China oil refinery to process Shwe imports

A new oil refinery is to be constructed at the end of the trans-Burma Shwe gas and oil pipeline near the capital of China’s Yunnan state, Kunming.

The new oil refinery will be located in Anning, 30 kilometres west of Kunming. China National Petroleum Corporation (CNPC) will begin acquiring the land next month and start construction in October. It will reportedly be of medium size with a capacity of around 200,000 barrels of oil a day; China’s largest refinery, in Zhenhai, refines around 462,000 barrels a day.

The pipeline will carry both Burmese gas and much of China’s oil imports from the Middle East and Africa, which will be offloaded close to Burma’s western coast on the Bay of Begal.

The pipeline will carry an estimated 12 million metric tons of crude oil a year into China, representing roughly six percent of China’s total imports according to figures last year – an equivalent amount to that imported by China from Sudan, its fifth largest supplier.

Construction of the refinery ironically comes as China looks to help build up to seven refineries in its other client petro-state, Iran, with investments set to total around US$40 billion. Like Burma, Iran is under Western sanctions, but while its major buyers remain Japan, Italy and some other Western nations, Tehran cannot sell its oil to the US.

Moreover, both nations are severely short of refining capabilities and are arguably becoming increasingly reliant upon patronage, both political and economic, from Beijing.

The intense Western pressure on Iran has lead to a string of high-profile withdrawals from the vast South Pars oil field in the Persian Gulf.

One of them is French oil giant, TOTAL, who pulled out of Iran because of, among other things, hysteria surrounding Iran’s nuclear capabilities. Despite similar fears about Burma’s nuclear ambitions, both Total and US giant Chevron continue to operate in Burma, where Western sanctions don’t force the withdrawal of companies who were there before the embargo was enacted.

Total has recently seen profits jump 72 percent in the second quarter of the year, with the company’s chief, Christophe de Margerie, saying that “Total faces the second half [of the year] confident in its outlook and strategy for growth”.

The French giant has remained defiant in the face of persistent criticism for its Burma operations, including condemnations from rights groups such as EarthRights International (ERI) that the investments that Total, Chevron and Thai PTT PLC made in the Yadana and Yetagun oil fields would have been the only way that one of Asia’s poorest countries could afford both a nascent nuclear program and a burgeoning military might.

A new consignment of advanced Russian MiG 29 fighter jets was bought by Burma for around US$570 million, which has acquired assorted other heavy and lighter armaments from nations like China, despite facing no external military threat.

This has happened in a country with one of the worst healthcare systems in the world, spending as it does roughly US$1.50 per person per year on healthcare and with an average GDP per person of US$200.

The US$3.4 billion oil refining facility will be a major plank in China’s search for energy security as it looks set to supply growing southwestern Chinese cities, such as Chongqing and Nanning, as well as Yunnan province. It could also ultimately supply Burma with refined petroleum products, for whilst its southern neighbour is an exporter of gas, its petrol refining capabilities have deteriorated through lack of investment since independence in 1948.

Iran meanwhile is undoubtedly a more lucrative supplier of China’s than Burma: it has one of the world’s largest proven oil reserves, at 137.6 billion barrels or 10 percent of the world’s estimated total. It is the largest in the OPEC cartel and exports 2.4 million barrels per day.

Planners in Burma may be ruing the fact that China has not had the ‘generosity’ to help the country with its refining capabilities. But then perhaps China, unlike Total, would rather place such investments in a country with a supposedly democratically elected government, like Iran.

On the other hand, Western concerns about nuclear technology may reflect Iran’s proximity to their prized energy assets in the Middle East, in client states such as Saudi Arabia and Iraq, and nuclear-armed Israel.

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