Oct 4, 2007 By Andrew Symon
Asia Times (Hong Kong)BANGKOK –As international condemnation mounts against Myanmar's military government and its recent armed crackdown on street demonstrators, the country's money-spinning oil-and-gas sector could soon be the target of new and tighter Western-led sanctions. Should new bans on energy trade and investment come to pass, more than any other regional country Thailand will find itself caught between a diplomatic rock and an economic hard place.
Natural gas exports to Thailand are by far the Myanmar government's largest source of foreign revenues, accounting for nearly US$160 million per month in take-or-pay contracts negotiated before the 1997-98 Asian financial crisis - and well before the recent spike in global energy prices. According to statistics from the Asian Development Bank, gas exports contribute nearly one-third of Myanmar's total official export revenues. And there are several big new bilateral investment plans underway to pump up further natural gas and electricity exports from Myanmar to Thailand.
Under former prime minister Thaksin Shinawatra, Thailand came under US criticism for expanding its business ties with Myanmar's junta. His government's so-called "forward engagement" policy towards Myanmar was out of line with US- and European-led trade and investment sanctions, but was in accord with the Association of Southeast Asian Nations (ASEAN), which, since admitting Myanmar into the grouping in 1997, had preferred economic engagement over isolationism to influence the regime.
After the recent military crackdown, however, ASEAN has been openly critical, signaling to some analysts that the grouping might try to throw its lot in with whatever punitive measures Western countries may move to impose. However any meaningful collective action would need to include Thailand and it seems doubtful the country's interim military government would be willing to pull the plug on crucial energy supplies for morality's sake.
That means any new sanctions against Myanmar's energy industry are likely to have as marginal an impact on Myanmar's ruling junta's staying power as the punitive measures the US first imposed in 1997. China and India are both bidding to negotiate greater access to Myanmar's untapped energy resources. And both countries have notably refrained from criticizing the regime after last week's crackdown. Energy analysts note that if Thailand were to abandon its contractual arrangements in Myanmar, China and India would likely move to take up the slack.
Natural gas is Myanmar's hotly contested prize, with several regional countries bidding to explore new blocks up for tender. In the early 20th century Myanmar, then known as Burma, was an important regional oil producer from its deep onshore fields. However, oil production had dwindled in recent decades and large - although not massive - natural gas resources have more recently been discovered and foreign investments have helped to boost output.
New sanctions targeting existing rather than only new investments in Myanmar's energy industry would at least temporarily dent the regime's ability to profit from these resources. Potential targets of Western-led and ASEAN-upheld sanctions could hit some of the largest energy companies in the world, including France's Total, the US's Chevron, Malaysia's Petronas, South Korea's Daewoo and Korea Gas Corp, and, hypothetically, Thailand's PTT Exploration and Production (PTTEP).
There are also several small and medium sized Western upstream oil and gas companies - including so-called larrikin outfits - which currently operate below the political radar, but if forced to withdraw due to new sanctions on existing investments would at least temporarily disrupt Myanmar's ability to tap offshore wells, until China, India or another non-Western-aligned country moved in to fill the technology gap.
Energized competition
The politics of imposing new sanctions against Myanmar would be highly complex and potentially damaging to the Thai economy if Bangkok were to take part. Myanmar is already expanding its energy export base, emerging as a key new supplier to China and possibly also to India and South Korea. China and India are locked in competition for gas supply from fields now operated by South Korean companies offshore near western Myanmar.
China has secured at least the initial advantage for a gas pipeline plan approved by the Myanmar government to send supplies to southwest China and the idea for another pipeline taking product landed in Myanmar from Africa and the Middle East - giving China an additional supply route to the congested Malacca Strait - is also on the table.
India has mooted a similarly ambitious pipeline plan with Myanmar, which conceivably would send gas through Bangladesh and supply areas in eastern India. But it's still unclear if Dhaka, which has stonewalled other energy projects with India, would support any India-Myanmar initiative which passes through its territory.
Thailand's own supplies of natural gas, which currently fuel 65% of the country's total electricity output, are fast diminishing at a time industrial demand for the resource is simultaneously rapidly rising. According to BP figures, proven gas reserves in the Gulf of Thailand will likely run dry over the next 17 years. There are still untapped resources in the joint Thai-Malaysia development area as well as in the contested overlapping claims area with Cambodia - but even if maximized are not expected to bridge the emerging shortfall.
Meanwhile, state energy company PTT predicts that national natural gas demand will grow from 3.32 billion cubic feet per day (cfpd) at present to 6.1 billion cfpd by 2015. Thailand's power generation capacity, meanwhile, is projected to increase to 58,000 megawatts by 2021 from its current level 28,500 megawatts in the current power plan. Myanmar gas currently meets over 25% of total Thai demand and plans to steadily increase those volumes are now on the cards.
Gas is now piped from the offshore Yadana field, operated by France's Total in partnership with the US's Chevron, as well as from the offshore Yetagun field in the eastern Andaman Sea. These two fields alone supply an average of 900 million cfpd to Thailand. Volumes from those same fields are set to increase by another 300 million cfpd by 2011 in a big new offshore project operated by Thailand's PTTEP.
Additionally, there are a growing number of joint Thai-Myanmar hydropower projects planned or under development on the Salween River, which forms part of the shared border between the two countries. These include the 7,110 megawatt Tar-Hsan and 1,500 megawatt Hut Gyi dams, both of which were signed by Myanmar's junta and Thai companies, including the state-run monopoly the Electricity Generating Authority of Thailand.
Both controversial projects are designed specifically to supply power to Thailand, but analysts say could conceivably be rerouted to China if Bangkok were to back new Western-led sanctions. China is currently backing other hydropower projects on the upper reaches of the same river designed to supply power to its fast growing south-western regions.
So far Thai officials have sent mixed signals about their intentions and have downplayed Thailand's significance to new sanctions imposed against the regime. Defense Minister Boonrawd Somtas told reporters that the current protests were unlikely to unseat Myanmar's junta and that political change was unlikely unless China, India and Russia exerted "serious pressure".
Meanwhile, top Thai energy official Piyasavati Amranand has said Myanmar's recent troubles have prevented his officials from negotiating any new gas supply deals and that any planned talks would be delayed until the political situation stabilizes. At the same time, he said that Thailand's intention to secure new natural gas supplies from Myanmar remains unchanged.
Andrew Symon is a Singapore-based journalist and analyst specializing in energy and mining issues.
