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Business News/ Companies / China beats India to 30-year natural gas deal with Myanmar

China beats India to 30-year natural gas deal with Myanmar

China beats India to 30-year natural gas deal with Myanmar


New Delhi: China has pipped India to sign a 30-year deal to import natural gas from fields lying in Myanmar offshore where India’s state-owned companies have a 25% stake.

China’s state oil and gas firm China National Petroleum Corp. (CNPC) last week signed a Gas Sales Agreement with South Korea’s Daewoo International Corp. for buying gas from the Shwe field in A-1 offshore block and the A-3 block, industry officials said.

Daewoo is the operator in the two blocks with 51% stake while India’s Oil and Natural Gas Corp. Ltd (ONGC) has a 17% stake and GAIL (India) Ltd, 8.5%. Another 8.5% stake is with Korea Gas Corp. and the remaining 15% is held by Myanmar Oil and Gas Enterprise (MOGE).

GAIL had offered to pay $5.01 (around Rs245) per million British thermal unit (mBtu) to buy the entire gas from the offshore fields and pipe it to India through the north-eastern states. But the military rulers of Myanmar have chosen China, which will have to lay a longer pipeline to reach its south-western Yunnan province.

People close to the development said Myanmar would also be able to tap the pipeline running across its territory to meet its fuel needs once the gas starts flowing in 2013.

Under the SPA, which cements a preliminary deal in June, CNPC would buy gas at the landfall point of A-1 and A-3 blocks. Shwe field in A-1 block has reserves between 4 and 5 trillion cubic feet (tcf).

Besides, another 5tcf of reserves have been estimated in the A-1 block’s Shwephyu field and 2tcf in the Mya field in the A-2 block, with a combined proven reserve of between 5.7 and 10tcf.

People familiar with the matter said CNPC and MOGE plan to build oil and gas pipelines through Myanmar and into China’s south-western Yunnan province, bypassing the long journey around the Malacca Strait for oil cargoes and solving the problem of getting the gas to the market.

Myanmar had in 2004 selected GAIL as the preferred buyer of gas from A-1 and A-3 blocks. A memorandum of understanding (MoU) to this effect was signed between the two countries on 9 March 2006. As per the MoU, GAIL completed a detailed feasibility report for an onland pipeline from Myanmar passing through the north-eastern states of India.

But on 9 August 2006, Myanmar invited bids from prospective buyers such as India, China and Thailand for export of gas. In October that year, the Myanmar government intimated that none of the bids met its expectations. Subsequently, it invited bids for the sale of 3.5 million tonnes of liquefied natural gas (LNG) from the blocks. GAIL again submitted its bid.

The Myanmar government subsequently informed that a part of gas from A-1 and A-3 blocks was to be used to meet domestic demand and that the export option—LNG project or pipelines to India or Thailand—would be decided only after reassessment of the reserves, people familiar with the matter said, adding it was indicated that the pipeline to China was not under consideration. In February 2007, the Myanmar government in principle made up its mind on the sale of gas from A-1 and A-3 blocks to China through the pipeline route, they said.

GAIL had wanted to lay a 1,573km line from Myanmar-India border to Gaya in Bihar after passing through Aizwal, Silchar and Guwahati, and Siliguri.

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Published: 30 Dec 2008, 12:24 AM IST
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