China Development Bank provides EUR 452.75 million loan for Myanmar-China Gas Pipeline Construction Project (Linked to Project ID#73285)

On March 26, 2009, government representatives from China and Myanmar signed cooperative agreements to jointly develop oil and gas pipelines. In June 2009, CNPC and the Myanmar government signed a MOU agreeing that CNPC would be responsible for the design, construction and operation of a 771km oil pipeline. The project is referred to as 中缅油气管道 or 中缅原油和天然气管道 in Chinese. In December, 2008, CNPC signed a 30-year purchase and sale agreement with South Korean conglomerate Daewoo International on importing natural gas from offshore blocks A-1 and A-3 in Myanmar - this project was referred to as the Shwe Gas Project. A consortium of companies were involved in the Shwe Gas Project, led by Daewoo. Over 2009 and 2010, a series of agreements were signed on constructing, operating and managing the Myanmar-China Oil and Gas Pipelines, which clarified the joint ventures' rights and obligations. The Myanmar-China Crude Oil Pipeline is jointly invested and constructed by a CNPC subsidiary, South-East Asia Pipeline Company Limited (SEAP) (50.9% stake) and Myanmar Oil and Gas Enterprise (MOGE) (49.1% stake). Their joint venture, South-East Asia Crude Oil Pipeline Company Limited (SEAOP) is responsible for its operation and management. The Myanmar-China Gas Pipeline Project is jointly invested and constructed by SEAP (50.9% stake), MOGE (7.365% stake), POSCO DAEWOO Corporation (25.041% stake), ONGC CASPIAN E&P B.V. (8.347% stake), Gas Authority of India Ltd (GAIL) (4.1735% stake) and Korea Gas Corporation (KOGAS) (4.1735% stake); their joint venture, South-East Asia Gas Pipeline Company Limited (SEAGP), is responsible for its operation and management.On 30 November 2010, China Development Bank and Myanmar Foreign Trade Bank (MFTB) signed an agreement on cooperation in loan disbursement. Then, on December 16, 2010, China Development Bank and Myanmar Oil and Gas Enterprise (MOGE) — a state-owned oil and gas company in Myanmar — signed an EUR 452.75 million loan facility agreement (ID#5300942322010591241) for the Myanmar-China Gas Pipeline Construction Project. The loan was provided in two tranches for two subcomponents of the project — an EUR 334 million tranche for the Offshore Natural Gas Pipeline and an EUR 119 million tranche for the Onshore Natural Gas Pipeline — and it carried the following borrowing terms: 20 year maturity, 5 year grace period, and an interest rate of 4.5%. An overseas euro currency account was established at the Frankfurt Branch of the Bank of China as part of the loan agreement between MFTB and China Development Bank, and revenue generated by the gas pipeline project was to be paid into the account. The borrower was expected to maintain a minimum cash balance in the overseas euro currency account.The total cost of the oil and gas pipeline project was reported to be 5 billion USD, though some sources stated that the oil pipeline costs 1.5 billion USD (financing captured in the linked project #73285) and the gas pipeline costs between 1.04 billion USD to 1.95 billion USD. The purpose of the project was to construct a 793 km gas pipeline from Ramree Island on the western coast of Myanmar to Ruili in China’s Yunnan Province. Running in parallel with the Myanmar-China Crude Oil Pipeline, the crude pipeline is 1,016 mm in diameter with a distance of 793km in Myanmar. It was designed to deliver 5.2 billion m3 per year upon completion of the project’s first phase, and 12 billion m3 per year upon completion of the project’s second phase. Pursuant to the cooperation agreement, four gas off-take stations (Kyaukphyu, Yenangyaung, Taungtha and Mandalay) were established to unload less than 20% of the pipeline’s total delivery in Myanmar. These 4 gas distribution stations deliver 2 billion cubic meters of natural gas to the local communities on a yearly basis. In particular, the pipeline supplies natural gas to a power plant in Kyaukpyu, thus enabling a substantially longer time of power supply. Construction on the project started on June 3, 2010. On July 28, 2013, the Myanmar-China Gas Pipeline became operational and started to deliver natural gas to the Myanmar market through its off-take stations. The Myanmar-China Gas Pipeline was designed to alleviate China’s dependence on the Strait of Malacca for its energy imports, giving it a shorter and alternate supply route from South East Asia.This project is also known as the Shwe Natural Gas Project and the Offshore Natural Gas Development and Pipeline Project/ Onshore Natural Gas Pipeline Project. The Chinese project title is 中缅油气管道 or 中缅原油和天然气管道. The Burmese project title is ေရႊသဘာ၀ဓာတ္ေငြ႔.

Additional details

According to the Myanmar's House of Representatives, China Development Bank issued an EUR 86.16 million loan to MOGE to finance its investment in the Shwe Natural Gas project. The loan had a maturity length of 20 years, a 5-year grace period, and an interest rate of 4.5%. The EUR 452.75 million loan facility likely included the EUR 86.16 million loan (in order to facilitate MOGE’s acquisition of a 7.365% ownership stake in South-East Asia Gas Pipeline Company Limited). In the Overseas Development Finance Dataset that Boston University’s Global Development Policy Center published in December 2020, a $2.4 billion CDB loan for the ‘Sino-Myanmar Pipeline’ is identified. However, this appears to be a $2.4 billion umbrella agreement (signed on November 30, 2009) that subsequently resulted in two separate loan agreements for the Myanmar-China Gas Pipeline Project (captured in Project ID#34468) and the Myanmar-China Oil Pipeline Project (Captured in Project ID#73285) in December 2010. South-East Asia Gas Pipeline Company Limited (SEAGP) is responsible for the operation and management of the Myanmar-China Gas Pipeline Project. It is a joint venture between SEAP (50.9% stake), MOGE (7.365% stake), POSCO DAEWOO Corporation (25.041% stake), ONGC CASPIAN E&P B.V. (8.347% stake), Gas Authority of India Ltd (GAIL) (4.1735% stake) and Korea Gas Corporation (KOGAS) (4.1735% stake).

Number of official sources

29

Number of unofficial sources

65