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Accessing energy
Prospects of Myanmar gas for India

As a growing power, India requires energy. Yet, it is not self-sufficient in energy security and is highly dependent on oil and gas imports from various energy basins. For this, India has begun looking eastwards, eyeing the oil and gas reserves of Myanmar.

Myanmar, being geographically close and economically attractive is a viable answer to India’s energy problems.

However, seeing the attraction that Myanmar has become following lifting of sanctions by the UN along with its strategic location as a coastal state off the resource laden Bay of Bengal, the geopolitics of muscle flexing has taken over.

In addition, due to its large oil and gas reserves it is the hotbed of resource diplomacy, especially for the two regional superpowers-India and China.

The two countries are involving themselves in vital energy and infrastructure projects in the region with an effort to check-mate the other for the purpose of resource control.

It is an important and enduring energy security game as it is estimated that by 2020, India and China alone will account for 50 per cent of the world’s energy resources.

However, the energy and geopolitical power game seems to show the trend in favour of China. it has almost completed an 800 kilometres long gas pipeline capable of transporting 12 billion cubic metres of natural gas annually from western Myanmar, along with an oil pipeline to transport crude oil from the Middle East to China (hence avoiding the US controlled Malacca Strait).

The Chinese seemed to have secured their energy needs as well as an opening for the landlocked south western provinces. In addition, India stands at a disadvantage because Myanmar has explicitly declared eagerness to do resource related business with China more than India.

As far as energy goes, India’s image deteriorated in the eyes of Myanmar when India failed to counter the trouble created by Bangladesh for a possible Myanmar-Bangladesh-India pipeline.

Hence, Bangladesh considerably dented India’s aspirations for being a favourable export country for Myanmar’s oil and natural gas.

In such a case, India’s solution lies in creating a pragmatic energy security policy, which not only encompasses Bangladesh’s untapped oil and gas reserves for possible exploration, but also that of Myanmar.

Wooing Bangladesh for the purpose of investment, which now realizes the importance of further oil exploration, can be a logical counter-measure to China’s advancement in the region, while constantly wooing Myanmar.

Challenges for India

Indian Commerce and Industry Minister Anand Sharma recently led a delegation to Myanmar to revive the Myanmar-India gas pipeline project. The possibility of setting up a pipeline along the land route, by-passing Bangladesh is expected to benefit the underdeveloped regions of both northern Myanmar and north-eastern states of India.

This was an effort to revive an old proposal to set up a gas pipeline from Myanmar’s western cost to Eastern India through Bangladesh. The proposal for such a pipeline was put forward in 2004, but it did not materialize because Bangladesh refused to cooperate since its demands were not met.

Although it is yet to be officially confirmed, the outcome of such a project, if implemented will significantly alter the geopolitical landscape of the region and add strategic value to the already implemented infrastructure and transport projects in the larger East Asian region.

Technically speaking, although India’s energy security policies have often been criticized for their incoherence and lack of planning; it has had its fair share of limitations. Its energy policy has the underlying principles of diversification of energy and climate change mitigation.

Because it is evident that energy self-sufficiency is a far reaching goal for India, diversification is important. It was also realized by India that it had to avoid an over reliance for oil from the Middle-East following the oil crisis in the 70’s.

In addition, because it is a rising power with increasing energy demands, it is also under pressure from the International community to contain greenhouse emissions. In this regard, its energy policies need to be tackled pragmatically.

The policy of gas imports thus led India to indulge in the options of several multilateral gas pipelines, such as the Iran-Pakistan-India pipeline, Turkmenistan-Afghanistan-India pipeline as well as the Myanmar-Bangladesh-India pipeline.

Also, natural gas has become an essential component for India’s energy mix as it is commensurate with India’s energy policy requirements of cost effectiveness and limited effect on climate. Its demand in India has grown at the rate of 6 per cent per year.

At the level of energy diplomacy, however, the pipeline from Myanmar could be an important diplomatic counter measure to Chinese influence in Myanmar. When the government of Myanmar withdrew the status of ‘preferential buyer’ from India, declaring its intent to sell to the Chinese instead, India suffered a huge diplomatic blow.

Myanmar took this step despite the fact that Indian PSU’S GAIL and ONGC have considerable holdings in the offshore field of the Shwe Project in Myanmar.

India also tried to woo Myanmar by adding a US $20 million ‘soft credit’ deal and a proposed construction of a power plant in Myanmar.

However, it seems that Chinese international support for Myanmar (Beijing use of its Veto for Myanmar’s human rights record at the UNSC), along with development projects made it the clear winner.

Therefore, India will and must make more overt efforts to establish a stronger presence in the face of Chinese diplomatic success in Myanmar.

Secondly, the economic implications for India are significant. India has reported reduction in its own offshore gas reserves. The Myanmar gas fields offer a strong replacement possibility. The pipeline is destined for the North-Eastern part of India, which is one of the most power-hungry parts of the country.

Prospects

If the pipeline project does go ahead as envisaged by India, a development cum security nexus can emerge for the benefit of both the countries. Energy sharing would result in development and greater cooperation of cross border security issues and counter insurgency measures.

The pipeline also has the capability to increase integration and further military and economic partnership. Albeit this would be the requirement once the trilateral highway between India, Myanmar and Thailand is complete. But energy security can prove to be a different ball game altogether.

Other prospects for India on account of such a pipeline project include a well secured energy security asset, which is geographically close and an important strategic asset.

Myanmar has become an attraction since the UN has lifted off the sanctions made on it and now, countries are flocking to Myanmar for investment purposed and albeit, geo-strategic purposes as well.

Oil and gas exploration in Myanmar is going to a highly lucrative business in times to come. In addition, the country is also supposed to be rich in hydrocarbons. Lastly, Myanmar is a much easier pit stop compared to the overcrowded Straits of Malacca.

However, as many prospects as India may have on account of such a project, it has considerable challenges to face with its negotiations with three major stakeholders and game changers-Myanmar, Bangladesh and China.

India and Myanmar relate to each other as immediate neighbours, linked by geography, history and age-old ties of religion, culture and interaction at various levels. However, while the relationship between the two has grown in depth in the past ten years, it is still not without vulnerable spots.

When the two countries were given independence, India acknowledged Myanmar as a close friend and partner and vice-versa. India gave military and economic aid to its government.

However, following a military coup in 1962, the Indo-Myanmar relations severed as the nationalization of private businesses led to many Indian’s fleeing Myanmar.

India however, never ignored the strategic significance of Myanmar, especially in light of China, who also gave Myanmar the importance it deserves. Myanmar is considered the link between South and South-East Asia.

Therefore, when the military took over, India pushed hard for democracy which alienated the military government in Myanmar.

Instead, Myanmar naturally inclined towards China then, which was a source of low interest loans and developmental projects. India was thus sidelined and China became Myanmar’s friend of choice.

China also hugely benefited from the failure of the Myanmar-Bangladesh-India pipeline project.  China is obviously planning to have strategic access to the Bay of Bengal multi-modally through Myanmar.

But, commensurate with its knowledge of its huge oil and gas reserves, India had to be friends with Myanmar, even if it meant alienating its cause for democracy and befriending the military establishment.

India also needed to synchronise its anti-insurgency efforts in the pores North-Eastern states that border Myanmar, for which it needed its help.

However, India also declared that the democratic efforts in Myanmar were not making much progress to restore democracy which did not bode well with opposition leaders such as Suu Kyi. This made apparent its personal interest in Myanmar and Myanmar became a cautious friend to India.

However, the reasons why India befriended the Military establishment eventually backfired when elections were held after 4 decades in Myanmar.

India’s pursuit in Myanmar was short-sighted and limited to the personal interests of securing energy security from Myanmar’s oil, gas and hydrocarbon reserves, of connecting the land-locked North-Eastern states to South-East Asia through an economic corridor, and check-mating China in the Bay of Bengal. India suffered a diplomatic blow.

However, India was quick to make amends. India embarked upon trade and economic cooperation with Myanmar and wooed both military and democratic leaders alike.

India wants to ensure that it does not lose out on investment opportunities in the strategic state of Myanmar as there are many opportunities in that country.

However, Myanmar is aware of its importance to powers like USA, India and China and therefore, India cannot be completely sure how the great game will play out eventually.

Problem of Bangladesh

Following the initial excitement about the Myanmar-Bangladesh-India pipeline project, Indian oil and gas companies like ONGC and GAIL invested significantly in Myanmar’s oil and hydrocarbon’s sector.

Following negotiations, the expected cost of the project stood at US $1 billion, to be borne mainly by India, whereas Bangladesh would receive US $125 million as annual fees transit. While gas would have been mostly been fed to the Indian market, Bangladesh would have also been able to make use of gas imports from the pipeline if its own indigenous sources became scarce.

However, the negotiations between the two countries failed in 2005 when additional conditions laid down by Bangladesh were unacceptable to India.

Bangladesh wanted  incentives such as importing hydroelectricity from Bhutan and the reduction in tariff barriers and its trade deficit. India refused the demands for two reasons.

First, it was strategically unviable for the Indian government to accept Bangladesh’s additional conditions fearing that this would set a precedent in all future bilateral negotiations. Second, India at the time was also exploring other options.

At the same time, Myanmar entered into an oil and gas pipeline with China. This created a panic because the natural gas reserves in Myanmar are limited, and Myanmar is not in a position to accommodate the needs of both China and the Indo-Bangladesh partnership.

Therefore the Myanmar-China pipeline project has prevented renewed Indo-Bangladesh energy security collaboration from bearing fruit ever since.

One of the reasons why the 2005 negotiations for the pipeline between India and Bangladesh broke down was the divergent energy policies of the two countries. Some also blames the Islamist ideology of the Bangladeshi government who propagated a strong Anti-India sentiment which blocked any policies beneficial to India.

India’s energy policy at that time necessitated the need for a pipeline because it was able to recognize the imperative need of gas imports to meet its domestic demand.

Bangladesh on the other hand, did not realize the resulting crisis from depletion of its gas reserves which can also threaten regional security because it believed it ‘floated on gases’.

By 2005 it was evident to Bangladesh that the indigenous resources would not meet the high demands, and it was compelled to revisit its energy policy. India suffered the same problem. India even entered into a deal with Pakistan, Iran and Turkmenistan for pipeline projects.

Bangladesh also emphasized on new investment in domestic energy later. The shortage in Bangladesh highlighted the problem of lack of funds for further exploration as well.

The inability of the countries to align their energy policies for the sake of the Myanmar-Bangladesh- India pipeline project led to its cancellation.

However, recent changes in the energy scenario in Bangladesh have enabled greater convergence in the energy policies of the two countries, which could lead to the revival of the pipeline project.

By mid-2007, Bangladesh expressed its intent to re-negotiate the pipeline project. Now, it will be the long term vision of the energy security policies of the two countries that will determine the success or failure of the project.

No doubt that such a project is a challenge to India to implement and safeguard all its interests through a comprehensive and strategic policy. But its immense opportunities cannot be overstated.

India has to develop an energy policy that truly caters to its energy demands in a way that its political and national interests are not threatened in any manner.

For this, it must negotiate hard with Bangladesh, who is realizing the importance of such a project. As far as Myanmar is considered, India must boost economic and political relations with the country so as to change the tide of energy investments in favour of India.