|Traditional Oil Drillers Threatened by China’s Oil Exploration|
|Reports and Publications - Accessible Alternatives|
|Tuesday, 01 September 2009 00:07|
Chinese companies are the fastest growing investors in Burma’s oil and gas sector, and China was the biggest foreign investor in Burma’s power sector in 2006-2007. China’s investment provides Burma’s ruling military junta with hard cash and the political support of a key international power. But contrary to claims by China’s largest oil firms, this investment does not foster a “win-win” situation. Instead, oil and gas exploration results in a series of negative consequences for affected people and the local environment.
For centuries, people in Burma’s Arakan State have extracted and refined crude oil by traditional methods. In the past few years, however, large-scale Chinese investment in extracting Burma’s untapped oil and gas reserves, particularly in Arakan, has begun to compete with and disrupt traditional oil drilling. Plans for both onshore and offshore natural gas and oil exploration and production, construction of pipelines stretching to China, and the development of a deep sea port in Arakan are underway.
2. Ramree Island and Block M
One hotspot in Arakan State for Chinese commercial drilling is in commercial Block M, which includes Ramree Island. Ramree Island is the largest island in Burma and a key commercial site. The island spans 1,350 square kilometers (twice the size of Singapore), and is home to more than 400,000 people, most of whom survive on a combination of subsistence farming, fishing, and traditional oil drilling activities. Shortage of arable land has driven more people to work on wells, and traditional oil drilling has been part of daily life on Ramree Island for centuries. Farms rarely yield enough produce to feed everyone, so community oil wells provide Ramree farmers with an essential source of supplementary income and are the primary income source for many of the island’s inhabitants. Local villagers use hand-dug wells to capture natural seepages.
Ramree Island is located within the “Block M” oil and gas exploration area which covers 3,007 square miles (see Figure 1). In 2004, the China National Offshore Oil Company Limited (CNOOC) won a contract from the SPDC to explore gas in Block M. Drilling started in 20051with virtually complete disregard for the needs and interests of local people. Gas from Block M is proposed to be connected to China’s Yunnan Province by pipeline2. In addition to Ramree, Manaung Island and Boronga Island are also in Block M. The population of Block M is about 600,000. The largest town in the region is Kyauk Phyu, which is also the second-largest urban area in Arakan State after Sittway (also spelled Sittwe).Lack of adherence to basic international environmental standards and absence of transparency and accountability has resulted in massive environmental pollution, human rights abuses, and destruction of local livelihoods. For example, the SPDC and CNOOC regularly force the local people to sell their traditional lands at far below market value. If locals refuse, their lands are confiscated without compensation. Along with this theft of land, CNOOC and the SPDC terrorize local people and commit rampant human rights abuses with impunity. Moreover, oil spills, drilling fluids, and wastewater have contaminated local drinking water, as well as farmlands and plantations. Because of land confiscations and pollution, the traditional lifestyle of many people on Ramree Island has been upended, leaving most without any way to support their families and making it extremely challenging to eke out a living under such circumstances.
Figure 1: Block M with Ramree Island in the middle (Arakan Oil Watch)3
Figure 2: Proposed route of oil and gas pipelines from Ramree Island to Yunnan4
3. A Way of Life: Drilling Oil for Local Consumption
In the past, when rice was harvested in December or January, villagers with spare time took to oil drilling as a means of adding to their meager farming incomes. Oil extraction season lasted until the rains returned in June, marking the start of the farming year. But now with the country’s economy failing and poverty increasing, oil drilling has shifted from being a seasonal activity to a year-round job and a main income source even for farmers. One 49 year-old farmer says that he earns 1,500 kyat a day for drilling, which goes to support six family members. The wells also finance local social development and are used to support the running of temples and monasteries. Today, there are over 5,000 hand-dug wells on the island.Many villagers use the Canadian rod drilling system which an Arakan oil driller learned from the Canadian Boronga Oil Company in the late 1800s. A tripod of tree trunks or bamboo about 40 to 50 feet high is constructed over the well. The tripod supports a pulley to which a drilling tool is attached. This method requires workers to vigorously pound for several hours to reach and extract oil. Wells are usually four square feet and can be as deep as 500 feet. Local oil drillers do not use any toxics when they drill for oil, and after they are done drilling in an area, the environmental impact is minimal. Usually five to seven people work one oil well, and often the process involves an entire family. Wells with a mechanized drill require only two or three workers, but this is too expensive for most people.
Drillers on Ramree usually sell crude oil from their wells to locally-owned refineries on the island. The refineries produce petrol, diesel, and dregs for local consumption. Almost everyone on the island depends on locally-produced oil and oil by products to fuel fishing boats, vehicles, and motorbikes as well as to run generators which supply electricity to households and businesses. Locally-produced crude oil and dregs also are used for preserving wooden and bamboo structures, caulking boats (the main means of transport in Arakan), illuminating rudimentary lamps made from half a coconut shell, lubricating cart wheels, and waterproofing paper used for umbrellas, as well as for occasional medicinal purposes.
Oil provided by the government is supplied only to offi cial and military use. There is no public electricity on the island, and Nyin Shan Maung’s Ramarwaddy Company has a monopoly on electricity production from locally-produced oil. Kyauk Phyu town and the villages of Kyauk Pyuk and Sanay receive two or three hours of electricity per day generated by Ramarwaddy.
Traditional oil drilling rig
4. Renandaung Village: The “Oil Mountain”
Renandaung means “Oil Mountain” in the Arakanese language and for good reason. With its abundance of oil, the village has managed to sustain a decent local economy based on the commodity. Some ninety percent of the village’s 200 households consider oil as their primary source of income. A native said, “some villagers even drill for oil inside the house compound.” Many come to Renandaung from other parts of Ramree Island in search of work on one of its 2,000 hand-dug oil wells. According to a Renandaung resident, the number of hand-dug wells in the village is increasing due to an influx of drillers from nearby villages.
Oil is not easy to come by, and the search for oil is unrelenting for Renandaung villagers. Although some lucky drillers are able to find oil within a few weeks at depths of 50-100 feet, it typically takes two to three months to drill up to 500 feet before oil is discovered. When drillers determine that a well does not contain oil—a conclusion that is sometimes not reached until workers have dug by hand to depths of 3-400 feet—they move on to another area in the village.
Villagers can drill oil anywhere they please in the village by paying 1/7 of their profits to the land’s owner. Wells average four square feet and are spaced approximately five feet apart. Each day, local oil drillers can collect between one and four gallons of oil, depending on each well’s productivity. They can sell crude oil to any of the ten local refineries in the village for 4,000 kyat per gallon. Some become rich quickly by discovering oil and selling it for commercial use, while others have to continue to drill in search of oil.
Oil drilling camp in Renandaung
Ordinarily, the cost of drilling for oil is divided amongst fi ve to seven households, as the typical resident cannot afford drilling equipment that costs upward of 500,000 kyat. Some villagers hold shares in neighbors’ wells and work as farmers. Farmers that cannot afford to become shareholders in drilling projects work as drilling laborers after the end of the seven-month farming season in December or January. Daily workers from Renandaung and nearby villages can earn 1,000 kyat (women) and 1,500 kyat (men) per day. They come to work in the morning and go back to their villages at night. A local said, “Every day when the sun rises, the streets in the village are crowded with many oil drillers walking to work, carrying their daily food.”
An oil well owner in Renandaung who depends solely on drilling for his livelihood said, “I have been drilling oil for five years in Renandaung. I have been producing oil from this well for three years. In the first year, I was getting 50 gallons of crude oil per day, but as the oil well aged, its yield has decreased to around eight gallons per day. The well is now around 300 feet deep, and I am still drilling for oil. So far I’ve earned over two million kyat from this oil well. Over the years I’ve been providing for my family and employing two others in the process.”
Local Oil Business
Renandaung Village on Ramree is a center not only for drilling but also for refining, with more than ten local refineries. The refineries produce petrol, diesel, and dregs (a by-product that is used to caulk boats and wooden houses and waterproof bamboo structures). These products are then sold to shops in Kyauk Phyu for local consumption. One refiner explains:
“I buy crude oil from owners of hand-dug wells for between 17,000 and 18,000 kyat per barrel (one local barrel is equivalent to four gallons of oil). We refine 600 gallons at a time, an amount that will produce 50 gallons of petrol, 500 gallons of diesel, and 25 gallons of oil dregs. We sell it in Kyauk Phyu City for local use.”
Traditional oil refinery
Drillers in Kyauk Pyuk Village do not have the freedom to sell oil to local refineries. As with many other commodities in Burma, the SPDC and its cronies use force to dominate the local trade in oil. In Kyauk Pyuk, regime-connected local businessman Nyin Shan Maung monopolizes the collection and distribution process and squeezes local producers by controlling the sale and purchase of the products. Here, drillers are forced to sell their oil to him at a low price.
As one of the richest and most powerful men on Ramree Island, Nyin Shan Maung “negotiates” contracts with land owners that make him their exclusive buyer. These negotiations are made on unequal terms, however, as one villager from Kyauk Phyu explains, “If we don’t sell our oil to [Nyin Shan Maung], he will send us to jail. A few villagers have already been sent to jail for trying to sell oil to other people. Villagers[’ selling of oil] for daily income [is] also banned by Nyin Shan Maung.”
5. Environmental Impacts of China’s Oil And Gas ExplorationIn addition to competition from local businesses, the arrival of Chinese companies at Ramree Island has caused a further decline in the livelihoods of hand-dug well drillers. In late 2004, a consortium of Chinese, Singaporean, and Burmese companies headed by the China National Offshore Oil Company Limited (CNOOC) started oil exploration on Ramree Island5. CNOOC did not provide any information of the project to communities and took no concerted steps to recognize or protect traditional hand-dug oil wells, local livelihoods, or the environment. To this day, communities are not told anything about what large-scale oil projects are taking place on their lands, what companies are involved, and how much profit is being collected by the junta.
Local people have been harmed by CNOOC’s project in many ways. The construction of each CNOOC drilling rig requires the clearing of two square miles and the demolition of all farmlands, traditional oil wells, and houses within that space. Farmers have had their fields destroyed and land confiscated. Some have been forced to relocate. Traditional oil drillers have lost their wells, local refiners have shut down, and ordinary consumers have had to cope with a disruption of local oil supplies and steady inflation.
CNOOC’s projects on Ramree Island are ecologically destructive. Rigs tower 1,000 feet tall and can reach depths of 10,000 feet. Home dwellers have suffered noise and air pollution from seismic surveying and oil drilling. Due to drilling mud contamination, land once drilled on by CNOOC can no longer be used by farmers. Drilling fluids and wastewater have killed fi sh and caused farmers, fisherfolk, and bathers to become ill.
CNOOC’s oil drilling rig dwarfs the local people’s traditional setup
Seismic survey underway
Impacts of Seismic Surveys
Chinese-owned Sichuan Petroleum Geophysical Company (SCGC) and China Oilfi eld Services Limited (COSL) performed seismic surveys throughout Ramree Island from October 2004 to March 2005, conducting an estimated 10,000 tests. Seismic surveying involves using explosives or a vibroseis truck to send sound waves into the ground. Instruments record the reflections of these waves to construct a picture of the underground landscape.
Arakan Oil Watch interviewed several mine testers as well as affected farmers. One of only three local Arakanese among the 3,000 test mining workers from the Rangoon-based service company Asia Guiding Star said, “the mining sounds [from seismic surveying] could be heard two to three miles away. The houses shook from the explosions. They did this close to the village, sometimes just 20-30 feet from the villager[s’] houses. Some rice farms and plantations were also destroyed.”The surveying, or test mining as some call it, was conducted without permission from landowners. Farms were left with large holes in the fields, crops were destroyed by trucks running over them, farmed trees were uprooted, and fields were left infertile. No compensation has been offered for damage done to lands or crops. Considerable noise pollution occurred from mining and the use of large trucks, as did significant deforestation throughout Block M to facilitate road construction and access to areas for seismic testing.
One Kyauk Pyuk villager who grows rice and drills using traditional methods reflected: “The rice yield now is not as good as previous years. The Chinese did some mining for oil exploration. This destroyed a lot of rice farmlands, and those with damaged lands received no compensation.” A female farmer, also from Kyauk Pyuk, stated that during oil exploration, large CNOOC vehicles drove across local farm fields, destroying chili crops. “One of our neighbors lost everything. There was no compensation.” She added: “The mining sounds scare us, and our paddies are also not as productive as before, but we don’t know why. Our lives are getting more difficult.”
Upon completion of the seismic surveys, CNOOC set up an exploratory drilling site with 100 Chinese workers in Lay Daung District on the central western edge of the island. When the drillers reached a layer of rock that could not be penetrated, however, they closed up this site in late 2005 and moved its workers and equipment to Renandaung Village, 50 kilometers to the north. They set up a camp for 100 Chinese workers and started drilling in late 2006. The well in Lay Daung was not cemented, and oil can still be heard percolating up from the ground. A guard who was paid to look after the site told local residents that the Chinese intend to return.
Figure 3: Oil Drilling on Ramree Island (Arakan Oil Watch) 6
Land that was confiscated for CNOOC’s drilling site in Lay Daung
6. Impacts on Local Oil Drilling
An estimated 300 local hand-dug oil wells were seized by police, headmen, and other authorities working on behalf of CNOOC during their exploration operations. Several refineries in Renandaung were forcibly shut down. A refiner who was forced to shut down in 2006 explained: “My refinery and two others have been shut down by local police at the request of CNOOC. They provided me with no compensation and no place to rebuild a refinery. I had to stop work for a month in order to rebuild a new refinery farther away from CNOOC’s drilling site. I did not sue them because I didn’t think it would work, since they had the backing of the local police.”
Another refiner owner added, “The government does not distribute enough oil to Kyauk Phyu Township to [meet local oil needs]. The people depend on our local refineries. If the Chinese explorations are successful and our local refineries are shut down, we won’t be able to fuel our motorboats, cars, motorbikes, and hand tractors. Many will face difficulties.”According to a former Myanmar Oil and Gas Enterprise (MOGE) engineer, “Oil drilling with modern and heavy machinery can change the geological structure in which oil currently accessible to traditional drillers would drain away into deeper layers.” The engineer cited the example of drilling conducted on Man Aung Island by state-owned MOGE during 1980 and 1981. The Heinzane oil field had a similar structure to the fields in Lay Daung and Renandaung, and wells there were also dug down to 500 feet by traditional methods. During MOGE’s operations, test wells were dug in the old field down to about 2,000 feet. After one year the drilling team left. “Since then, the wells have produced nothing. It must be due to infiltration of drilling mud into the upper layers where oil was accessible,” concluded the former engineer.
7. Land Confiscation and Pollution
Over 200 acres of farmlands were confiscated for CNOOC’s exploration operations. According to a source close to the local land department office, “The Chinese paid 40,000 kyat for each farmer who lost land, regardless of the size of the farm. However, the township chairman takes 10,000 kyat for himself.” Interviews with farmers corroborate this, confirming that the money is given to Burmese officials and does not always reach the owner of the land.In large-scale oil exploration, “drilling mud,” a mixture including wastewater and oil, is used to lubricate the drill bit and pull cuttings away from the well head. It may contain volatile organic compounds, polycyclic aromatic hydrocarbons, arsenic, barium, lead, corrosive irons, and other hazardous substances. Contradicting its own claims that they would use proper environmental protection measures, CNOOC has recklessly dumped these wastes on Ramree’s farmlands and in creeks, leading to fish kills and sickness. To dispose of drilling mud at CNOOC’s Renandaung drilling site, workers dug shallow canals, draining the sludge into the Chaing Wa Creek which flows past several local farms before emptying into the Bay of Bengal.
“Since CNOOC began drilling, I often find dead fish in the river,” stated one local farmer and traditional oil driller. “In the beginning, we ate the fish. But no one dares to eat them anymore after people began getting headaches and falling sick. The headaches lasted about two or three days. These days we also get itchy after going in the creek. We have to take a shower immediately after we go in the water. It was never like this before. Nobody warned us not to go in the creek, and no one has helped [treat] our sickness.”
Oil spills and improper disposal of drilling fluids from CNOOC operations destroyed rice farms, plantations, and small trees. The soil is now unsuitable for growing crops due to reduced nutrients and infused with toxins. This is a setback which threatens food security, health, and source of income for the locals.
Pollution from CNOOC exploration has destroyed many farms and waterways
The SPDC has confiscated hundreds of acres from local people for CNOOC’s oil drilling
8. Terror, Intimidation, and Human Rights Abuses
CNOOC pays the Burmese military to protect drilling sites. Light Infantry Battalion 543 is deployed to guard the Chinese oil plants in Block M. Burmese army soldiers are known for the brutality and violence that they use against civilians. Instead of securing peace, the presence of troops has allowed environmental destruction to continue unabated and added to the suffering of local people. Beatings, killings, and sexual violence have been used or condoned by the military to instill a climate of fear and ensure total acquiescence to SPDC and CNOOC demands. In August 2006, five villagers, including one pregnant woman, were beaten to death in Kyauk Phyu Township by navy and possibly army personnel. The family of one victim attempted to sue the Navy, but their lawsuit was rejected. They were later paid one million kyat in compensation. Villagers have no protection from such abuses and no recourse for justice.
Expressions of dissatisfaction and dissent are swiftly suppressed. To vent their frustrations of two and a half years of Chinese oil exploration, underground explosions, land seizure, and pollution of local creeks, about ten frustrated villagers broke into the CNOOC site at Renandaung on April 28, 2007. They emptied chemicals from 50 gallon plastic barrels and took off with the drums. They also destroyed and looted drilling equipment and supplies. In early May, about 30 people took the remaining barrels and other items such as rope, iron pipe, and engine oil. The total value of stolen goods was about one million kyat. Soon after the incident, the army cracked down on the village, arresting all the men, interrogating and beating them, and jailing three shop owners who had purchased the stolen goods. The SPDC searched houses, with some soldiers kicking over rice cookers, a highly-respected household item. Because of this violent response, seventy people have since fled to other towns, to Rangoon, and some as far as Malaysia and Thailand.
Burmese officials and Chinese oil workers have been complicit in rapes of local Ramree women. A female student from the Education College in Kyauk Phyu was brought to CNOOC’s drilling camp in Renandaung by U Hla Win, an official from the Myanmar Oil and Gas Enterprise (MOGE). It is widely believed that she was raped by at least ten Chinese workers. Locals who tried to intervene were prevented from entering the camp. The student was sent to the local hospital unconscious and expelled from her college afterwards. Another rape also occurred at CNOOC’s Lay Daung exploration site. Similar cases of sexual violence have been reported to the International Labour Organization, and locals are in constant fear of such attacks by local authorities and the Chinese.
Chinese oil operations on Ramree Island in Block M, involving underground explosions, the confiscation of local oil wells and farmlands, the destruction of crops and pollution of waterways, were all conducted without prior consent or even knowledge of local residents. Villagers had no opportunity to participate in the decision-making surrounding the operations and have no course of redress. This total disregard for community rights helped fuel the anger that exploded in April 2007 and resulted in the destruction at the exploratory drilling site in Renandaung.
The China National Offshore Oil Company (CNOOC) is the only Chinese member of the International Petroleum Industry Environmental Conservation Association (IPIECA). The association recognizes the need for companies to “mitigate risk and deliver net benefit for all parties,” and has even published a Human Rights Training Toolkit. As the managing partner of operations in Block M, however, CNOOC has not lived up to IPIECA’s vision or to its own claims made in corporate social responsibility reports.
Burma is considered a “golden backyard” for China’s energy needs, potentially supplying a conduit to transport Middle Eastern and African oil as well as natural gas. The experience on Ramree Island is symbolic of the expanding role of Chinese companies in Burma’s oil and gas sector. Overall investment in the sector has tripled in 2007 with the Chinese being the fastest-growing investors. Chinese interests are central to plans for Arakan that include further exploration, purchase of offshore natural gas reserves, construction of a cross-country pipeline from Ramree Island to Yunnan Province, and the development of a deep sea port. Exploration by Chinese companies is also underway in other areas of Burma.
Although the regime has earned billions of dollars from the oil and gas sector, Burma is still one of the poorest countries in the world, remaining economically and politically unstable. Investment from Chinese and other foreign corporations has not improved the lives of people in Burma or developed the country’s economy. On the contrary, it is enabling one of the world’s most corrupt military regimes to remain in power, fueling popular discontent and instability.
For genuine development from oil and gas projects to take place, foreign governments and companies need to meet international standards to protect the environment and human rights and ensure that revenues are used for the country’s growth. Until effective accountability and transparency mechanisms are established in Burma, however, investors will find it impossible to avoid causing abuses similar to those that have occurred in Block M.
10. Policy Recommendations
The Burmese military has no law to protect human rights or the environment from oil and gas exploration and other development projects. Even if there were, currently rule of law does not exist in Burma. If foreign corporations or governments engage in the oil and gas sector in Burma, they should first follow the basic principles below. Unless these basic provisions are ensured, Chinese and other multinational oil and gas corporations in Burma must stop investment and operations in Burma’s oil and gas sector, and shareholders and investors should divest their holdings in the companies engaged in these projects, and banks should refrain from financing these projects.
Community Rights Are Protected
Revenue Transparency Is Ensured
Operations Follow Basic Environmental and Human Rights Standards
About Arakan Oil Watch (AOW)
Founded in 2006, AOW is an independent non-governmental organization that aims to protect human rights and the environment from extractive industries in Arakan State and in Burma. AOW educates affected peoples on these issues, develops and promotes oil and gas revenue transparency standards, and conducts international advocacy. AOW is an active core member of the Shwe Gas Movement and a member of South East Asia Oil Watch. Each month AOW publishes The Shwe Gas Bulletin in English and Burmese, a newsletter covering the latest developments in Burma’s oil and natural gas industry.
References:1 B. Raman, “Myanmar: Second Thoughts about Gas Pipelines to India & China?” 14 Apr. 2007. Available at: <http://www.southasiaanalysis.org/%5Cpapers23%5Cpaper2207.html>. Last accessed 27 Apr. 2009.
3 Arakan Oil Watch, Blocking Freedom: A Case Study of China’s Oil and Gas Investment in Burma (Oct. 2008), available at <http://www.shwe.org/media-releases/publications/fi le/Blocking%20Freedom%20English.pdf>), p.6.
4 Map from Al Jazeera, “Myanmar Resources Offer Few Riches,” Last updated 31 Jan 2008. <http://english.aljazeera.net/news/asia-pacifi c/2008/01/2008525183751821445.html>. Last accessed 27 Apr. 2009.5 Other companies in the CNOOC-led consortium include China Oilfi eld Services Limited (COSL), China National Petroleum Corporation (CNPC), China Huan Qiu Contracting and Engineering Corporation (HQCEC), Sichuan Petroleum Geophysical Company (SCGC), Singaporean company Golden Aaron Pte. Ltd, and Burma’s Asia World Company and Asia Guiding Star. On October 22, 2004, CNOOC, CNPC, and Golden Aaron signed a production sharing contract with the Myanmar Oil and Gas Enterprise (MOGE), a state-owned oil and gas company to explore the onshore area of Block M.