photo by jon nicholson

news - A Look at Burma's History as Emerging Energy Supplier

november 2nd, 2009

"Sandwiched in between China and India, two of the world's biggest new sources of energy demand, Burma is believed to have significant untapped reserves of natural gas. But its tangled history of government restrictions and, more recently, allegations of human-rights violations have limited outside investment to develop its resources.

Burma was one of the world's first oil producers, with some exports as early as 1853. Foreign investment followed, with sizable fields developed in the late 1800s and early 1900s.

In 1962, the country came under the control of a military regime that nationalized the oil and gas industry. Until the late 1980s, the government kept foreign operators out. But beginning in 1988, it liberalized the oil and gas sector to begin allowing outside investment again. Western companies including Total S.A. and Unocal Corp.--later bought by Chevron--entered the market.

Within a few years, however, the US and Europe imposed sanctions against Burma's military regime, preventing other Western companies from staking a claim. In their absence, a host of investors from Asia and elsewhere expanded their operations, including Cnooc Ltd. of China and South Korea's Daewoo International. The process intensified after 2004, as Burmese authorities accelerated the opening of areas for exploration.

By 2007, at least 27 companies from 13 countries, including Petronas of Malaysia and ONGC of India, were active in Burma's oil and gas industry, according to a report by Human Rights Watch. The list included numerous companies that are wholly or partially owned by national governments in the region.

Although discoveries of oil have been limited, companies have found sizable deposits of natural gas, which now makes up the bulk of Burma's production. Foreign companies are particularly interested in offshore areas along Burma's western coast in the Bay of Bengal near Bangladesh, where a consortium including Daewoo is developing a major gas asset that will include a pipeline to China.

Human-rights advocates decry the rise in foreign investment in gas in Burma because they believe much of the revenue is used by Burma's military regime to support its rule and commit human-rights violations.

According to Human Rights Watch, Burma's military government earned approximately $2.16 billion in 2006 from sales of natural gas, accounting for half the country's exports and serving as its single largest source of foreign exchange. In September, a Washington, D.C.-based group called EarthRights International said Burma's military siphoned off at least $4.8 billion in revenues from gas in recent years, storing much of the money in foreign banks.

Critics say some of the worst human-rights abuses--including the use of forced labor--occurred in the construction of the country's last major pipeline project, called Yadana, in the 1990s. EarthRights has compiled reports detailing the allegations and posted them online.

Many foreign companies in Burma, including Total and Chevron, have said they are not involved in human-rights abuses and that their investments benefit both the Burmese people as well as consumers of the energy in other neighboring countries, including Thailand. Total has set up a Web site detailing its operations in the country with more detailed responses to some of the allegations regarding the Yadana project.

As energy demands in the region grow, interest in Burma's untapped reserves--and the debates over whether they should be developed--will only increase."

LINK: "A Look at Burma's History as Emerging Energy Supplier" (WSJ)

FURTHER READING: "Burma's Neighbors Advance Pipeline Project" (WSJ)

FURTHER READING: "SKorea shipbuilder wins Burma gas order" (AFP)


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