Myanmar to Receive Revenues from China-Myanmar Crude Oil Pipeline

Myanmar will gain financially from the China-Myanmar crude oil pipeline, which began operations in early April after the two countries signed an agreement for the transport of crude oil, said officials.

The crude oil transport agreement was signed on April 10 in Beijing during president U Htin Kyaw’s state visit to China. Now, imported crude oil is finally being pumped from Made Island in western Myanmar to Yunan province in the northwest of China.

Operations of the crude oil pipeline had been delayed for two years due to a number of reasons. “The pipeline construction was completed in early 2015. But operations were delayed due to oil refinery projects in Yunan and also due to discussions between MOGE, MPA and CNPC,” said an official from the Ministry and Electricity and Energy.

The China National Petroleum Cooperation (CNPC) first signed an agreement with the previous government in 2008 to build a trans-Myanmar pipeline to transport crude oil from the Middle East and Africa to China.

Construction of a 771 km crude oil pipeline, 480-meter oil unloading terminal and oil storage tanks began in 2009. Construction was completed in early 2015.

The total investment of the entire crude oil pipeline project is US$2.45 billion. CNPC holds 51 per cent stake while Myanmar has a 49 pc stake through state-owned Myanmar Oil and Gas Enterprise (MOGE).

Gaining revenue

Myanmar will directly obtain a road right fee of US$13.81 million from the pipeline every year and a transit fee of $1 per ton of crude oil under a 30-year concession agreement, according to the official announcement made during the soft opening of the project in early 2015.

Apart from annual tax revenues and fees, Myanmar will also earn revenues from the use of land, the sea port and oil tankers in relation to the pipeline, according to an official from the Myanmar Port Authority (MPA).

“We are waiting for replies from MOGE and Southeast Asia Crude Oil Pipeline Company (SEAOP) on the Contractual Transport Date (for land lease, land use premium). As soon that is confirmed, we will receive the money,” said U Myo Nyein Aye, Deputy General Manager of MPA. SEAOP is operating the pipeline under CNPC and MOGE.

Myanmar could receive annual revenues of US$300,000 from the land lease and an US$4.7 million one-time payment in land-use premiums.

Myanmar authorities have allowed an 80 per cent exemption in port dues and tugboat dues as all properties, operation and maintenance of the entire Made Island port terminal belonged to CNPC, according to him.

“Port dues and tugboat dues are 80 pc exempt. But we are getting 100 pc in light dues and other fees,” said U Myo Nyein Aye.

The MPA receives US$70,000 on average for the arrival of each oil tanker. “It depends on how much crude oil they are carrying. It ranges from US$60,000 to US$80,000,” said U Myo Nyein Aye. It will also receive pilotage fees “because only MPA pilots are allowed in our territory.”

Right to buy oil

Since April, a dozen oil tankers with capacities of 300,000 tons have docked at Made Island, Mr Cai Jian, manager of Made Island Operation Center, told the media last week. In addition, “some 1.3 million cubic meters of crude oil have been pumped to China through the pipeline.”

The pipeline is designed to transport 12 million tons of crude oil in its first phase and 22 million tons in the second phase.

Myanmar has the right to buy 2 million tons of crude oil annually from the project, according to officials.

It will take some time before Myanmar is able to purchase any oil though. “We are not ready yet. We don’t know when we can get this amount of crude oil from the pipeline because we have a lot of things to do, such as building an oil refinery and other offloading pipelines. It will take at least five years,” U Kyaw Nyan, a director from MOGE, told The Myanmar Times.

 

Source: The Myanmar Times

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