China Development Bank provides EUR 185.6 million loan for Yadana-Yangon Natural Gas Pipeline Construction Project (Linked to Record ID#98030, 98031)

Project narrative

On December 20, 2009, China Development Bank and Myanmar Oil and Gas Enterprise (MOGE) — a state-owned oil and gas company in Myanmar — signed an EUR 185.6 million loan agreement (ID#5300942322009591489) for the Yadana-Yangon Natural Gas Pipeline Construction Project. The borrowing terms of the loan were as follows: a 20 year maturity, a 5 year grace period, and a 4.5% interest rate. The borrower had made principal repayments worth EUR 35.92 million and interest repayments worth EUR 62.39 million as of March 31, 2018. The loan’s amount outstanding was EUR 162 million (in loan principal and interest) as of March 31, 2017 and EUR 194.22 million (EUR 149.68 million in loan principal and EUR 44.54 million in loan interest) as of March 31, 2018. The purpose of the project was to construct a 24-inch diameter, 287 km long pipeline that supplies natural gas from the Yadana Offshore Natural Gas Region in the Andaman Sea to the gas distribution station (Ywama) of Yangon. The 24-inch (610 mm) pipeline has 151-kilometer-long (94 mi) offshore and 136 kilometers (85 mi) long onshore sections. The pipeline has capacity of 150 million cubic feet per day (4.2×106 m3/d). CNPC was the EPC contractor responsible for project implementation. The pipeline became operational on June 12, 2010. The Yadana gas field is located in the Andaman Sea, approximately 60 kilometres offshore the nearest landfall in Myanmar. This major energy resource contains more than 5.3 trillion cubic feet (150 billion cubic meters) of natural gas, with an expected field life of 30 years. Commercial production began in the year 2000 and production averaged more than 21.5 million cubic meters per day in 2007. There are some indications that the CDB loan for the Yadana-Yangon Natural Gas Pipeline Construction Project may have financially underperformed vis-a-vis the original expectations of the lender. In 2020, CDB and the Government of Myanmar signed a debt suspension agreement as part of the G-20 Debt Service Suspension Initiative (DSSI). Under the terms of the agreement, the lender agreed to suspend principal and interest payments due between May 1, 2020 and December 31, 2020 under 5 loan agreements (as captured via Record ID#98030). Debt service payments under these loan agreements were again deferred in 2021 (as captured via Record ID#98031). The project has been met with controversy due to human rights abuses. Soldiers were brought into the area and frequently forced villagers to work for them. They were often tortured, beaten or killed. In addition there are allegations that sections of the pipeline were built with forced labor.