SOCIAL PROJECTS BENEFIT PIPELINE VILLAGES

UNCLAS SECTION 01 OF 03 RANGOON 000668

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS; PACOM FOR FPA; TREASURY FOR OASIA:AJEWELL

E.O. 12958: N/A
TAGS: ECON ENRG SOCI PGOV BM
SUBJECT: SOCIAL PROJECTS BENEFIT PIPELINE VILLAGES

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1. (SBU) Summary: The controversial pipeline running from the
Yadana gas field in the Andaman Sea to Thailand is expected
to produce over $800 million in revenue this year for its
joint venture partners TOTAL, UNOCAL, PTTEP (the Thai
government petroleum company),and the Myanmar Oil and Gas
Enterprise (MOGE). While the GOB offers little to the
residents of the region, TOTAL and UNOCAL have tried to be
"socially responsible" by reforesting almost the entire
pipeline route and implementing successful agricultural,
educational, and health care projects among local villages.
The joint venture investors plan to offer $1.4 million to the
local Wildlife Conservation Society to develop a major
wildlife preserve in the area. End Summary.

A Profitable Pipeline
--------------


2. (SBU) On April 25, DCM and Econoff visited onshore
pipeline facilities in Tanintharyi Division, southern Burma,
that service the offshore Yadana gas field. The visit was at
the invitation of UNOCAL representative David Peters (Note:
Although merged with Chevron Texaco, UNOCAL retains its
original name in Burma to avoid the trouble of a complicated
and costly re-registration process. End note). The joint
investors in the Yadana natural gas field, located 225 miles
offshore, are TOTAL (31.24%),UNOCAL (28.26%),PTTEP (25.5%)
and MOGE (15%). While revenues from the pipeline tariff are
divided strictly according to percentage of ownership,
production revenues are divided according to a cost sharing
agreement that is based on a number of variables. This year,
Peters estimates that the Burmese regime will earn about 60%
of gross revenues, or over $480 million from the consortium's
approximately $810 million total revenues.


3. (SBU) TOTAL, as the consortium's operating partner,
manages the pipeline from its Pipeline Control Center,
located 5 miles from the coast, with 350 people employed on
shore and 382 on the offshore Yadana platform. Seven GOB
officials are also assigned to the on-shore facility,
primarily to facilitate coordination with MOGE and to
supervise local social programs. The pipeline currently
delivers approx. 620 million cubic feet daily (MCFD) of
natural gas to the Thai border, and 35-50 MCFD to a domestic
cement plant and a small gas turbine generation plant in
neighboring Mon State. PTTEP has a 30-year "take or pay"
contract, valid until 2028. The GOB is upgrading its own
narrow (18 cm.) pipeline, which feeds the old cement plant in
Bago Division, into a larger 32 cm. pipe that would bring gas
as far as Rangoon. Burma does not currently take its full
entitlement of 20% of production. Peters told us that the
GOB would most likely route any expanded domestic supply to
new industrial projects, rather than using it to address the
urgent needs of Burma's troubled electricity sector.


4. (U) The Burmese military, once an ominous presence in the
pipeline region, now maintains a low local profile. Locals
admitted that "bandits" remained a problem on the road north
to Moulmein, but said that roads south to Dawei were now
relatively secure. Most military camps along the pipeline
route were abandoned, with the only obvious troop presence on
the Thai border and at a few camps near the pipeline
right-of-way.

It Takes A Village
--------------


5. (SBU) The undersea Yadana pipeline comes onshore near
Kanbauk village, 35 miles north of Dawei township, and runs
40 km to the Thai border. The region is sparsely populated,
with 40,000 inhabitants, mostly ethnic Burmans and Mon, along

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with 2,200 Karen in the highlands areas closest to the Thai
border. The consortium spends $1.3 million per year in
ongoing expenses to support the social needs of 25 villages
located near the pipeline Right-of-Way. TOTAL pays the
employees of all social work projects directly, then bills
the other three partners for a share of expenses. Newly
replanted native vegetation covers the low hills on either
side of the pipeline. From 1997 to 2003, a
consortium-sponsored nursery project distributed 50,000 teak,
ironwood, acacia, and other saplings annually to rebuild the
area's forests.


6. (SBU) While the reforestation project helped make the
pipeline's path less visible, local residents wanted more
immediate returns from their planting efforts, so the
consortium's nursery switched to cash crops, distributing
175,000 seedlings in the past year. The most popular are
cashew and rubber trees, since the former products can be
easily stored, and villagers can tap rubber throughout the
year. The nursery also provides saplings for tropical fruit
trees, cocoa, and betel nuts, but those products have proven
hard to transport to distant markets.


7. (SBU) Many villagers, who previously worked on the
pipeline or in the region's shrinking tin mining industry,
are now successful farmers, according to the joint venture
nursery's director. The consortium supports a loan program
that offers up to K1.5 million (about $1000) at 1% interest
per month to set up new plantations. No borrower has
defaulted since the loan program began. The consortium has
also upgraded minor roads to improve access to
transportation, and villagers now sell produce to passengers
on buses plying the Dawei-Rangoon trail.


8. (U) The consortium also supports local efforts to raise
pigs, poultry, and cattle. The consortium runs breeding
centers and distributes livestock free of charge to local
villagers, who then commit to give back one or two offspring
from future litters. Veterinarians visit the farmers
regularly and offer training sessions. Other social programs
in the pipeline area include schools, educational training,
and a land compensation program.

Health and Habitats
--------------


9. (SBU) Emboffs also visited the 40-bed Kanbauk Hospital,
where the joint venture provided funds for renovations,
equipment, supplies and training. While the hospital was
very modest by international standards (the main operating
room was clean, but contained only a single light and a bed),
it was far better equipped than most in Burma. A new ward is
under construction, and the storeroom was well stocked with
medical supplies. The hospital's two doctors treat 15,000
outpatients and 1,200 inpatients per year. 20% of the clinic
patients come from beyond the immediate region, seeking
better care. The joint venture also pays ten midwives who
regularly travel between the district's 25 villages.


10. (SBU) According to the hospital director, public health
in the pipeline region has improved significantly. Infant
mortality has fallen from over half the national average in
1997 to one fifth the national average in 2003. Malaria
mortality declined from 9 deaths per 1000 cases to fewer than
1 per 1000 in the same time period. The number of deaths
from water- and food-born diseases fell from 4.4 per 1000
cases in 1997 to 0.2 in 2004. The clinic prominently
displayed recent public awareness campaign posters on Avian
Influenza, HIV/AIDS, and Dengue Fever.


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11. (U) The consortium plans to provide $1.4 million to
develop a major new wildlife conservation area in cooperation
with the Ministry of Forests and the local Wildlife
Conservation Society. The park runs along the Thai-Burma
border from south of Kyaunghwa in Mon State almost to Dawei.
Twenty forestry officials now patrol the sparsely populated
area and have reported sightings of wild elephants and
evidence of a small population of tigers. The Thai
government recently signed an MOU with the GOB to extend the
park's protection across the border.

Comment: A Narrow Pipeline
--------------


11. (SBU) Comment: The controversy abroad over TOTAL's and
UNOCAL's involvement in the Yadana pipeline project has never
died, and a new Czech documentary will give further notoriety
to allegations that the companies were complicit in the GOB's
use of forced labor during pipeline construction. TOTAL and
UNOCAL deny culpability, and prefer to focus attention on
their social programs, which offer free seedlings, livestock,
medicines, educational support and health care to 40,000
local residents. These residents in 25 villages have
definitely benefited. But the vast majority of Burmese
living elsewhere have not seen any benefits from the almost
$500 million flowing into regime coffers each year from
Yadana. End comment.
VILLAROSA