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Hunting for Myanmar's hidden treasure

Western nations are moving into the resource-rich country after decades of disinterest, challenging China's interests.

| Business & Economy, Myanmar, Asia Pacific

By

Hereward Holland

Ramree Island, Myanmar - Zaw Myint looked quizzical as he sniffed a handful of grey sludge. He had just pulled the mud up from the bottom of an oil well he's digging on Myanmar's impoverished western coastline, hoping for the sweet whiff of black gold.

"The money I get working here is good," Zaw Myint said, standing in a shallow pool of water that glistened with the sheen of oil.

However, Zaw Myint's success may soon change. Big Oil is hot on his trail.

The hunt for hidden treasure in Myanmar, Southeast Asia's hottest frontier market, is rapidly gaining pace.

Companies from the United States, Europe, Japan and Singapore are elbowing their way into the country they turned their backs on during the past two decades because of its appalling human rights abuses.

The country fell into China's less scrupulous embrace and, for two decades, Myanmar was the monogamous partner in a loveless marriage of convenience.

The Chinese don't care about local people. They do as they like.

- U Tun Thein, landowner

In 2011, fearing the country was sliding towards Chinese client statehood, Myanmar began a process of liberalising the economy, releasing political prisoners, and rebalancing foreign relations.

As Myanmar took its first baby-steps towards democracy, Western nations eased economic sanctions. Last year, Myanmar's President Thein Sein met with US President Barack Obama at the White House, the first such visit by a Myanmar head of state in almost 50 years.

China is no longer Myanmar's only suitor; she's being courted, she's seeing other people. It's complicated.

Burmah Oil

Myanmar is one of the world's oldest oil producers, exporting its first barrel in 1853. Its discovery by British colonisers prompted the creation of the Burmah Oil Company, an early shareholder of the company that would later become oil giant BP.

Despite its early start, production has been negligible under the five decades of economic mismanagement since independence from Britain in 1948. In 2007, its output was just 8,000 barrels of oil per day, according to Total's website.

Still, the technique for hand drilling wells with simple bamboo rigs was passed down the generations, and has provided a healthy enough income for some communities living on Ramree Island.

The oil, which looks and smells like gasoline, was once distilled in makeshift refineries in the main town of Kyaukphyu.

The fuel was used in motorbikes and cars, but the refining process was dangerous. These days more reliable supplies of petrol are trucked in from Myanmar ' s commercial capital, Yangon.

"I found a lot of oil here 10 years ago," said U Tun Thein, who owns the land where the ramshackle village of Oil Mountain stands. He points proudly to a photograph of his daughter graduating from university, paid for on the proceeds of renting out his land to local oil drillers.

It's on this small resource-rich isle that Myanmar's disenchantment with its northern neighbour China is palpable, and its flirtation with the West will become increasingly obvious.

Like most people, U Tun Thein resents the large Chinese workforce that runs the nearby China National Petroleum Corporation's gas installation.

"The Chinese don't care about local people. They do as they like," U Tun Thein said.

Fresh trouble

For oilmen such as Zaw Myint, their troubles reflect the changing fancy of Myanmar's economic dalliances.

A couple of years ago he was uprooted by the construction of parallel 1,240km-long oil and gas pipelines stretching from Kyaukphyu, his coastal hometown, to China's southern Yunan province.

During the last year the gas pipeline, which connects to the offshore gas facility, has pumped 66.5 billion cubic feet of gas to China. The sister pipeline will come online later this year, and is expected to carry 440,000 barrels of crude oil per day.

"My family depends on this land. I want to regain the land I lost," said Zaw Myint.

His complaints are a common refrain on the island. Despite the abundance of offshore gas resources, locals say they've seen little of the revenue.

"Local people do not get enough profits from our natural resources," said Soe Shwe from the Shwe Gas Movement, a civil society group.

Driller Zaw Myint faces new trouble from plans to build a 17-square-kilometre industrial park on his oil field.

The "Special Economic Zone" will include a deep-sea port and a "one-stop service centre for comprehensive logistics and supply services for oil and gas exploration, development and production facilities", according to the development plan.

The oil facility will cater to the 20 offshore oil blocks auctioned off in April, several of which were awarded to Western oil conglomerates including Shell, ENI, Total, Chevron and ConocoPhillips.

Chinese companies were notably absent; one of several potent signs of China's less-privileged position.

As Myanmar opened up its nascent banking sector earlier this month, only one Chinese bank was granted a license to operate, while Japan won three, and Singapore two. Meanwhile, Myanmar is said to have become dissatisfied with Chinese weaponry, preferring Russian planes and helicopters.

In 2011, President Thein Sein halted construction of the $3.6bn Myitsone hydroelectric dam, which would have sent 90 percent of the electricity it generated to China.

Four-years ago, China pledged $8.26bn worth of investments. The following year, Myanmar opened its doors to the West and that number halved. This year, China committed a paltry $56.9m.

Zaw Myint smells sludge for the hint of oil [Hereward Holland] 

'Old coziness'

Chinese investment in Myanmar has plunged, according to Ian Storey, a senior fellow at the Institute of Southeast Asian Studies in Singapore.

"By broadening its foreign and economic relations, Burma has almost certainly reduced its dependence on China," he said in an email..

Even so, that doesn't mean the Sino-Myanmar romance is completely over. Despite the drop in foreign direct investment, bilateral trade remains healthy and this will continue to grow. In 2012, two-way trade almost doubled to $6.5bn.

"China remains a very important partner for Burma on nearly all levels," Storey said, pointing to the nearly 2,000-km shared border. Myanmar will want to maintain cordial and productive relations with Beijing, he said.

Asia's emergent superpower still wields considerable diplomatic power, pressuring Myanmar to end a brief offensive against Kachin rebels on the Chinese border in late 2012 when shells landed on the wrong side of the boundary.

As the Kyaukphyu economic zone develops, China wants to lay down a highway and railway along the same route as the oil and gas pipelines.

This would establish an economic artery from China's Yunan province to the Bay of Bengal that shortens transport times, avoids pirate-infested waters, and is, crucially, insurance against any future stand-off with the US over use of the shipping lane through the vital Strait of Malacca.

Relations have cooled significantly since 2011, but China's proximity and economic weight will always be compelling, said Sean Turnell, an economist from Macquarie University in Sydney.

"The old coziness may never come back, but the ties will continue to bind," Turnell said.

Source: Al Jazeera

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