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26. 07. 2005
The growing energy needs of India have prompted it to explore newer sources of supply. In this quest of India, Myanmar has now emerged as an important partner. Huge reserves of oil and gas has been found in that country. Most importantly, India has a stake in these findings and wants to bring these resources home in a cost-effective manner. With this objective, it has been now pursuing a tri-nation pipeline project for nearly a decade. This issue has also become important as all the leading consumers of energy in world are trying to secure their supplies and the struggle to acquire stakes in overseas energy resources is intensifying.
The tri-nation pipeline project was initiated by a Bangladeshi private company, the Mohona Holdings Limited way back in 1997. The pipeline was to run through Arakan state in Myanmar and the Indian states of Mizoram and Tripura before crossing Bangladesh to reach India's West Bengal capital Kolkata. The governments of India and Myanmar have already approved the Mohona's proposal for the cross-border pipeline. But Bangladesh is yet to approve it. The laying of this 900-km tri-nation pipeline was agreed to in principle by the energy ministers of the three countries in Yangon in January this year. However, a formal signing of the agreement has been delayed up to now.
This issue figured prominently during the foreign secretary level meeting between India and Bangladesh recently held in New Delhi. The issue got complicated when Bangladesh linked the laying of pipeline with three new conditions, completely unrelated to the project. Bangladesh Foreign Secretary Mohammed Hemayatuddin said his country was not averse to it but wanted India to sort out certain things.
Dhaka now wants India to first address issues like reduction of trade imbalance, providing a corridor for Nepalese goods to Bangladeshi ports and access to hydropower from Bhutan before moving ahead on the pipeline. India has been opposed to making bilateral issues part of a trilateral agreement.
It is difficult for India to accept any of these demands as it would mean seriously compromising with its strategic interests. Allowing Bangladesh a corridor to trade with Nepal is just not possible in present situation, as it would worsen the problem of illegal immigration and insurgency. The vulnerability of the region to foreign agencies like ISI and DGFI would increase. Allowing this facility to Bangladesh would seriously threaten the internal security of India.
Bangladesh claims that its adverse trade balance with India is due to various tariff and non-tariff barriers. But, the truth lies elsewhere. Bangladesh has a negative trade balance with most of its trading partners. This is due to a very small export basket of the country. Moreover, its infrastructure is also underdeveloped. Instead of taking steps to improve its economy, Bangladesh always expects unreasonable concessions from other countries. Recently, it urged the US to allow duty free access to Bangladeshi products. The US has also advised Bangladesh to take steps to improve its economy and infrastructure like facilities at Chittagong port. Bangladesh also wants India to allow it to access hydropower from Bhutan through Indian territory.
India on the other hand thinks that pipeline should be considered as a standalone project, and Bangladesh is adequately compensated by the $125m that will be getting as transit fee. At the same time, Bangladesh would be able to transfer gas supplies from the east to the western region of the country. Besides, Bangladesh will also benefit as the construction of pipeline would create new jobs in the country.
New Delhi is opposed to new conditions which are completely unrelated to project. Indias Ministry of External Affairs (MEA) has noted that "under no circumstances should India accept any of the (Bangladesh's) conditions... That will encourage Dhaka to tie up unrelated conditionalities in future negotiations on other issues, as it is always prone to do. India will always consider bonafide demands from Bangladesh but they cannot start unfair bargaining."
The new conditions imposed by Bangladesh have made the future of gas pipeline completely uncertain. But a gas pipeline from Myanmar is in Indias economic and strategic interests. The economic cooperation between India and Myanmar has brought both these countries close to each other. India also needs the cooperation of Myanmar to successfully handle the insurgency problem in the northeast. A greater Indian interaction with Myanmar has reduced the influence of other powers in that country. Most importantly, Myanmar could act as a gateway for India to ASEAN countries.
The growing relationship with India is also useful for Myanmar. As the country is facing economic sanction from certain quarters, it needs economic partners. And its most easily available exportable product with great demand is the new found gas and oil resources. Myanmar quickly wants to monetize this. India's state-run Oil and Natural Gas Corporation has a 20 per cent stake in Myanmar's A-1 and A-3 Blocks, while GAIL has a 10 per cent stake in the two sites. The proposed pipeline was one of several options India has been considering to bring gas reserves from the Shwe Field's Block A-1 site in Myanmar.
India is now at a juncture where it has to take a decision on how it wants to transport the gas purchased from Myanmar. It is possible either through a gas pipeline or through ship in LNG form. The gas pipeline is the most cost-effective way and India has been trying for this. The shortest and convenient route of this gas pipeline passes through Bangladesh. But unfortunately, Bangladesh wants to take unreasonable advantage for allowing the gas pipeline pass through its territory.
It has forced India and Myanmar to rethink about the route of the gas pipeline. It has also forced them to explore other possible alternatives to bring gas to India. To sort out some of these problems India and Myanmar decided to hold a meeting between their energy ministers in New Delhi on July 6. Both sides have now started considering a proposal to redesign the gas pipeline so that it runs entirely through Indian territory skipping Bangladesh altogether. According to the new plan, the pipeline coming from Myanmar will run through Mizoram and Assam before culminating in West Bengal. Its revised length would be 1400 km. After his meeting with Brigadier General Lun Thi, Minister of Energy, Myanmar, Mani Shankar Aiyar, Minister for Petroleum and Natural Gas, said that the techno-commercial group would examine the possibility of laying the pipeline bypassing Bangladesh and importing natural gas through ships in its liquefied (LNG) or compressed (CNG) form.
If the pipeline is constructed through Bangladesh, its length would be 900 km long and cost around Rs 4,500 crore. On the other hand, if it is laid through the Northeast bypassing Bangladesh, the pipeline will have to cover an additional 500 km. The cost would also go up by about Rs 2,500 crore.
Although laying the pipeline through Bangladesh will be cheaper, bringing it through the Indian territory also has its merit. Part of this additional cost will be offset by the transit fee that Bangladesh will charge for allowing the pipeline to pass through its territory.
If the pipeline enters India directly from Myanmar through the northeastern states, it would be a boon as the gas produced in these states cannot be evacuated to the more lucrative markets at present. The region as well as oil exploration companies would gain from higher prices, if the gas can be evacuated. A pipeline is like a road, it benefits the entire territory that it passes through.
Since the gas from Myanmar is expected to flow over a period of 15 to 20 years or even more, the security cover of laying the pipeline entirely through the Indian territory could well be worth the additional cost.
Initially, Bangladesh gave the impression that it was not bothered if it was left out of the proposed gas pipeline. Adviser to the Ministry of Energy and Mineral Resources Mahmudur Rahman stated that Dhaka would not mind if New Delhi decides to exclude Bangladesh from the proposed overland gas pipeline between India and Myanmar. He reportedly said, "We will welcome new plan on the proposed tri-nation gas line project that might bypass Bangladesh to safeguard India's strategic interests." However, he also said that the energy division and other line ministries would continue to work on the original proposal as India is yet to inform Bangladesh about its change of mind.
However, on July 22, Bangladesh once again showed its willingness to resume talks on the proposed gas pipeline project with all the partner countries. Mahmudur Rahman, reportedly said, "But to start re-negotiation India should approach Bangladesh afresh if it thinks the project would be viable both technically and financially using Bangladesh territory to carry Myanmar gas to their land."
Indias External Affairs Minister K. Natwar Singh is expected to visit Dhaka on August 6. During this visit, the issue of pipeline is expected to be discussed once again. India will definitely try to break the deadlock. With this aim, it has included in the delegation, Talmiz Ahmad who is additional secretary for international cooperation in the petroleum ministry.
But this time, if the deadlock is not broken, India must take a decision regarding the transportation of gas. Myanmar would not wait indefinitely for India to buy gas. Moreover, Myanmar, which had banned foreign companies from exploring for oil and gas in onland blocks, has agreed to consider the bid by Oil India Ltd consortium for two blocks as a special case. Yangon was also open to Indian firms bidding for offshore blocks. Hence, India would have to decide on this issue. It should take a decision in favour of pipeline, with or without Bangladesh.
However, if the pipeline is laid through Bangladesh, it will be an example of regional cooperation. The success of this project might encourage the partner countries to contemplate cooperation in other areas. It may also act as a confidence-building measure between India and Bangladesh as their relationship has deteriorated in recent times. But, India should not loose too much time either in bringing Bangladesh onboard. It should make very clear to Bangladesh that it would not entertain bilateral matters when a tri-nation project is being considered for the benefit of all the involved parties.
Bangladeshs dealing with India regarding gas and its transportation through its territory has never been entirely above board. Whenever, India showed its interest to buy gas from Bangladesh, it has not been very keen to sell. In fact, due to reluctance of Bangladesh to export gas many foreign companies left the country as the domestic market is not fully developed. The export of gas to India would have also allowed the country to tackle the adverse balance of trade.
Interestingly, recently Bangladesh has shown keen interest in exporting the same gas to Nepal through pipeline passing through Indian territory. This clearly shows that there are other factors involved in Bangladesh not exporting gas to India and allowing the laying of pipeline. But, India must take care of its own interest. It should now take a decision on the construction of pipeline. If Bangladesh is willing to consider it as standalone project, well and good, otherwise India should start a feasibility study of laying the pipeline through northeast. It must tap the energy sources available in Myanmar, which might go elsewhere, if India allows Bangladesh to delay this project.
saag(dot)org/common/uploaded_files/paper1474.html
The growing energy needs of India have prompted it to explore newer sources of supply. In this quest of India, Myanmar has now emerged as an important partner. Huge reserves of oil and gas has been found in that country. Most importantly, India has a stake in these findings and wants to bring these resources home in a cost-effective manner. With this objective, it has been now pursuing a tri-nation pipeline project for nearly a decade. This issue has also become important as all the leading consumers of energy in world are trying to secure their supplies and the struggle to acquire stakes in overseas energy resources is intensifying.
The tri-nation pipeline project was initiated by a Bangladeshi private company, the Mohona Holdings Limited way back in 1997. The pipeline was to run through Arakan state in Myanmar and the Indian states of Mizoram and Tripura before crossing Bangladesh to reach India's West Bengal capital Kolkata. The governments of India and Myanmar have already approved the Mohona's proposal for the cross-border pipeline. But Bangladesh is yet to approve it. The laying of this 900-km tri-nation pipeline was agreed to in principle by the energy ministers of the three countries in Yangon in January this year. However, a formal signing of the agreement has been delayed up to now.
This issue figured prominently during the foreign secretary level meeting between India and Bangladesh recently held in New Delhi. The issue got complicated when Bangladesh linked the laying of pipeline with three new conditions, completely unrelated to the project. Bangladesh Foreign Secretary Mohammed Hemayatuddin said his country was not averse to it but wanted India to sort out certain things.
Dhaka now wants India to first address issues like reduction of trade imbalance, providing a corridor for Nepalese goods to Bangladeshi ports and access to hydropower from Bhutan before moving ahead on the pipeline. India has been opposed to making bilateral issues part of a trilateral agreement.
It is difficult for India to accept any of these demands as it would mean seriously compromising with its strategic interests. Allowing Bangladesh a corridor to trade with Nepal is just not possible in present situation, as it would worsen the problem of illegal immigration and insurgency. The vulnerability of the region to foreign agencies like ISI and DGFI would increase. Allowing this facility to Bangladesh would seriously threaten the internal security of India.
Bangladesh claims that its adverse trade balance with India is due to various tariff and non-tariff barriers. But, the truth lies elsewhere. Bangladesh has a negative trade balance with most of its trading partners. This is due to a very small export basket of the country. Moreover, its infrastructure is also underdeveloped. Instead of taking steps to improve its economy, Bangladesh always expects unreasonable concessions from other countries. Recently, it urged the US to allow duty free access to Bangladeshi products. The US has also advised Bangladesh to take steps to improve its economy and infrastructure like facilities at Chittagong port. Bangladesh also wants India to allow it to access hydropower from Bhutan through Indian territory.
India on the other hand thinks that pipeline should be considered as a standalone project, and Bangladesh is adequately compensated by the $125m that will be getting as transit fee. At the same time, Bangladesh would be able to transfer gas supplies from the east to the western region of the country. Besides, Bangladesh will also benefit as the construction of pipeline would create new jobs in the country.
New Delhi is opposed to new conditions which are completely unrelated to project. Indias Ministry of External Affairs (MEA) has noted that "under no circumstances should India accept any of the (Bangladesh's) conditions... That will encourage Dhaka to tie up unrelated conditionalities in future negotiations on other issues, as it is always prone to do. India will always consider bonafide demands from Bangladesh but they cannot start unfair bargaining."
The new conditions imposed by Bangladesh have made the future of gas pipeline completely uncertain. But a gas pipeline from Myanmar is in Indias economic and strategic interests. The economic cooperation between India and Myanmar has brought both these countries close to each other. India also needs the cooperation of Myanmar to successfully handle the insurgency problem in the northeast. A greater Indian interaction with Myanmar has reduced the influence of other powers in that country. Most importantly, Myanmar could act as a gateway for India to ASEAN countries.
The growing relationship with India is also useful for Myanmar. As the country is facing economic sanction from certain quarters, it needs economic partners. And its most easily available exportable product with great demand is the new found gas and oil resources. Myanmar quickly wants to monetize this. India's state-run Oil and Natural Gas Corporation has a 20 per cent stake in Myanmar's A-1 and A-3 Blocks, while GAIL has a 10 per cent stake in the two sites. The proposed pipeline was one of several options India has been considering to bring gas reserves from the Shwe Field's Block A-1 site in Myanmar.
India is now at a juncture where it has to take a decision on how it wants to transport the gas purchased from Myanmar. It is possible either through a gas pipeline or through ship in LNG form. The gas pipeline is the most cost-effective way and India has been trying for this. The shortest and convenient route of this gas pipeline passes through Bangladesh. But unfortunately, Bangladesh wants to take unreasonable advantage for allowing the gas pipeline pass through its territory.
It has forced India and Myanmar to rethink about the route of the gas pipeline. It has also forced them to explore other possible alternatives to bring gas to India. To sort out some of these problems India and Myanmar decided to hold a meeting between their energy ministers in New Delhi on July 6. Both sides have now started considering a proposal to redesign the gas pipeline so that it runs entirely through Indian territory skipping Bangladesh altogether. According to the new plan, the pipeline coming from Myanmar will run through Mizoram and Assam before culminating in West Bengal. Its revised length would be 1400 km. After his meeting with Brigadier General Lun Thi, Minister of Energy, Myanmar, Mani Shankar Aiyar, Minister for Petroleum and Natural Gas, said that the techno-commercial group would examine the possibility of laying the pipeline bypassing Bangladesh and importing natural gas through ships in its liquefied (LNG) or compressed (CNG) form.
If the pipeline is constructed through Bangladesh, its length would be 900 km long and cost around Rs 4,500 crore. On the other hand, if it is laid through the Northeast bypassing Bangladesh, the pipeline will have to cover an additional 500 km. The cost would also go up by about Rs 2,500 crore.
Although laying the pipeline through Bangladesh will be cheaper, bringing it through the Indian territory also has its merit. Part of this additional cost will be offset by the transit fee that Bangladesh will charge for allowing the pipeline to pass through its territory.
If the pipeline enters India directly from Myanmar through the northeastern states, it would be a boon as the gas produced in these states cannot be evacuated to the more lucrative markets at present. The region as well as oil exploration companies would gain from higher prices, if the gas can be evacuated. A pipeline is like a road, it benefits the entire territory that it passes through.
Since the gas from Myanmar is expected to flow over a period of 15 to 20 years or even more, the security cover of laying the pipeline entirely through the Indian territory could well be worth the additional cost.
Initially, Bangladesh gave the impression that it was not bothered if it was left out of the proposed gas pipeline. Adviser to the Ministry of Energy and Mineral Resources Mahmudur Rahman stated that Dhaka would not mind if New Delhi decides to exclude Bangladesh from the proposed overland gas pipeline between India and Myanmar. He reportedly said, "We will welcome new plan on the proposed tri-nation gas line project that might bypass Bangladesh to safeguard India's strategic interests." However, he also said that the energy division and other line ministries would continue to work on the original proposal as India is yet to inform Bangladesh about its change of mind.
However, on July 22, Bangladesh once again showed its willingness to resume talks on the proposed gas pipeline project with all the partner countries. Mahmudur Rahman, reportedly said, "But to start re-negotiation India should approach Bangladesh afresh if it thinks the project would be viable both technically and financially using Bangladesh territory to carry Myanmar gas to their land."
Indias External Affairs Minister K. Natwar Singh is expected to visit Dhaka on August 6. During this visit, the issue of pipeline is expected to be discussed once again. India will definitely try to break the deadlock. With this aim, it has included in the delegation, Talmiz Ahmad who is additional secretary for international cooperation in the petroleum ministry.
But this time, if the deadlock is not broken, India must take a decision regarding the transportation of gas. Myanmar would not wait indefinitely for India to buy gas. Moreover, Myanmar, which had banned foreign companies from exploring for oil and gas in onland blocks, has agreed to consider the bid by Oil India Ltd consortium for two blocks as a special case. Yangon was also open to Indian firms bidding for offshore blocks. Hence, India would have to decide on this issue. It should take a decision in favour of pipeline, with or without Bangladesh.
However, if the pipeline is laid through Bangladesh, it will be an example of regional cooperation. The success of this project might encourage the partner countries to contemplate cooperation in other areas. It may also act as a confidence-building measure between India and Bangladesh as their relationship has deteriorated in recent times. But, India should not loose too much time either in bringing Bangladesh onboard. It should make very clear to Bangladesh that it would not entertain bilateral matters when a tri-nation project is being considered for the benefit of all the involved parties.
Bangladeshs dealing with India regarding gas and its transportation through its territory has never been entirely above board. Whenever, India showed its interest to buy gas from Bangladesh, it has not been very keen to sell. In fact, due to reluctance of Bangladesh to export gas many foreign companies left the country as the domestic market is not fully developed. The export of gas to India would have also allowed the country to tackle the adverse balance of trade.
Interestingly, recently Bangladesh has shown keen interest in exporting the same gas to Nepal through pipeline passing through Indian territory. This clearly shows that there are other factors involved in Bangladesh not exporting gas to India and allowing the laying of pipeline. But, India must take care of its own interest. It should now take a decision on the construction of pipeline. If Bangladesh is willing to consider it as standalone project, well and good, otherwise India should start a feasibility study of laying the pipeline through northeast. It must tap the energy sources available in Myanmar, which might go elsewhere, if India allows Bangladesh to delay this project.
saag(dot)org/common/uploaded_files/paper1474.html
