Myanmar finally approves second Yadana gas pipeline

Myanmar told a three-company international consortium to proceed with a long-delayed project to build a $200 million gas pipeline from Myanmar's largest hydrocarbon resource, Yadana gas field in the Gulf of Martaban to an onshore location near the capital of Rangoon. The Myanmar junta realized that it needs the indigenous natural gas to fuel its power plants near Rangoon. However, the other elements of the plan�a consortium-owned power station and fertilizer plant�remain on hold indefinitely.


BANGKOK�Myanmar told a three-company international consortium to proceed with a long-delayed project to build a $200 million gas pipeline from Myanmar's largest hydrocarbon resource, the Yadana gas field in the Gulf of Martaban, to an onshore location near the capital city of Rangoon. The Myanmar junta realized that it needs the indigenous natural gas to fuel its power plants near Rangoon. However, the other elements of the plan�a consortium-owned power station and fertilizer plant�remain on hold indefinitely.

The decision, long awaited by the international consortium, came as the junta awakened by the economic reality that, although the price of oil used by its power plants has become prohibitive, the country has an alternative: to use cheaper indigenous natural gas.

Randy Howard, Unocal Corp.'s vice-president for international energy operations in Southeast Asia, confirmed that the Yadana-to-Rangoon pipeline consortium, known as Myanmar Fertilizer Power Development Co. (MFPD), was recently advised by the Rangoon government to go ahead with the gas pipeline project. Partners in MFPD are Unocal, the European energy group TotalFinaElf SA, and Mitsui & Co. of Japan.

The 20-in., 241-km gas pipeline was planned as part of the so-called "Three-in-One" project first contemplated in the mid-1990s as an element of the overall development of Yadana gas. Aside from the gas pipeline, the Three-in-One project, then estimated to cost up to $750 million, included a 300-Mw gas-fired power station and a 1,750-tonne/day fertilizer production facility near Kyaiktaw, southwest of Rangoon.

With the Rangoon regime's recent advice to MFPD, the Three-in-One project sponsor, it is now clear that only the gas pipeline, estimated by the industry to cost $200 million, will be executed. The junta has indicated to MFPD that the proposed fertilizer and power plant projects will continue to be put off until "sometime in the future," according to sources involved in the project.

The Yadana-Kyaiktaw gas pipeline was originally planned to come on stream in early 1998, delivering up to 105 MMcfd of gas from the Yadana offshore production complex to the proposed power and fertilizer plants. The natural gas required for this project is part of the 125 MMcfd of gas already allotted under the 30-year domestic sale agreement signed by the Yadana consortium and the junta in February 1995.

Howard said the consortium is discussing with Myanmar authorities the execution of the gas pipeline project. "We are in preliminary discussions and Yangon [Rangoon] said they are already to proceed [with the project] now,'' he said.

According to Howard, MFPD has yet to complete an engineering design for the gas pipeline, which he said is expected to come on stream in the next 3-5 years.

A Yadana-to-Thailand gas pipeline came on stream earlier this year.

Myanmar controversy
The revival of the Myanmar domestic gas pipeline project is likely to renew anti-Rangoon-regime elements' criticisms of Unocal and TotalFinaElf for their involvement in military-run Myanmar. Allegations include the use of slave labor on an onshore section of the Yadana-to-Thailand pipeline, which the companies have rejected repeatedly.

Over the past 5 years, the two energy concerns have been subject to widespread and intense criticism by international activist groups of supporting the repressive government through their $1 billion investment in the development of Yadana field production complex and its related transmission line to western Thailand. These activists' goal is to apply public and political pressure on the two firms in order to force them to sell off their interests in the Yadana project and withdraw from Myanmar. The firms so far have not yielded to pressure.

Interests in the main Yadana gas field development project are TotalFinaElf, 31.24%; Unocal Corp., 28.26%; Thailand's PTT Exploration & Production PLC, 25.5%; and state-owned Myanma Oil & Gas Enterprise, 15%.

Howard expects further criticism: "Yes, we are always in the focus. But I think Unocal has improved the lives of the [Myanmar] people, who understand that we do the right thing."

Referring to activists' allegations that slave labor was used in building the 63-km onshore section of the 409-km Yadana export pipeline, Howard said, "First of all, it was part of the original [Yadana development] project. It is legal and within the approval of the US government. [There's] nothing wrong with that. The pipeline does not go through the areas where there are ethnic groups with problems with Rangoon [the country's southwest region]."

Howard added, "We've seen that sanctions and isolation do not hurt the leaders [of governments] but the people."

He denied that the revival of the Yadana domestic gas pipeline is linked to Thailand's failure to take delivery of Yadana gas under the contractual rate (OGJ Online, May 2, 2000): "No, it has nothing to do with PTT [Petroleum Authority of Thailand, the gas buyer] not being able to take Yadana gas. It has more to do with Yangon's needs."

With gas reserves of more than 5 tcf, Yadana can comfortably meet the 525 MMcfd gas demand specified in the 30-year gas delivery contract with Thailand plus Myanmar's domestic gas requirements.

Under the original deal, Myanmar does not have to make cash payment for the gas it takes through the revived domestic gas pipeline from Yadana. In other words, Myanmar is allowed to take its share of gas in kind.

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