Identifier
Created
Classification
Origin
08RANGOON328
2008-05-06 11:04:00
CONFIDENTIAL
Embassy Rangoon
Cable title:  

BURMA: FUEL SHORTAGE IMMINENT

Tags:  ECON ENRG PGOV EPET SENV BM 
pdf how-to read a cable
VZCZCXRO6295
OO RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGO #0328/01 1271104
ZNY CCCCC ZZH
O 061104Z MAY 08
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7499
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHBY/AMEMBASSY CANBERRA 1129
RUEHBJ/AMEMBASSY BEIJING 1849
RUEHKA/AMEMBASSY DHAKA 4857
RUEHNE/AMEMBASSY NEW DELHI 4676
RUEHUL/AMEMBASSY SEOUL 8217
RUEHKO/AMEMBASSY TOKYO 5779
RUEHCN/AMCONSUL CHENGDU 1451
RUEHCHI/AMCONSUL CHIANG MAI 1555
RUEHCI/AMCONSUL KOLKATA 0309
RUEAIIA/CIA WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEKJCS/DIA WASHDC
RUEHGV/USMISSION GENEVA 3648
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUCNDT/USMISSION USUN NEW YORK 1534
RUEHBS/USEU BRUSSELS
C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 000328 

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: 05/06/2018
TAGS: ECON ENRG PGOV EPET SENV BM
SUBJECT: BURMA: FUEL SHORTAGE IMMINENT

REF: A. RANGOON 323

B. RANGOON 310

C. 07 RANGOON 1035

RANGOON 00000328 001.2 OF 003


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

C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 000328

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: 05/06/2018
TAGS: ECON ENRG PGOV EPET SENV BM
SUBJECT: BURMA: FUEL SHORTAGE IMMINENT

REF: A. RANGOON 323

B. RANGOON 310

C. 07 RANGOON 1035

RANGOON 00000328 001.2 OF 003


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


1. (C) Summary. Burma will soon face a shortage of fuel,
Petronas Cargali Production Manager Bob Thomas told us.
Burma imports approximately 110 million barrels of crude oil
a year from Malaysia - roughly three-quarters of domestic
need - which it refines into diesel and petrol. However,
crude oil imports are currently at a standstill for three
reasons, Thomas noted. First, the cyclone sunk approximately
80 ships in the Rangoon River, cutting off access to the
Rangoon Port and oil refinery. The jetties surrounding the
port and refinery are also damaged, making it impossible for
ships to dock and unload cargo. Without international
assistance, it could take months to remove the debris and
repair the jetties. Second, the oil refinery was damaged by
the storm and the GOB may not be able to refine crude oil
into diesel and petrol. Third, Malaysian-owned Petronas,
which sells crude oil to the GOB, is unlikely to consider
shipping additional oil to Burma until the GOB pays off its
considerable debt, estimated to be in the tens of millions of
dollars. The GOB has not publicized the quantities of its
stockpiles of diesel and petrol. Businesses have begun
making some effort to conserve fuel in Rangoon. A fuel
shortage will make it difficult for the GOB to undertake
recovery activities, will further drive up the cost of food
and water, and may add to potential political unrest. End
Summary.

Reliance on Imports of Crude Oil
--------------


2. (C) Although Burma successfully produces gas from its
offshore fields, its onshore oil field production is severely
limited. Oil fields produce approximately 10,000 barrels of
oil a day, far less than domestic demand of 40,000 barrels a
day (Ref C). The GOB denies that it imports crude oil,

although industry insiders confirm that the regime imports it
from Malaysia, through its contract with Malaysian
government-owned Petronas. Bob Thomas, Production Manager at
Petronas Cargali, told us that the GOB imported more than 110
million barrels of crude oil from Petronas in 2007. (Note:
Petronas Cargali, while a member of the Petronas group of
companies, is technically a separate entity that manages the
Yetagun offshore gas field. End Note.)

Port and Refinery Facilities Blocked
--------------


3. (C) Thomas told us that Burma will soon face a severe
shortage of fuel, including diesel and petrol - this shortage
will affect Burma's ability to recover from Cyclone Nargis
(Ref B). Economic contacts confirm that the cyclone, with
its 120-mile per hour winds, sunk approximately 80 registered
ships in Rangoon River. The sunken ships and debris
effectively block any ships from reaching either the Rangoon
Port or the oil refinery, both of which are more than 20
miles from the mouth of river. According to Thomas, the GOB
normally clears sunken ships from the river by sending in a
dive crew, which uses saws and machetes to cut the ships into
pieces. This can take up to six months for one ship, he
stated. The GOB lacks the technology to raise the 80 ships
and remove them, and would have to depend on international
assistance to dredge the river, he opined. The GOB has not

RANGOON 00000328 002.2 OF 003


acknowledged that access to the port is a problem, nor has it
requested any assistance in dredging the Rangoon River.
Additionally, Thomas noted that even if the ships could enter
the Rangoon River, the cyclone destroyed all the jetties,
making it impossible for any ships to dock at either the port
or the refinery.


4. (C) Lack of access to the oil refinery is just part of
the problem, he continued. The cyclone damaged the refinery,
which was built by the British in the 1920s; however, the GOB
has not commented on whether it can still refine crude oil.
Thomas noted that the GOB on May 5 declined to purchase
condensate from Petronas Cargali, which it mixes with crude
oil to make petroleum and diesel. Thomas doubted the GOB had
enough stocks of condensate, since the last sale was two
months ago, and opined that the reason it did not take the
condensate stock was because it could not actually refine the
crude oil.


5. (C) The GOB has a larger problem on hand, Thomas noted.
It has not paid Malaysian-owned Petronas for crude oil in at
least six months, owing the company millions of dollars.
Thomas could not cite the exact figure, but opined that since
the Petronas CEO (who rarely travels, particularly to Burma)
visited Nay Pyi Taw in March to discuss lack of payment with
the senior generals, the figure must be quite high. Until
the GOB makes an effort to pay off its debt to Petronas, the
company is unlikely to bring in additional crude oil, he
explained. Petronas may change its mind, depending on
discussions between the Burmese and Malaysian Governments.
This could take time, he explained, and Burma may face a fuel
shortage in the near future, unless it can pay part of its
bill, quickly dredge the river, and repair the refinery.

Supplies of Fuel Unknown
--------------


6. (C) Because Burma produces some crude oil domestically,
the GOB will be able to refine small amounts of diesel and
petrol, Thomas acknowledged. The Mann Refinery, located in
Chauk (south of Mandalay in Magwe Division),is still
operational, although its refining capabilities are quite
low, he told us. The GOB has not publicly stated how much
petrol and diesel it has in reserve. He suggested that the
USG use satellite imagery to identify the fuel tanks and
estimate how much the GOB could have in reserve.


7. (C) During the past two days, we have seen few efforts
being made throughout Rangoon to conserve fuel. With power
lines down, people and businesses depend solely upon
diesel-powered generators for electricity. Many hotels are
running on generators 24-hours a day and the largest hotel in
Rangoon continues to operate its night club, gym, and spa
rather than shutting operations to conserve fuel. Some
hotels and apartments have begun to ration its use of fuel,
cutting off the power for up to 12 hours a day and stopping
non-essential services.


8. (SBU) Black market prices of fuel continue to increase
around Rangoon, contacts tell us. Yesterday, petrol sold for
8,000 kyat ($7.20) a gallon and diesel sold for 10,000 kyat
($9.00) a gallon (Ref A). Today, prices jumped up more - one
gallon of petrol cost 11,000 kyat ($10.00) and diesel cost up
to 16,000 kyat ($14.54) a gallon in some areas. Throughout
the city, people wait for hours in long queues to fill up
their gas tanks. Some people use the gas to power their
taxis, charging fares that are approximately 400 percent
higher than pre-cyclone levels. However, many purchase the

RANGOON 00000328 003.2 OF 003


gas to resell on the black market, allowing them to earn some
money they can use to buy food and supplies.

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


9. (C) A shortage of fuel will have long-term and widespread
affects on all sectors of Burma's economy. As the black
market rates of fuel increase, transportation and shipping
costs also increase, which affect both the cost and
availability of food in local markets. Additionally, without
fuel, the GOB will be unable to supply water from the
reservoirs to those in need and the Burmese will be unable to
use generators to pump whatever water is available to their
homes. Lack of fuel will mean lack of water and worsening
health and sanitary conditions. The Burmese are hungry,
thirsty, and tired of paying higher prices because of the
government's inability to manage the situation or prepare for
the cyclone. There is only so much the people can take.
Further fuel shortages could add to potential political
unrest.
VILLAROSA