The discovery of vast oil and gas reserves in the Bay of Bengal especially the maritime zone of Myanmar has considerably increased the economic and geo-strategic importance of the region. Myanmar has the third largest gas reserves in Southeast Asia after Indonesia and Malaysia. Taking advantage of Myanmar’s international isolation under prolonged military rule, China made deep inroads into the country’s abundant energy resources over the years.
As Myanmar started political reforms, national reconciliation process and opening up its economy after 2010, more and more international Energy Giants are now engaged in the Southeast Asian nation’s hydrocarbon industry even though China still remains its dominant bilateral partner. Following the lifting of sanctions by the United Nations and Western countries, Myanmar has emerged as an attractive destination for foreign investment in oil and gas sectors. In recent years, state-owned Myanmar Oil and Gas Enterpise (MOGE) has entered into contracts with several foreign companies on oil and gas exploration and production in both onshore and offshore regions.
Myanmar’s oil and gas reserves and their importance in the economy
Myanmar has huge gas and oil reserves around its west coast and in the Irrawaddy Valley, respectively. According to studies, the country is estimated to have 11-23 trillion cubic feet of gas and about 83 million barrels of oil deposits. However, most of these gas and oil reserves have remained untapped. It presently produces 19,600 barrels oil per day and 1.475 billion cubic feet of gas per day.
Natural gas accounts for one-third of Myanmar’s total exports. Gas is the single most important source of revenue for Myanmar and with the addition of oil; both of them combinedly constitute 33% of the country’s foreign direct investment (FDI). Some global energy giants reportedly noted that Myanmar has the potential of earning at least $86 million in net profit annually for 20 years from 2010. On the whole, the Southeast Asian nation is expected to earn a minimum of $800 million a year and this may further increase to $3 billion in the future.
India’s opportunities in Myanmar’s hydrocarbon industry
Myanmar seeks to diversify its market and the country’s large oil and gas deposits could meet the growing energy needs of India’s North Eastern states and Bangladesh. India produces only half of the natural gas it uses and imports 70% of its crude oil mostly from West Asian and North African countries. To make the procurement of oil and gas faster and cheaper, India has been making efforts to tap the resources in its immediate neighborhood. As part of Hydrocarbon Vision 2030 for the North Eastern region, the government of India has formulated an ambitious plan to lay 6,900 km of gas pipelines from Myanmar’s Sittwe to West Bengal through Bangladesh and some of the North Eastern states.
Reports suggest that New Delhi is exploring the possibilities of laying a number of pipelines connecting Myanmar with West Bengal via North East and Bangladesh. Two of them include: pipeline from Shwe to Kolkata through Myanmar’s Rakhine and Chin states, Bangladesh’s Brahmanbaria and Rajshahi; and pipeline from Shwe to Kolkata through Rakhine and southern Bangladesh. India prefers the first option but Bangladesh’s reluctance to provide transit facility through its territory stalled the progress of the project.
India’s engagement in Myanmar’s oil and gas sectors
The close proximity of Myanmar’s oil and gas fields offer lucrative investment opportunities for the Indian companies in both public and private sectors. They have been engaged in the extraction of Myanmar’s oil and gas since the discovery of Shwe fields, 60 km from the coast of Sittwe, in 2004. In December 2006, Gas Authority of India Limited (GAIL) signed an agreement with Myanmar for drilling oil and gas in one offshore off the coast of Rakhine.
India’s investment in Myanmar’s oil and gas sectors stood at $1.6 billion in 2012. State-owned ONGC Videsh Limited (OVL) and GAIL have nearly 30% stake in the exploration and production in the Shwe offshore gas fields. Besides, the two public sector units (PSUs) combinedly have 12% stake in the Myanmar-China gas pipeline project as sizeable part of the gas is transported from the Shwe fields. In addition to these, India’s private enterprises such as ESSAR, Reliance Industries Limited (RIL) and some others have begun investing in Myanmar’s gas sector.
However, these investments have not benefited India much because very less of the extracted gas is imported into the country. The lack of proper infrastructure facilities stood in the way of India acquiring Myanmar’s gas. This prompted New Delhi to attach priority to the up gradation of Myanmar’s physical infrastructure. In 2005-06, India renovated the Thanlyin Refinery and has recently undertaken the up gradation of the Thanbayakan Petrochemical Complex. New Delhi also provided $150 million line of credit for setting up a Special Economic Zone (SEZ) at Sittwe and is currently engaged in the up gradation of Sittwe port as part of the Kaladan Multimodal Transit Transport Project.
Efforts to revive Myanmar-Bangladesh-India gas pipeline project
In 2004, India sought to export gas from Myanmar’s Shwe fields through overland pipelines via Bangladesh to Kolkata. The idea of the 900 km long Myanmar-Bangladesh-India (MBI) gas pipeline was conceived in 1997. The pipeline was designed to supply 5 billion cubic meters of gas from Myanmar to India. After initial surveys and negotiations, the total cost of the MBI project was estimated at $1 billion to be financed mainly by India. But dissimilar energy policies of India and Bangladesh hindered the materialization of the project.
Bangladesh’s the then Khaleda Zia government (2001-06) demanded an annual $125 million transit fee and laid down some preconditions for the gas pipeline. India did not accept the conditions resulting in the postponement of the project. However, recent reports suggest that the stalled talks on the MBI project will resume soon. The proposed project was re-examined during Indian Prime Minister Narendra Modi’s landmark visit to Dhaka in June 2015. Earlier in June 2013, India’s Commerce Minister Anand Sharma restarted discussions on the MBI pipeline during his visit to Naypyitaw to attend East Asian Forum and explored the possibility of the two blocks awarded to ESSAR.
Bangladesh’s present Sheikh Hasina-led Awami League government too expressed its intent to re-negotiate the MBI project. An alternative 1575 km long pipeline route bypassing Bangladesh did not take off mainly for the lack of funding. According to an estimate made in 2005, the second option would cost around $2.3-3 billion, while the MBI pipeline project was estimated at $1 billion. The import of gas is essential for the economic development of India’s isolated North Eastern region. The MBI project could meet India’s long-term energy requirements.
Myanmar-China oil and gas cooperation
The two Asian giants India and China have been competing over Myanmar’s oil and gas resources particularly those deposited in the Shwe fields. Beijing seized the opportunity arising out of the shelving of the MBI project and PetroChina struck a deal with Myanmar for the sale of gas from one of its block through an overland pipeline to Kunming, the provincial capital of southwestern China’s Yunnan province. It has constructed a 2,300 km long pipeline from deep-water port at Kyaukpyu in the Bay of Bengal to Kunming for transporting 424 billion cubic feet of natural gas per year. China also built a 771 km pipeline running parallel with the gas pipeline to carry 24,000 barrels of crude oil per day.
Prospects of cooperation between Myanmar and Bangladesh
The peaceful settlement of the Bangladesh-Myanmar maritime boundary disputes has opened the floodgate of opportunities for energy cooperation between the two nations. In 2015, Bangladesh reportedly worked out a plan to import gas from Myanmar and set up a power plant in Chittagong and also proposed to share electricity with the neighboring country. Myanmar evinced interest in the proposal and agreed to send a technical team to undertake feasibility study of exporting gas from its Chin state that shares border with Bangladesh’s southeastern Chittagong Hill Tracts (CHT).
Current India-Bangladesh cooperation
In order to ensure its energy security, Bangladesh under Hasina has also been seeking close cooperation from neighboring India. Bangladesh signed several energy-related agreements with the Indian companies after her assumption of power in 2009. The OVL is currently engaged in Bangladesh’s hydrocarbon industry. In February 2014, the OVL signed a contract for two shallow-water exploration blocks of Bangladesh in the Bay of Bengal.
Moreover, Bangladesh wants to export diesel from India to meet its ever-growing demand for fuel. Assam’s Numaligarh Refinery Limited (NRL) agreed to supply 1 billion metric ton (MT) of diesel per year after the completion of Rs 200 crore pipeline project from Siliguri in North Bengal to Parbatipur in Bangladesh. On April 22, 2015, the NRL signed a memorandum of understanding (MoU) with Bangladesh Petroleum Corporation (BPC) to lay 130 km pipeline from its marketing terminal in Siliguri to the latter’s depot in Parbatipur in northern part of Bangladesh.
Both NRL and Indian Oil Corporation Limited (IOCL) are exporting diesel to Bangladesh through railway network for the time being. On March 18, 2016, India’s union Minister for Petroleum and Natural Gas Dharmendra Pradhan inaugurated a goodwill rail rake consignment carrying 2200 MT of high speed diesel (HPD) from Siliguri.
Similarly, India in its bids to save time and cost of transporting liquefied natural gas (LNG) and liquefied petroleum gas (LPG) to the North Eastern states, wants to set up facilities along Bangladesh coast. The IOCL has proposed to build LPG bottling plant in joint venture with BPC and LNG terminal in another joint venture with state-run Petrobangla. Reports indicate that imported LNG, after re-gasification, will be supplied to the North Eastern states using Bangladeshi pipelines, while the imported LPG will be bottled in the neighboring country and also be supplied there. In April 2016, BPC and IOCL signed an agreement to jointly build a LPG terminal in Chittagong.
A roadmap for trilateral cooperation
The energy cooperation between India and Bangladesh has received new impetus in recent months. There is a growing realization in New Delhi and Dhaka that greater cooperation in the arena of oil and gas will bring about win-win situation for both the nations. The depletion of Bangladesh’s gas reserves forced the policy makers to revise the country’s energy policy and seek productive engagement with the foreign energy companies for optimum utilization of its oil and gas reserves. Given the current warm ties between New Delhi and Dhaka, it is expected that the political leaders of both the nations would accommodate each other’s energy needs and concerns and initiate concrete measures to revive the negotiation of the MBI project.
However, numerous factors, including periodic political turmoil, geopolitical competition, security threats and instability stemming from chronic ethnic conflicts have impeded expansion of energy cooperation among India, Myanmar and Bangladesh. All three nations should broaden engagement at the regional level for better understanding of each other’s needs and aspirations. India, Myanmar and Bangladesh share only two regional platforms together—Bangladesh, China, India and Myanmar-Economic Corridor (BCIM-EC) and the Bay of Bengal Initiative for Multi-Sectoral and Economic Cooperation (BIMSTEC) and they could utilize both the forums to promote their energy requirements.
India needs to recalibrate its energy security policy, which includes the possibility of exploring Bangladesh’s untapped oil and gas resources along with that of Myanmar. New Delhi must consider transporting Myanmar’s gas back to the country either through pipelines or in the form of LNG to meet its rising energy demands. India should also ensure coordination among its public and private companies especially those engaged in the exploration and production of gas in Myanmar to reap the benefit of investment. It is imperative that India devises a comprehensive energy strategy under its “Act East” initiative that encompasses the needs and concerns of Bangladesh and Myanmar as well.