On February 1, 2021, the Myanmar military announced that military commander-in-chief Min Aung Hlaing would take over the country. Detaining the country’s leader Aung San Suu Kyi, transferring power to the military and imposing a year-long state of emergency.
U.S. President Joe Biden said that the Myanmar military’s seizure of power was a direct attack on the democratic transition process and that the United States would hold the coup leaders accountable. The United States may re-impose sanctions on Myanmar.
In 2020, China imported 540 million tons of crude oil. How much impact will Myanmar’s “coup” have on China’s crude oil imports?
Min Aung Hlaing
ANG San Suu Kyi
China-Myanmar Oil and Gas Pipeline
2020 marks the tenth anniversary of the construction and operation of the China-Myanmar oil and gas pipeline project. The China-Myanmar natural gas pipeline is 793 kilometers long, and the China-Myanmar crude oil pipeline is 771 kilometers long. The two pipelines are laid in parallel, traversing four provinces and states in Myanmar, and entering China from Ruili, Yunnan.
As of June 3, 2020, the China-Myanmar Natural Gas Pipeline of China Petroleum International Pipeline Company has Since it was put into operation in 2013, it has steadily transported more than 26.5 billion cubic meters of natural gas to China and downloaded nearly 4.7 billion cubic meters of natural gas to Myanmar. Since the China-Myanmar crude oil pipeline was put into operation in 2017, Made Island Port has received and unloaded 123 large oil tankers, transporting 123 large oil tankers to China. More than 30 million tons of oil.
Ten years ago, on June 3, 2010, as an important achievement and crystallization of the 60th anniversary of the establishment of diplomatic relations between China and Myanmar, the China-Myanmar oil and gas pipeline project officially started construction. After ten years of hard work, a world-class high-quality pipeline project was completed as scheduled and is functioning stably. The China-Myanmar oil and gas pipeline project not only provides a new southwestern path for my country’s diversified oil and gas import pattern, but also effectively alleviates Myanmar’s local energy shortage and fully promotes the development of local society, economy and employment. It has become a key component of the implementation of the “Belt and Road Initiative” in Myanmar. A pioneering demonstration and a powerful testimony of the Paukphaw friendship between China and Myanmar in the new era. According to the shareholders’ agreement, after the China-Myanmar oil and gas pipeline is completed and put into operation, it will be able to download 2 million tons of crude oil and natural gas accounting for 20% of the pipeline’s transportation volume in Myanmar every year, which will be used to promote Myanmar’s economic development and improve people’s quality of life.
In March 2009, the then Director of the National Energy Administration Zhang Guobao and the Minister of Energy of Myanmar signed a memorandum on the construction of the China-Myanmar Oil and Gas Pipeline
The China-Myanmar oil and gas pipeline is designed to build natural gas and crude oil pipelines in parallel, both starting from the Indian Ocean port in western Myanmar. The natural gas pipeline starts from Kyaukpyu Port, and the crude oil pipeline starts from Made Island, and is then constructed in parallel, both entering China from Ruili in Yunnan.
The source of natural gas is jointly developed by foreign companies such as South Korea’s Daewoo and other natural gas pipeline companies in the A1A3 offshore gas field in the Arakan Basin on the Indian Ocean continental shelf in Myanmar. The output for next year has been determined to be 5 billion cubic meters. At that time, South Korea’s Daewoo was looking for a sales market. At the same time, we have also discussed several offshore blocks with Myanmar for risky exploration, and Sinopec also has risky exploration blocks on land. I also negotiated the intergovernmental negotiations and signed the intergovernmental agreement, but I don’t know whether these blocks later obtained reserves with commercial mining value. Crude oil comes from the Middle East and Africa.
Crude oil and natural gas pipelines are both China-Myanmar joint ventures. The crude oil pipeline has a designed annual oil transportation capacity of 22 million tons, of which China accounts for 50.9% and Myanmar accounts for 49.1%. Natural gas pipeline share ratio: China 50.9%, Myanmar 7.365%, South Korea’s Daewoo International 25.041%, India OVL 8.347%, India GAIL 4.1735%, Korea Gas 4.1735%.
It is estimated that from 2017 to 2020, the China-Myanmar oil and gas pipeline transported more than 30 million tons of oil to China, with an average of no more than 10 million tons per year. Even if the 2 million tons of crude oil downloaded by Myanmar per year are included, there is still some room for the designed oil transportation capacity of 22 million tons per year.
Based on 10 million tons, crude oil imports from the China-Myanmar Pipeline account for 1.8% of China’s total imports; even if operating at full capacity, the China-Myanmar Pipeline accounts for 10% of China’s total crude oil imports in 2020 The proportion is only 3.7%.
The possibility of the United States restarting sanctions and Japan’s concerns
U.S. President Joe Biden ) said the coup leaders would be held accountable. U.S. options include expanding human rights sanctions against coup leaders and tracking and disclosing the international business dealings of these military leaders. The United States has previously imposed sanctions on Myanmar’s military leaders over its treatment of the Rohingya Muslim minority.
However, the “Wall Street Journal” commented that the United States has limited influence on Myanmar’s military leadership. Analysts say that if the Biden administration imposes broad economic sanctions on Myanmar like the Bush and Obama administrations did, it could alienate the Burmese people and undermine their public perception of Western countries.Fang’s attitude.
U.S. trade with Myanmar is small. By contrast, China has billions of dollars in trade and investment ties with its neighbor Myanmar, and Beijing has expressed less public concern than the United States about who should be in power. This raises the possibility that any U.S. action may further push Myanmar closer to China, which will exacerbate tensions between the United States and China at a time when the United States and China are competing for influence in the region.
The “Nikkei Chinese Network” article pointed out that Japanese companies that have been driving investment in Myanmar in recent years are also facing huge challenges. Myanmar first attracted attention as “Asia’s last virgin land” in 2012. That was after Aung San Suu Kyi, who had been under house arrest in opposition to military rule, was released and elected to the House of Representatives. As the dialogue between government forces and democratization forces started, the United States lifted economic sanctions on Myanmar in stages. After Aung San Suu Kyi was elected as a member of the House of Representatives and participated in national politics in 2012, global companies such as Coca-Cola from the United States re-entered Myanmar, and economic growth driven by foreign investment began. As “Asia’s last virgin land”, the amount of foreign direct investment in Myanmar increased seven times from 2012 to 2015, when it reached its peak, soaring to approximately US$9.4 billion.
The composition of countries or regions with foreign investment reaching approximately US$5.5 billion from October 2019 to September 2020 is led by Singapore (34%). This is followed by Hong Kong (26%), Japan (14%) and Mainland China (10%).
In the Thilawa Special Economic Zone (SEZ) on the outskirts of Yangon, Myanmar’s largest city, Sumitomo Corporation, Mitsubishi Corporation and Marubeni are among the After 2013, Myanmar’s first modern industrial park was built. Toyota also plans to get the new plant operational.
Japanese media are worried that the United States will restart economic sanctions against Myanmar. During the military junta era, the United States prohibited its own companies from investing in Myanmar, as well as transactions with Myanmar companies that had close ties with the government forces. This has also become an obstacle for companies outside the United States to invest in Myanmar. If sanctions are restarted, they will have an impact on the business of Japanese companies. On the other hand, China has been actively investing in Myanmar, focusing on the resource field. If investment from Europe, the United States, and Japan decreases, there is a high possibility that China will fill the gap. Myanmar’s entry into a military government may be an opportunity for China to expand its economic power in Southeast Asia.
China will face challenges: rising crude oil prices and steady increase in imports
According to Reuters, Entering the new year of 2021, Asia’s crude oil imports surged despite the ongoing COVID-19 epidemic, as China increased purchases again and other major buyers in Asia also showed signs of demand recovery.
Asia is expected to unload a total of 26.14 million barrels per day of crude oil in January, according to tanker tracking and port data compiled by Refinitiv. The increase was 7.5% from 24.32 million barrels per day in December, making imports in January increase for the fourth consecutive month.
This import growth is still led by China, the world’s largest crude oil importer. China will receive about 12 million barrels per day of crude oil in January, an increase of 33% from the official figure of 9.06 million barrels per day in December. The surge in imports in January was likely mainly due to China’s release of new annual import quotas, which increased the amount independent refineries can purchase. In addition, it may also be due to the fact that some cargoes arrived in December but could not be unloaded until the new quota took effect.
The increase in refining capacity and processing volume will lead to China maintaining steady imports in 2021. Brent crude oil has risen from $45 a barrel in mid-November to a range of around $55.
From the perspective of 2021-2022, regardless of whether Myanmar’s “coup” will trigger US sanctions, or the extent of the sanctions, it has nothing to do with the overall situation of China’s crude oil imports. As the effects of vaccines gradually become apparent and the global economy recovers, the challenges of rising crude oil prices and China’s steady increase in imports, as well as the possible rising costs of downstream chemical products, deserve more attention from domestic companies. </p
