卦Trigram 2.0

I just thought I’d blog this, since it’s a topic I’ve been following since before I started my MBA.

Asia Times Online reports that China has finally reached an agreement with Myanmar on the transport of oil and natural gas. Tankers bringing oil from Africa and the Middle East will now dock in Myanmar. The oil, and natural gas from Myanmar itself, will be transported in overland pipelines to China’s Yunnan province. This has two important benefits for China. Firstly, the transport time for oil will be reduced significantly. Secondly, it means that the main part of China’s total oil supply (80%, in fact) will no longer have to move through the pirate-infested Straits of Malacca (which are also extremely vulnerable to naval blockade).

China’s plans in Myanmar seem to have changed since I first wrote about them on the first incarnation of this blog, back in 2004. At that time, the idea was to re-open the Irrawaddy to ocean-going ships, including oil tanker, which would then be able to sail upriver to a port deep inland in Myanmar. Perhaps this proved technically impossible, or perhaps there were political issues that stopped it. Perhaps longer pipelines from the coast are simply cheaper and quicker to build.

I still think that China has its eyes on the Irrawaddy, for reasons I went over in a 2006 blog post: it would make the development of China’s far west much more rational in economic terms, as manufactured goods could be shipped to market directly from the Indian Ocean.

However, this is getting off-topic for this post!

At around the same time as the deal with Myanmar, China also signed an agreement with Russia, locking in supplies of oil for the next twenty years.

That’s a long time – particularly as Gregor MacDonald, an energy analyst with a pretty good track record, is predicting oil to hit a price of $200/barrel by 2012… Now, that may or may not happen – but it’s clear to anyone who reads the business pages that oil prices are only low now because of the global recession, and once the economy improves… naturally demand for oil will rise and the price of oil will move to reflect this.

All in all, it looks as though China’s leaders are following a very low-key, and very clever, strategy when it comes to energy security…