PETROLEUM PRODUCTION DESTROYING BURMA'S ECOSYSTEMS

C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 000037

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: 01/17/2018
TAGS: SENV ECON ENRG PGOV EPET BM
SUBJECT: PETROLEUM PRODUCTION DESTROYING BURMA'S ECOSYSTEMS

REF: A. RANGOON 35


B. 07 RANGOON 1035

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


1. (C) Summary. The development of new and existing onshore
and offshore oil and gas wells continues to inflict grave
damage on Burma's environment. Local NGOs report that
companies do not take precautions when disposing of the toxic
byproducts of drilling, which may contain dangerous levels of
mercury. One local Burmese company admitted that it just
dumps toxic mud in the surrounding area, often near villages.
Heavy equipment and seismic surveys used in oil and gas
production cause soil erosion, destroy natural habitats for
land and marine species, and contaminate water and land
sources. The Burmese Government does little to promote
environmental protection. It neither requires oil and gas
companies to conduct environment impact assessments nor
encourages them to file environmental plans with appropriate
Ministry offices. Further development of oil and gas wells
in Burma will contribute to Burma's deteriorating environment
and possibly endanger the health of those living in the
surrounding areas. End Summary.

Lack of Environmental Regulations
--------------


2. (C) Although Burma has one of the world's most diverse
ecosystems, the Burmese Government does little to protect the
environment. Companies that invest in development projects
are not required to conduct environment impact assessments
(EIAs),nor must they ensure that their projects do not
destroy natural habitats (Ref A). According to local
environmental NGOs, investors in the extractive industries,
particularly oil and gas and mining, are among the worst,
digging and drilling into the ground with no thought to the
surrounding areas. U Uga, Chairman of the Biodiversity and
Nature Conservation Association (BANCA),told us that foreign
oil and gas companies are more apt to protect the environment
than Burmese companies, conducting EIAs and using more energy
efficient technology. However, the lack of transparency in
the Burmese legal system enables foreign companies,
particularly the Chinese, to be more lax than they would be
in most other countries, U Uga stated.


3. (C) We met with both local and foreign oil and gas
companies to hear their views on environmental protections.
(Note: Not all companies would meet with us. The state-owned
Myanmar Oil and Gas Enterprise (MOGE); Chinese-owned CNOOC,
CNPC and SINOPEC; Russian company Zarubezhneft; Australian
company Danford Equities; and Thailand's PTTEP declined
meetings with us. End Note.) Dr. Su-Yeong Yang, Managing
Director of Korean-owned Daewoo, told us that most foreign
companies working in Burma voluntarily take steps to protect
the environment, despite the lack of regulation. Local
companies, particularly MOGE, do not follow the same high
standards, he admitted. Developing Burma's oil and gas
sector is not easy, he underscored. While Burma has rich oil
and gas reserves, its rugged terrain and lack of
infrastructure make it difficult for companies to explore and
produce, either on or off shore. When working under these
conditions and using heavy machinery, companies often tear up
the areas near or on the way to the drill sites. What is
important, he stressed, is how a company cleans up after
itself.

Environmentally Unsound Onshore Drilling
--------------

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4. (C) According to U Ohn, Director of local environment
NGO FREDA, the environmental impacts of onshore drilling are
more readily apparent than of offshore projects. Under
Burmese law, only the state can invest in onshore oil and gas
projects; if a foreign company wants to invest, it must enter
into a joint venture with MOGE. As a result, MOGE controls
more than 70 percent of onshore fields, with eight companies
(only one is Burmese, the others are joint ventures with
foreign companies) having exploration and production rights
to the other 30 percent of fields (Ref B). While many of
these fields are located in the plains of Central Burma, some
of the Chinese-owned fields are located in remote areas of
Magway, Mandalay, and Sagaing Divisions. To explore and
produce in these areas, CNOOC, CNPC, SINOPEC, and MOGE cut
down trees, bulldozed the area, and built roads, causing soil
erosion and deforestation, U Ohn told us. The use of heavy
machinery further destroyed the area, tearing up the land and
displacing those who lived there, he continued.


5. (C) Oil and gas exploration practices also destroy the
environment, U Uga declared. Before a company decides to
build well heads, it must conduct seismic tests to determine
whether there are sufficient reserves. In order to obtain
seismic data, companies must clear paths, detonate dynamite,
and take readings. U Uga noted that most of the onshore
wells are old; MOGE conducted many of these tests in the
1970s. Instead of cleaning up after conducting these tests,
MOGE just left holes in the ground, U Uga complained. CNOOC
and SINOPEC are now looking to conduct seismic tests in
northern Burma. He doubted that they would take better care
of the environment than MOGE did.


6. (C) Daewoo Drilling Manager Bruce Leach told us that in
both onshore and offshore drilling, companies use drill mud,
which contains barite mercury, to extract the oil from the
sand. Because Burma's onshore fields are located in high
pressure pockets, companies must use either a high density
mud, which has a higher mercury content, or a high density
brine, which is toxic. In other countries, the government
requires a company to have an environmental plan that details
how it will handle and dispose of toxic mud and waste. The
Burmese Government does not do this, he noted. Indeed, Ye
Myat Soe, Technical Coordinator for Focus Energy (a joint
venture between MOGE and the Swiss),admitted to us that
Focus Energy and MOGE just "dump" their toxic mud in the
areas surrounding the drill wells, often near villages. He
was unconcerned about the health of the people living near
the wells, noting that "they appeared fine." Although NGOs
are aware of the dumping of toxic waste, their efforts to
halt this practice fall on deaf ears, U Uga complained.

Offshore Drilling Also a Concern
--------------


7. (C) Foreign companies control the majority of Burma's
offshore wells, and they take their own measures to protect
the environment, U Uga noted. However, dumping of toxic
waste, brine, and muds from drilling also occurs offshore.
Some companies, such as PTTEP and Burmese-owned MPRL, just
dump them into the ocean, killing off plant and marine life.
Other companies, such as French-owned Total, Daewoo, and
Malaysian company Petronas, attempt to detoxify the waste
before they dispose of it. These companies declined to tell
us where they dispose of the toxic waste or show us their
environmental plans. While environmentalists have yet to
study the waters surrounding the offshore fields, they
believe that habitats for fish and coral reefs may have been
destroyed because of natural gas projects.

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8. (C) The gas pipeline that connects the Yadana and
Yetagun gas fields (controlled by Total and PTTEP
respectively) to onshore refineries also damage the natural
environment, U Ohn told us. Dave Peters of Chevron/UNOCAL
(partner with Total in the Yadana fields) told us in November
that there are often leaks in the pipeline, which was built
by MOGE in the 1980s. Chevron/UNOCAL estimates that due to
pipeline corrosion, approximately 70 million cubic feet of
natural gas a day is lost. According to Peters, MOGE
attempts to quickly patch the leaks and repair the rusty
pipeline. However, because MOGE does not adequately monitor
the pipeline, leaks may go unnoticed for weeks and natural
gas, which is highly combustible, leaches into the
surrounding soil.

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


9. (C) As long as "black gold and golden gas" continue to
flow in Burmese territory, foreign and local companies will
seize the opportunity to invest in the oil and gas sector.
The GOB expects companies to continue to explore, drill, and
produce oil and gas in both onshore and offshore blocks in

2008. The longer companies are allowed to work in Burma with
no environmental requirements, the more damage to Burma's
ecosystems. Not only do the people not receive any benefits
from oil and gas revenues, they will bear the costs of
environmental damage.

VILLAROSA