Identifier
Created
Classification
Origin
07RANGOON706
2007-08-02 11:37:00
CONFIDENTIAL
Embassy Rangoon
Cable title:  

WILL CHINA OR THE U.S. DEVELOP BURMA'S OIL AND

Tags:  ECON ENRG PGOV EPET BM 
pdf how-to read a cable
VZCZCXRO9195
OO RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGO #0706/01 2141137
ZNY CCCCC ZZH
O 021137Z AUG 07
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6299
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1470
RUEHBY/AMEMBASSY CANBERRA 0397
RUEHKA/AMEMBASSY DHAKA 4570
RUEHLO/AMEMBASSY LONDON 1967
RUEHNE/AMEMBASSY NEW DELHI 3937
RUEHUL/AMEMBASSY SEOUL 7491
RUEHTC/AMEMBASSY THE HAGUE 0631
RUEHKO/AMEMBASSY TOKYO 5045
RUEHCN/AMCONSUL CHENGDU 1156
RUDKIA/AMCONSUL CHIANG MAI 1024
RUEHCI/AMCONSUL KOLKATA 0019
RUEATRS/DEPT OF TREASURY WASHDC
RUEHGV/USMISSION GENEVA 3197
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUCNDT/USMISSION USUN NEW YORK 0843
RUEHBS/USEU BRUSSELS
C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 000706 

SIPDIS

SIPDIS

STATE FOR EAP/MLS; INR/EAP; OES FOR JMIOTKE AND ACOVINGTON;
EAP FOR JYAMAMOTO; EEB FOR TSAEGER
PACOM FOR FPA
TREASURY FOR OASIA:SCHUN

E.O. 12958: DECL: 09/21/2016
TAGS: ECON ENRG PGOV EPET BM
SUBJECT: WILL CHINA OR THE U.S. DEVELOP BURMA'S OIL AND
GAS?

REF: A. A) RANGOON 645 - KEY REGIME CRONY LIKELY TO
BUILD DEEP SEA PORT

B. B) RANGOON 600 - SHWE GAS GOES TO CHINA MAYBE

C. C) RANGOON 361 - MICHAEL MOE MYINT LAYS LOW AND
PROFITS

D. D) RANGOON 313 -BURMA'S OFFSHORE WATERS BECOME
MORE CROWDED

RANGOON 00000706 001.2 OF 003


Classified By: Economic Officer Samantha A. Carl-Yoder for Reasons 1.4
(b,d)

C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 000706

SIPDIS

SIPDIS

STATE FOR EAP/MLS; INR/EAP; OES FOR JMIOTKE AND ACOVINGTON;
EAP FOR JYAMAMOTO; EEB FOR TSAEGER
PACOM FOR FPA
TREASURY FOR OASIA:SCHUN

E.O. 12958: DECL: 09/21/2016
TAGS: ECON ENRG PGOV EPET BM
SUBJECT: WILL CHINA OR THE U.S. DEVELOP BURMA'S OIL AND
GAS?

REF: A. A) RANGOON 645 - KEY REGIME CRONY LIKELY TO
BUILD DEEP SEA PORT

B. B) RANGOON 600 - SHWE GAS GOES TO CHINA MAYBE

C. C) RANGOON 361 - MICHAEL MOE MYINT LAYS LOW AND
PROFITS

D. D) RANGOON 313 -BURMA'S OFFSHORE WATERS BECOME
MORE CROWDED

RANGOON 00000706 001.2 OF 003


Classified By: Economic Officer Samantha A. Carl-Yoder for Reasons 1.4
(b,d)


1. (C) Summary: Well-connected businessman Moe Myint, who
is heavily involved in the Burmese oil and gas sector,
emphatically denies rumors that the GOB has an agreement to
sell Shwe gas to the Chinese. Moe Myint claims the Korean
company Daewoo has rights to develop the Shwe gas field and
refuses to sell to the Chinese, instead looking to deal to
the highest bidder. The Chinese, however, refuse to be
shunted and are pressuring the GOB for the rights to build a
deep sea port in Kyauk Pyu and a dual pipeline connecting to
Yunan Province. The GOB recently opened bids for several
deep sea blocks in the Bay of Bengal, looking for experienced
international companies' investment. Moe Myint claims the
GOB has set no timeframe for closing the bidding process, as
it hopes for access to the superior deep sea drilling
technology of American companies to develop the fields and,
according to Moe Myint, believes that if it holds out, U.S.
sanctions would be lifted when a new Administration takes
power after the 2008 elections. End Summary.

Shwe Gas TyQa? Koreans Stand in the Way
--------------


2. (C) In a meeting with Econoff on August 1, Moe Myint, aka
Michael, discussed the fierce competition in Burma's oil and
gas sector. The Chinese, he noted, are increasingly
concerned about energy security and hope to lock up imports
of natural gas from Burma as a way to decrease dependence on
the Middle East. Although Secretary-1 Thein Sein allegedly

told the Chinese in June that they would receive exports of
Shwe gas, the GOB has not yet officially confirmed the
decision (Ref B). Moe Myint affirmed that because Korean
company Daewoo holds a 25-year concession to develop and
produce gas from blocks A-1 and A-3, where Shwe gas is
located, it must also agree to sell the natural gas to China.
Daewoo, interested in maximizing its profits, is not willing
to sell the gas to China, but would rather deal with India or
Thailand, which will pay a higher price per barrel.


3. (C) Daewoo is also actively exploring both blocks for
additional gas reserves, in the hope that if more natural gas
is found (at least 6 trillion cubic feet),it can build a
liquefied natural gas (LNG) plant. An LNG plant would enable
Daewoo to sell the gas at higher prices to a larger market.
This puts the GOB in a difficult position, Moe Myint
observed, as the GOB believes an LNG plant in Burmese waters
would bring it higher profits. However, in order to maintain
strong relations with China, the GOB would have to sell Shwe
gas at a price lower than market value. Thus, he noted, "the
generals are between a rock and a hard place."


4. (C) Desperate to obtain Shwe gas, China National
Petroleum Corporation (CNPC) earlier this year inked a
contract to explore deepwater blocks AD-1, AD-6 and AD-8,
which cover 10,000 square kilometers and border the Shwe
fields to the north, south and west (Ref D). This deal, Moe
Myint said, was not completely above-board. A Thai company

RANGOON 00000706 002.2 OF 003


outbid all competitors, but the GOB refused to accept the
Thai offer. Instead, the GOB immediately met with Chinese
officials, offering the blocks to CNPC if the company could
match the Thai terms. There was one catch, however -- CNPC
cannot do a data study on the fields, but instead must start
exploration once the rainy season ends. Moe Myint discerned
that CNPC should start exploration this October.

Waiting for Yankee Ingenuity
--------------


5. (C) Although the GOB has opened bids for seven deep
water blocks in the Bay of Bengal, it has yet to set a
timeframe for the closing of the bidding process. Normally
the GOB establishes a 3-6 month bidding cycle, reviews the
applications, and negotiates the commercial terms with the
two companies that submitted the best bids before making a
decision. These blocks will be more difficult to explore and
develop because of their depth, Moe Myint said. He believes
the GOB will not close the bid until after U.S. presidential
elections in 2008, in hopes that a new Administration would
lift investment sanctions. The GOB wants American firms to
develop these gas fields because of their superior deep sea
drilling technology, Moe Myint explained. The GOB hopes that
sanctions will be repealed after the elections, inundating
Burma with new investment.

The Race to Build Pipelines and Ports
--------------


6. (C) The Chinese continue to push the GOB for permission
to start building two pipelines -- one for oil and one for
gas -- from the Bay of Bengal to Yunan Province. The GOB and
GOC signed a memorandum of understanding in June for pipeline
construction, but Moe Myint explained that "an MOU is not a
contract. The Chinese need the pipelines to import Shwe Gas,
and the Chinese fear that the longer construction is delayed,
the more likely the GOB is to sell the gas to another
bidder." If CNPC finds gas reserves in the blocks
surrounding the Shwe fields, Moe Myint explained, the GOB
will grant permission for pipeline construction.


7. (C) Discussing the possibility of a deep sea port Kyauk
Phyu (Ref A),Moe Myint refuted news reports that Asia World
(run by crony Steven Law) has been granted the construction
contract. The GOB is eager to establish the port, but is
afraid that if the Chinese are involved, the GOB will lose
control. Ideally, Moe Myint said, the GOB wants to attract a
large international port operator, such as Hong Kong's
Hutchison, to build and run the port, but large port
operators are unwilling to work in Burma due to exchange rate
problems, the inability to expatriate dollars, and unclear
and conflicting laws.


8. (C) Moe Myint's Singapore-based company, MPRL, which has
both onshore and offshore gas operations, will not bid for
the port contract. He asserted, however, that if his company
were to submit a bid, it would win over Asia World, because
Asia World is fully supported by the Chinese and "the GOB is
afraid of too much Chinese influence in the oil and gas
sector."

Comment
--------------


9. (C) As the regime opens its natural resources to foreign
investment, they are trying to play a careful balancing act.

RANGOON 00000706 003.2 OF 003


As much as the generals want Chinese political support -- and
their UNSC veto -- they are paying a high price at home with
Chinese penetration of almost every economic sector. The GOB
has long used U.S. economic sanctions as the scapegoat for
its inept economic management and dismal investment climate.
Their hope that the 2008 elections would change the solid
bipartisan support for Burma policy shows how little they
understand U.S. politics. If the regime genuinely needs
American technology to fully exploit its rich off-shore gas
fields, then we have more leverage to push the GOB to take
the necessary steps for democratic reform that could
eventually lead to lifting the sanctions.
STOLTZ