New China Refinery Faces Delay As Myanmar Seeks Extra Oil Tax

Source: Reuters 10/10/2016, Location: Asia

A newly built Chinese refinery near its border with Myanmar is facing a delayed start-up after state firm PetroChina balked at paying an extra tax for piping crude oil through the Southeast Asian nation, two senior Chinese industry sources said.

PetroChina parent CNPC early last year began trial operations of a deep sea port and 2,400-km (1,490 mile) pipeline through Myanmar to China's Yunnan province. The pipeline is aimed at easing China's reliance on the Malacca Strait, through which about 80 percent of its oil imports now pass.

PetroChina has also been building a 260,000 barrels per day (bpd) refinery at Anning in Yunnan province to process the oil, which so far can only be stored in tanks.

The company completed construction of the Anning plant around July, and had aimed for test operations this month, but the project was now facing delays, said one of sources with knowledge of the matter.

"The Myanmar government is asking for an additional 5-percent tax for the crude oil, which is on top of an agreed transit fee and pipeline tariff," said the Beijing-based industry official.

"It (tax) is quite off the international norm. The refinery will certainly run into losses if this tax applies," said the source, adding that the start-up of the plant was being held back by this issue.

Commercial operations of a new refinery typically follow several months after testing.

A Naypyitaw-based senior official with Myanmar's Energy Ministry said the two countries had agreed that the pipeline contract was subject to change if the Finance Ministry and other government agencies suggested it needed changing.

"The respective Chinese company still needs to talk with the Ministry of Finance ... They have met twice but they haven't been able to sort it out," said the Naypyitaw official, who requested anonymity as he is not authorized to speak to media.

A PetroChina spokesman said the company does not comment on operational matters.

The 440,000-bpd pipeline, which starts at Kyauk Phyu in Myanmar's west and enters China at the border city Ruili, is a joint investment by CNPC and the Myanmar Oil and Gas Enterprise.

China has been on a diplomatic offensive in Myanmar since Aung San Suu Kyi's government came to power in April, aiming to ensure continuing good ties with its resource-rich neighbor. China also built a gas pipeline parallel to the oil pipeline and has been eyeing large large dam projects in Myanmar.


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