EVENTS & ISSUES

New Delhi, 30 January 2006     

MYANMAR GAS FIELDS

Has India Really lost to China?

By Syed Ali Mujtaba

Why has New Delhi not made much of hullabaloo about China getting the rights to lay the pipelines to exploit Arakan gas fields of Myanmar? Every one knows India took keen interest about piping the gas from the Arakans since its discovery in 2002. The ruling against it by the Myanmar’s military junta must have irked those in the mandarins of power in New Delhi. However, no murmur was heard about the deal either in official or unofficial India media. Was it a case of losing to China or there are some other reasons behind it?

Contrary to experts’ opinion that China has beaten India in the race of procuring Arakan gas, a realistic assessment suggests that it was New Delhi’s calibrated policy to let the proposal slip off, as laying gas pipeline to Arakans would be more of a liability than an asset for India.

For India to lay a pipeline for the exploration of the Arakan fields, a land route has to be taken either from Bangladesh or through its north-eastern States of Mizoram or Manipur. The talks on pipeline to Myanmar  via Bangladesh have failed because of a very high price quoted by Dhaka for its transit. With the elections round the corner and given the sensitivity of the issue, no political party in Bangladesh wants to open negotiations on this with India.  So to explore the Arakan gas fields India’s Bangladesh option became out of question. 

This leaves India with the second option to lay the pipeline through Mizoram or Manipur directly to Myanmar. However, when the cost effectiveness of both the routes was calculated, New Delhi found that none of the routes could be worth  consideration.

The other reason for India to back out was the volatile internal security situation in Arakan province. The province comprises the Rohingia Muslim population which is fighting discrimination of the Military rulers. This fight resulted in over 200,000 of them fleeing to Bangladesh. This issue was resolved after a decade of Burma- Bangladesh negotiations with Rohingas being repatriated back to the Arakans.

However, the actual problem remains unresolved and that continues to be the cause of insurgency in that region. Similarly, India’s north-east region too remains infested with insurgency. Any such pipeline would be susceptible to insurgent action both from Myanmar and India. New Delhi fully knowing the ground reality may not have liked to take any risk.

The other reason could be American factor that may have played a role in India overlooking the idea of laying the pipelines to Arakans. Even if India may have got the rights, the American ban, which exists for trade with Myanmar, may have come in its way. The economics of Indo-US relationship over-weighed the consideration for India to lay pipeline to Burma. It seems India does not want to sour its relationship with the US at any cost.

So the best option for New Delhi is to buy gas tankers. These are cheap, more secure, cost-effective and may not incur American sanctions. In fact, such ventures may attract foreign investment. That could be the main reason why India let go the gas pipelines proposal that is being grabbed by China.

This does not mean that India has lost the race for the Myanmar gas. With the demand for gas in the fertilizer and the industrial sectors in the eastern India alone is believed to be 13-15 million cubic meters per day, India can hardly shut its eye at the gas reservoirs in its neighbour. 

India is still keen on AI block gas and has prepared Gas Pricing approach paper for negotiations with the military rulers. India's ONGC Videsh Ltd. (OVL) and GAIL (India) Ltd are in a joint venture with block operator Daewoo and Korea Gas for exploration and production of gas of the AI block. The Indian combine has 30 per cent, the Daewoo 60 per cent and Korea Gas the remaining 10 per cent.

India's pricing formulation pegs the price of $3.3 per mmBtu (million metric British thermal unit) with the ceiling at Brent price of $60 per barrel. The floor can be set at the Brent price of $20 per barrel and that comes to $2.05 per mmBtu.  Based on this calculation, India can procure Myanmar gas at $3.1-3.5 per mmBtu at the well-head price. The gas when delivered in to the Indian market would cost $5.1325 per mmBtu.

India’s proposed pricing profile is done in line with well-head price profile that Myanmar has for its export to Thailand. In deciding the pricing approach, New Delhi has given necessary consideration to the Indian market affordability under a "realistic and optimal supply scenario. At what rate the deal would finally be made is yet to be worked out. The general impression is that pricing is done to keep some negotiation margins at the final agreed price mechanism that may somewhat be higher to the initial offer. All this indicates that India’s hunt for the gas from Myanmar is still on.---INFA