together an efficient mechanism to exploit its natural resources in a way that truly benefits the Burmese people?