China CNPC Nearing Completion of Key Burma Oil Storage Facility

Top state energy group China National Petroleum Company has completed six oil storage tanks on an island off western Burma from which two pipelines will carry fuel to China, and will soon finish six more, an industry official said on Tuesday.

The crucial strategic link will allow China to bypass the Malacca Strait, one of the world’s busiest shipping lanes, and ship in oil from the Middle East and Africa via the Indian Ocean and a port on Maday island, off the coast of Burma.

The island, just 10 square km in area with almost no infrastructure, is the origin point for both a crude oil pipeline planned to carry 440,000 barrels per day and a natural gas pipeline intended to ship 12 billion cubic meters annually to China’s land-locked southwestern province of Yunnan.

The oil pipeline is set to begin operation in 2014 and the gas pipeline was originally due to start up at the end of May, CNPC has said.

CNPC’s Huanqiu Contracting and Engineering Corp unit has built six crude oil tanks with capacity of 100,000 cubic meters each and is expected to complete six more similar tanks in about two months’ time, a Huanqiu official told Reuters.

“The island basically didn’t have anything, so we need to ship in all the building materials using a small port. … CNPC is building a big terminal there,” said the official, who declined to be identified, as he is not authorized to speak to the media.

The additional tanks would double the facility’s storage capacity to 1.2 million cubic meters, or about 7.6 million barrels.

CNPC is building the terminal to moor big oil tankers on the island as China seeks to cut its dependence on energy supplies traversing the narrow Malacca Strait between Malaysia and Indonesia.

The project has sparked protests by islanders, who say land has been confiscated for the deep sea port.

The gas pipeline will bring gas from the Shwe fields off the coast of Arakan State, a western state bordering Bangladesh, to China’s Yunnan province.

But it could be delayed over security concerns as it runs across territories controlled by ethnic militia groups, a Burma energy official said this month.

China has long worried about its ties with Burma, where there has been a history of resentment of China among the Burmese population and fierce public opposition to a $3.6 billion Chinese-built dam at Myitsone. President Thein Sein shelved that project in 2011, in a move that stunned Beijing.