Government authorities in Shan state have begun a compensation scheme for locals forced off their land to make way for the highly lucrative, albeit controversial, trans-Burma Shwe gas pipeline that will cut through the state before entering China.

Up to 86 households in villages close to Namkham township near the China border have received the first batch of payments, according to the Shan Herald Agency for News, which reported that one acre of confiscated farmland near to the town could earn as much as $US18,500 in compensation. The figure appears an usually healthy one for Burma, but the cost for a number of closed factories and a severance package for redundant workers may be included.

The scheme is being mirrored over the border in China, locals claim, although Chinese authorities are offering substitute land as well as a four-figure sum.

The pipeline is key to China’s future energy needs, particularly its southwestern Yunnan province which has lagged behind the rest of the country in terms of development. Oil and gas uploaded in the town of Kyaukphyu on Burma’s western coast, and which are is to account for six percent of China’s total energy needs when the project comes online in 2013, is destined for a refinery in Kunming.

Consistent with the majority of major energy projects in Burma, huge controversy has surrounded the pipeline. The Shwe Gas Movement, which has campaigned against the project, estimates that around 15,000 people in 20 townships along the route will be directly affected. On Maday Island, where a ceremony was held amid great pomp to mark the start of construction in 2009, around 2,900 people have or will be evicted from their homes.

Resentment of the project is high among civilians: a report in March by EarthRights International (ERI) found that from a pool of 100 men and women interviewed clandestinely in Shan state, not a single one was in favour of the development.

South of Namkham lies the township of Hsipaw, also through which the pipeline will travel. Heavy fighting erupted in the region in March as Burmese troops attempted to drive out Shan rebels resisting the pipeline. Shortly after fighting ceased, trucks laden with pipeline parts were seen leaving the Chinese border town of Jegao towards Hsipaw.

China is desperate for the passage through Burma that the Shwe pipelines provide, given its traditional route for oil cargoes from Africa and the Middle East runs through the Straits of Malacca, a congested strip of water beneath Singapore that is heavily patrolled by US warships.

Its energy demands are rising at nine percent each year and it will soon exhaust its own oil supplies, meaning speedy construction of the project is crucial. In April Beijing offered the Burmese government $US6 million to build hospitals in towns along the pipeline route in return for Burmese authorities upping the pace on finishing the venture.