September 27, 2007 ☼ Economy ☼ Foreign Affairs ☼ Security
This is an archived blog post from The Acorn.
India’s energy security is often cited in justifying its hands-off approach to the anti-dictatorship movement in Myanmar. Murli Deora, the petroleum minister, found time to fly into Myanmar earlier this week—even as the protests were gathering strength—to sign a deal under which India will invest $150 million in a natural gas exploration in the country [also see Sandeep Dikshit’s report in The Hindu]. So, does securing natural gas supplies from Myanmar require India to be wary of rubbing the junta on the wrong side?
Not quite. Aruna Urs, who will be covering energy security issues in an upcoming issue of Pragati - The Indian National Interest Review tells us more about the gas business.
In 2004 ONGC Videsh Ltd (10%) and GAIL (20%) participated in gas exploration and development deal along with Daewoo (60%) and Myanmar Oil and Gas Company (10%) in the shallow blocks of A1 and A3.
In 2005, gas was discovered in the Shwe gas field at the A1 block. It was expected to have about 3.5 trillion cubic feet (TCF) of gas. In addition, a small find of 0.5 TCF was also made in Shwe Phyu field at Block A1. But even before the signing of the gas purchase deal, India began dreaming of a pipeline through Bangladesh. Bangladesh, however, demanded the moon and dragged the negotiations on for over a year. Meanwhile the junta signed an MOU for the A1 block with Petrochina. Similarly, in 2006, gas with an expected yield of about 1.5 TCF was discovered at Mya in the A3 block. The deal fell out of India’s hands for very much the same reasons.
At this time, ONGC Videsh has signed production sharing contracts to develop three deep-water blocks of AD-2, AD-3 and AD-4. It has 5 years for exploration and can take a share in production for 20 years after the find. This sounds much better than A-1 and A-3 deal where it was only exploration and development deal. Moreover AD2 and AD3 are closer to the shallow A1 and A3 blocks, which might increase the probability of a good find.
India finally dropped the Bangladesh pipe dream and then proposed four alternatives: A pipeline via North Eastern states; an undersea pipeline bypassing Bangladesh; shipping compressed natural gas (CNG) by tankers; or shipping liquified natural gas (LNG) by tankers. The land pipeline through the North East has not been received well by locals and Bangladesh. India’s sea borders in the region are not yet demarcated for any undersea pipelines. This leaves CNG or LNG as the realistic options.
But India is not alone in the great race for Myanmar’s gas. Thailand is already a large buyer, are are Japan, Malaysia and Korea, apart from China. If the regime were to change tomorrow, any democratically elected government will have to honour its commitments. They can’t run away from their neighbours who are also large customers..
It must be noted that it was the rise in consumer gas prices that triggered the current protests. If these eventually oust the junta, any future government will have to keep the gas prices artificially low to hold on to power. International donors might give aid but will surely not foot the gas bill. In this scenario, Myanmar will have to sell gas to bigger consumers like India and China in order to subside its citizens. [Aruna Urs]The upshot of all this is that there is not much to the claim that supporting the junta is vital as far as securing gas supplies is concerned. Indeed, it can be argued that the countries that bring about a positive political change in Myanmar might be beneficiaries in future energy deals.
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