US embassy cable - 02RANGOON1340

BURMA: DARKNESS AT NOON

Identifier: 02RANGOON1340
Wikileaks: View 02RANGOON1340 at Wikileaks.org
Origin: Embassy Rangoon
Created: 2002-10-16 06:37:00
Classification: CONFIDENTIAL
Tags: ENRG EPET ECON BM Economy
Redacted: This cable was not redacted by Wikileaks.
This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 001340 
 
SIPDIS 
 
STATE FOR EAP, EB 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
CINCPAC FOR FPA 
 
E.O. 12958: DECL: 10/15/2012 
TAGS: ENRG, EPET, ECON, BM, Economy 
SUBJECT: BURMA: DARKNESS AT NOON 
 
REF: A. RANGOON 1292 
     B. 01 RANGOON 1819 
     C. 01 RANGOON 783 
 
Classified By: COM CARMEN MARTINEZ FOR REASONS 1.5 (B,D) 
 
1. (C) Summary: Power is flowing nearly 24 hours a day in the 
capital.  The government is making this happen through a 
hodgepodge of policy proclamations, full dams at the 
hydropower plants, and expensive, and potentially dangerous, 
stopgap measures.  Because of increasing agitation over food 
prices, the regime is trying to hold this Potemkin village 
together until after the harvests in November.  However, as 
we see no long-term solution on the drawing board, we expect 
darkness to descend again by the end of the dry season.  End 
Summary. 
 
Light at the End of the Tunnel? 
 
2. (U) Denizens of Rangoon have been pleasantly surprised by 
nearly 24 hour electricity in their homes since September 18 
or 19.  The government asserts that this will be the reality 
from now on as additional natural gas is brought into the 
city from the offshore Yadana field.  Also, the government 
says, a turbine in a Rangoon-area power plant has been fixed 
allowing for full capacity generation of power.  The 
government mouthpiece newspaper New Light of Myanmar has been 
filled with photos and stories of officials from the Ministry 
of Electric Power visiting power plants, factories, and 
government offices offering "guidance" on production and 
conservation of electricity. 
 
3. (C) The government is, in fact, able to pipe some gas now 
from Yadana to the capital.  However, there is less to their 
claims than meets the eye.  This gas is coming over a 
haphazard collection of poorly constructed pipelines of 
varying diameters running from Kanbauk in Tanintharyi 
Division up to Hpa'an and then on to Rangoon.  A Ministry of 
Energy official claims it is now piping 50 million cubic feet 
a day (mcfd) through this pipeline network (although he 
admitted that most of this was consumed by factories and 
power plants along the way).  UNOCAL says that supplies now 
are running about 40 mcfd, though how long the pipeline can 
sustain the volume remains a question mark.  Because of its 
poor quality, the existing Burmese pipeline system could 
easily be disabled through corrosion, flooding along the 
pipeline's path, or explosion. 
 
No Easy Way Out 
 
4. (C) Other than this shaky supply from Yadana, the 
government is relying on four things to keep the lights 
burning in Rangoon. 
 
-- First, the government has ceased piping 8 mcfd of gas per 
day from the onshore A'Pyauk field, near Rangoon, to a power 
plant near Thaton.  This supply has been redirected to power 
plants in the Rangoon area. 
 
-- Second, the government is now firing up existing 
hydropower plants whose dams are full following the heavy 
monsoon season this year. 
 
-- Third, the government is pushing massive conservation 
efforts, both in the ministries and at state-owned factories. 
 Ministry buildings, government schools, and hospitals are 
kept dark except for emergencies.  A representative of a 
foreign oil company told us that the government has ceased 
sending gas to its fertilizer and methanol plants. 
 
-- Finally, the government is spending precious hard currency 
to import high-speed diesel fuel (at around $40/barrel) to 
run generators and dual-fuel turbines. 
 
5.  (C) These strategies may be effective in the short term, 
but are not sustainable.  As reported in Refs B and C, the 
A'Pyauk gas field is nearly drained, producing at under 40 
mcfd and declining rapidly.  The other major onshore gas 
field, in Nyaung Doun, is masking some of A'Pyauk's decline 
(producing between 25 and 45 mcfd depending on whom you ask), 
but is being exploited too quickly.  This unwise strategy 
shortens the fields economic life span and risks spoiling the 
gas by sucking water into the reserve.  Based on our sources, 
we think the A'Pyauk field could run dry within a year.  The 
Nyaung Doun field should hold out a few more years, but 
unsound drilling practices could reduce yield and drive up 
costs of production. 
 
6. (C) Hydropower is also only a temporary balm.  If 
conditions are perfect, hydropower plants in operation can 
generate 350-390 MW of power (Rangoon relies on hydropower 
for 250 MW), but nearly 40 percent of this will be lost 
during transmission.  However, some of these plants are in 
dire need of refurbishment, and in any event, this peak 
generating capacity is available only during the period of 
least demand, during the post-monsoon "cool season" (October 
to February).  The dams are usually quite low, and generation 
capacity much reduced, during the "hot season" period of peak 
demand (March to July).  The government claims that 2136.6 MW 
of new hydropower will be available over the next five years 
as new dams and plants are built.  However, only about 510 MW 
of new generating capacity is predicted between now and the 
end of 2003 -- and we are skeptical of this number. 
 
7. (C) The Burmese government claims it is moving away from 
fueling its power plants with imported oil as it is a very 
expensive solution -- particularly as the cost of Malaysian 
and Sumatran oil rises alongside Middle East oil.  Domestic 
oil fields are producing about 6000 barrels a day, but the 
production is not economical and provides only about 60 
percent of total domestic demand during normal times.  No new 
oil production is forecasted, although the Chinese National 
Petroleum Company has agreed to work with the Ministry of 
Energy to try and pump out any remaining oil in the old Pyay 
fields north of Rangoon. 
 
8. (C) Finally, radical conservation by government ministries 
will have no real impact on the energy situation here.  More 
alarming is if the government continues to keep hospitals and 
schools in the dark.  Though keeping fertilizer and other 
factories idled will have the largest impact on energy 
conservation (we estimate that heavy industry here consumes 
about 85 mcfd of gas) the impact on the economy, and in the 
case of fertilizer plants food yields, will be devastating. 
 
Which Way Out? 
 
9. (C) Unfortunately there are no quick, or cheap, solutions. 
 The most logical move would be for the Burmese to claim the 
right it negotiated several years ago to 125 million cubic 
feet a day of Yadana gas by approving the Total/UNOCAL plan 
to build a 20-inch pipeline directly from the Yadana to 
Rangoon.  This has been tabled since the end of 2000 due to 
reluctance by Senior General Than Shwe to front the $750 
million (over 15 years) price tag.  A Ministry of Energy 
official said, though, that there was no interest now in 
continuing with this project.  Instead the focus would remain 
on using the existing domestically constructed pipelines, 
cooperating with neighboring countries on regional pipeline 
projects, and on developing hydropower.  The latter two 
priorities are long-term solutions. 
 
10. (C) If, as we predict, Burma's dwindling onshore gas 
reserves suddenly become unreliable, the only short-term 
option for the Burmese government will be to try its luck 
buying additional gas from the Yadana pipeline consortium, 
expensive and unlikely if the Thais increase demand or if the 
Burmese do not upgrade their pipeline network.  Another 
option would be to negotiate with the Yetagun operators for a 
share of its Thai-destined gas, though this too would be a 
very expensive solution.  Failing this, the Burmese might 
have to return to the most expensive option of all, shifting 
their plants back onto imported oil, and increasing their 
purchases from Malaysia. 
 
Comment 
 
11. (C) We cannot predict exactly when the lights will start 
going out again, but we would be surprised if the government 
could keep its expensive patchwork of stopgap measures in 
place for long.  Because of growing unrest over mounting food 
prices, see Ref A, the government is desperate to maintain 
the illusion of government sacrifice and electricity upgrades 
until after the rice harvest in October of November. 
However, once the flush of monsoon-driven hydropower subsides 
in January and February, the government will be stuck trying 
to supply nearly all the country's energy needs with imported 
oil and gas.  This is an impossible proposition for an 
already foreign exchange-poor country.  End comment. 
Martinez 

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