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Crude supply to PetroChina Yunnan via China-Myanmar pipeline steady despite political crisis

Highlights

About 7 mil barrels of crude discharged since coup

Refinery operating smoothly

Petrochina Yunnan reliant on crude supply via pipeline

Singapore — PetroChina's Yunnan Petrochemical continues to receive a steady supply of feedstock through the cross-border China-Myanmar crude oil pipeline despite logistical constraints arising from the political crisis in the Southeast Asian nation and the US' targeted sanctions on Myanmar's military leaders.

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"The crude pipeline transmission is going smoothly, not affected by the disturbance [from Myanmar]," a refining source with Yunnan Petrochemical said on March 8.

The 13 million mt/year refinery gradually resumed operations in late January after maintenance and its run rate was 77% in February, according to S&P Global Platts data.

The VLCC Xin Run Yang has discharged 1.97 million barrels of Kuwaiti crude over March 2-5 at Kyaukpyu, Maday Island in Myanmar, from which the China-Myanmar pipeline begins, data intelligence from Kpler showed. The 22 million mt/year transnational pipeline connects with China's domestic pipeline to carry feedstock to the refinery located in Anning city, Kunming.

This was the fourth cargo discharged at Kyaukpyu since early February when the military coup was staged, bringing overall discharged volumes to about 7 million barrels since then, according to the Kpler data. Two more VLCC cargoes are scheduled to arrive at Kyaukpyu in March, each loaded with Saudi crude and Iraq's Basrah light.

THREAT

However, another source with PetroChina warned that the uncertainties in Myanmar remain a threat to the supply of crude to Yunnan Petrochemical.

The China-Myanmar pipeline, which was launched in April 2017, is seen as a strategic channel for China to meet its energy needs.

It allows China to bypass the busy Straits of Melaka, and transport oil from the Middle East, Europe and Africa via the Bay of Bengal by reducing the shipping time by more than a third.

The land-locked Yunnan Petrochemical, PetroChina's youngest refinery which was launched in August 2017, relies heavily on crude supplied through this pipeline.

A disagreement over tariff payments for the cross-border pipeline with Myanmar had reportedly been a hurdle to its start up.

The situation in Myanmar has been uncertain for foreign companies with operations in the country since the military seized power from its civilian government in the week ended Feb. 6. Protests have erupted in towns and cities, and there is a strong likelihood of sanctions against the military government.