BANGKOK - A new international campaign aims to encourage oil and gas giants
Total and Chevron to reveal the extent of payments they have made to the
Myanmar government over the past 18 years. New oil and gas pipelines are slated
to come online in the next few years and rights groups allege Myanmar's oil and
gas industry serves to prop up the rights-abusing military regime.
EarthRights International (ERI), a Washington DC-based human-rights and
environmental organization, announced the campaign at a press conference in
Bangkok on April 27. A statement for the campaign was signed by more than 160
labor unions, investment firms, academics, non-government organizations and
policy makers, including former Irish president and head of the United Nations
Human Rights Commission, Mary Robinson, as well as
former Norwegian prime minister Kjell Magne Bondevik.
The statement calls for France-based Total, Chevron of the United States, and
Thai state oil company Petroleum Authority of Thailand Exploration and
Production (PTTEP), to reveal the amounts paid to the junta in fees, taxes,
royalties and benefits since the start of the Yadana Gas project in 1992.
EarthRights says transparency of these payments would set a good example for
other oil and gas companies now working in Myanmar.
Total, in response to a report by ERI in September 2009, disclosed in October
2009 that its portion of the Yadana gas project had generated US$254 million
for the junta in 2008. Economists say this data will be important for the
policies, including taxation, interest rates and exchange rate management, of
the government that comes into power after the elections that are expected to
be held this year.
Total, Chevron and PTTEP are part of a consortium, together with Myanmar state
gas firm Myanmar Oil and Gas Enterprise (MOGE), in the Yadana gas field in the
Andaman sea as well as a gas pipeline that feeds two power plants that provide
electricity to Bangkok. Total signed an initial profit-sharing contract with
MOGE in 1992 and remains the primary shareholder. Chevron became involved when
it bought UNOCAL in 2005. Sales of gas from the pipeline to PTT Public Company
Ltd, Thailand's state-owned oil and gas company, began in 2000.
The project came in for criticism over well-documented human-rights abuses in
the area directly related to construction of the pipeline between 1996-1999 and
ongoing security measures maintained along its route. A lawsuit brought against
UNOCAL in the United States by villagers from the pipeline area was settled for
an undisclosed sum in 2005.
Despite this, Total and Chevron - which inherited UNOCAL's liabilities in the
merger - deny responsibility for the negative impacts of the project, including
human-rights abuses. They have even made claims that rights abuses have been
eradicated in the project area, statements that ERI and other human-rights
groups contest.
The Yadana field is the military regime's single-largest revenue earner. ERI
estimates the field earned $1.7 billion in 2008, of which an estimated $1.02
billion went directly to the regime. The group believes that from 2000, when
gas sales began, through 2008, the junta earned a total of $7.58 billion in
revenues.
Fast cash flows
Another field in the Andaman Sea, the Yetagun, is run by Malaysia's Petronas,
Thai Nippon Steel, PTTEP and MOGE. Petronas took over the stake of a British
energy company that pulled out of the project under pressure in 2002 and is now
its largest shareholder. A natural gas pipeline from the field joins with the
Yadana pipeline at the Thai border. According to ERI's research, the amount of
revenue earned from the Yetagun project is only slightly less than that
generated by the Yadana project.
Another much more ambitious oil and gas pipeline project in western Myanmar is
projected to at least double these annual earnings. The Shwe Gas project
encompasses natural gas extraction from a field off the coast of Arakan
Division and a 2,806-kilometer pipeline that will run the length of Myanmar to
Kunming in southwestern China and onto Nanning, the capital of Guangxi
province.
The consortium involves Daewoo International and Korean Gas of South Korea, Oil
and Gas Corporation (ONCG-Videsh) and Gas Authority of India Ltd (GAIL) and
MOGE. Hyundai Heavy Industries of South Korea was contracted by Daewoo in
February to construct related offshore and onshore gas production facilities.
China's state-run China National Petroleum Corporation (CNPC) secured its place
as the sole buyer of the Shwe natural gas reserves in 2008. In June 2009,
Chinese Vice President Xi Jinping and Myanmar deputy leader Vice Senior General
Maung Aye signed a memorandum of understanding for the development, operation
and management of the pipeline, which will have a capacity to transport 12
billion cubic meters of natural gas annually.
Conservative estimates indicate that Myanmar's government will earn $1 billion
per year from the pipeline over the next 30 years, with the first gas transfers
expected to begin in 2013. This is in addition to the $2.5 billion to $3
billion already paid to the regime for bonuses and contract exploration rights
related to the project.
Supplementing the project is the construction of a deep-sea port and crude oil
storage facilities on Maday Island, near the town of Kyaukpyu, on the Arakan
coast. The port will allow Chinese oil tankers to unload at the facility and
pump the oil through a 771-kilometer pipeline being built alongside the natural
gas pipeline to Kunming.
The oil pipeline will have the capacity to transport 22 million tonnes of crude
oil annually. The port and pipeline will also allow China to avoid sending oil,
by some estimates over 80% of its fuel shipments, from the Middle East and
Africa through the pirate-infested and easily blocked Malacca Strait. While the
port and storage facilities are scheduled to be completed this year, the
pipeline is not expected to be up and running until 2013.
Blacklisted bosses
Contracts for the construction of the port facilities and some of the pipeline
infrastructure have been given to Asia World and IGE. Asia World is owned by
Steven Law, also known as Tun Myint Hlaing, the son of alleged drug trafficker
Lo Hsing Han. Both Law and his father have been on a US visa blacklist since
1996 for suspected drug trafficking and their company is on the US Treasury
Department's sanctions list for their financial connections to the regime.
IGE, which is registered in Singapore, is owned by the sons of Myanmar Minister
of Industry-1, Aung Thaung. The company is on a European Union sanctions list
against junta members and their associated businesses. Aung Thaung and his sons
are barred from entering the European Union and Australia under the sanctions.
The dual pipeline project has come under criticism from rights groups. They
claim the deal has contributed to increased militarization along the pipeline
route, land confiscation and forced labor. A Myanmar army offensive against the
Kokang ethnic group along the border with China last year may have also been
connected to the pipeline project. Both the military government in the Myanmar
capital in Naypyidaw and officials in Beijing are keen to make sure that
continued tensions between the junta and ethnic groups along the border do not
cause security problems for the pipeline.
Although India will not receive any of the Shwe Gas field's output, it is still
interested in Myanmar's offshore oil and gas potential. In February, the Indian
government authorized ONCG Videsh and GAIL to move forward with their stakes in
the gas pipeline to China. It also authorized a reported $1 billion investment
by the companies in continued development of offshore gas fields operated by
Daewoo.
Rights groups claim the profits earned by the junta from the Yadana and Yetagun
gas projects already provide the means for the regime to ignore international
criticism and purchase more weapons and equipment for its military. They claim
the $3 billion earned annually from oil and gas projects would be better spent
to improve the country's abysmally underfunded health and education sectors.
The generals have been criticized for under-reporting their earnings from the
gas projects, which are believed to make up over 60% of national income.
Instead of accurately including gas revenues in its national budget, the cash
received is recorded at the 30-year-old fixed exchange rate of six kyat to the
dollar; the current black market rate is over 1,000 kyat to the greenback.
In a September 2009 report entitled "Total Impact", ERI claimed that the funds
not recorded went into offshore accounts at two banks in Singapore - the
Overseas Chinese Banking Corporation (OCBC) and the DBS Group. Both banks have
officially denied the accusation.
Although oil and gas revenues fell last year due to a decline in global prices,
the revenues were still significant. A MOGE representative told the ASEAN
Council on Petroleum at a trade fair in November that Myanmar expected to
double its output of natural gas in the next 10 years, largely from the Shwe
project.
Economist Joseph Stiglitz, a Nobel laureate for economics and former World Bank
head, suggested to Myanmar's leaders in a rare seminar with a foreign expert in
December 2009 that oil and gas revenues could, if used wisely, open up a new
era for the impoverished country. Sean Turnell, an Australian expert on
Myanmar's economy, has suggested that oil and gas revenues could be used to
shore up other parts of the economy, including initiatives that establish
credit systems for farmers. So far this foreign advice has fallen on deaf ears.
Oil and gas prices and revenues are a contentious issue in Myanmar. Rapidly
rising fuel prices were one of the chief factors that sparked the
anti-government street demonstrations in 2007 that later became known around
the world as the Buddhist monk-led "Saffron" revolution. As part of a recent
move to privatize many of the junta's business holdings, tycoon and junta
favorite Tay Za has moved to secure contracts for state-run gas stations, a
move that has apparently provoked anger in some Yangon business circles.
The government announced in February it would sell 256 gas stations to private
companies. Tay Za, who is the chairman of the recently formed Fuel Oil
Importers and Distributors Association (FOIDA) and already has the contract to
operate state-run stations in northern Myanmar, is well placed to buy the
stations. The vice chairman of the FOIDA is Aung Thet Mann, son of junta number
three and armed forces joint chief of staff General Thura Shwe Mann.
It is unlikely however that the privatizations will extend to the state-owned
MOGE and it remains unclear how the oil and gas operations will be operated
under the new government that will take over after elections late this year.
Analysts believe it is unlikely that the generals would allow a new minister to
drastically alter the current revenue arrangements. This will be a problem for
any new regime as it bids to manage more effectively - and hopefully
transparently - the economy.
Brian McCartan is a Bangkok-based freelance journalist. He may be reached
at brianpm@comcast.net.
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