Oil Politics in the Bay of Bengal

Hydrocarbon rich Bay of Bengal seems to be emerging as another centre of oil politics. This was recently manifested by a standoff between Myanmar and Bangladesh, when Dhaka sent three naval vessels to stop Myanmar from conducting exploration activities in their disputed Exclusive Economic Zones (EEZs). The crisis has since been diffused, though it is far from over.

Myanmar and India have made major discoveries of oil and gas in the Bay, and Bangladesh is feeling left out of all this action. Probably because of confidence that existing gas resources would meet its needs for decades, Dhaka had felt that there was no need to explore for new gas and oil fields. The lack of interest could also be because of the lack of necessary technology and capital within the country. At the same time, there was unwillingness to collaborate with foreign companies because of the widespread feeling that multinational companies were overcharging for exploring hydrocarbon.

Subsequently, however, Bangladesh has felt compelled to move on this front since its existing gas reserves have proved smaller than anticipated. The country currently produces 1,750 million cubic feet of gas a day (mmcfd) and faces a shortage of nearly 200 mmcfd for daily domestic consumption. But multinational companies have lost interest in exploring gas, given Bangladesh’s reluctance to allow them to sell gas to India – the nearest large market. As a result, there have been no new gas field discoveries since the 1990s. And now in the wake of the Indian and Myanmarese successes in finding oil and gas resources, Dhaka is hurrying to engage in exploration of its own in the Bay of Bengal. The changing energy scene in the Bay of Bengal and the shortage of gas within the country prompted Bangladesh to divide its territorial waters into 28 blocks, which it auctioned off in January 2008.

According to estimates provided by British Petroleum, Myanmar has 21.19 trillion cubic feet of gas reserves or 0.3 per cent of the world’s total, while Bangladesh has 13.77 trillion cubic feet or 0.2 per cent of the world total at the end of 2007. Much of this is located in the Bay of Bengal. Bangladesh has disputes over territorial waters in the Bay with both India and Myanmar. International Law grants every country an EEZ of 200 nautical miles extending from its coast. However, given that the coasts of Bangladesh, India and Myanmar in the Bay follow a curve, there is overlap of the EEZs of the three countries, leading to disagreement on where exactly their respective maritime borders fall. Under the UN Convention on the Law of the Sea (UNCLOS), India and Myanmar have to delimit their maritime borders and file their claims with the United Nations before June 29 and May 21, 2009 respectively, while Bangladesh has to do this before July 27, 2011.

Efforts have been made since 2004 to sort out this dispute over EEZs, but without any success so far. In their last meeting, both Myanmar and Bangladesh agreed that they would not carry out any exploration in disputed territory. But Bangladesh broke this agreement, which led to Myanmar auction off a block (AD-7) to the South Korean company Daewoo, which began exploration work in September 2008. In response, Bangladesh sent three naval ships on November 2, 2008 to stop this activity. At the same time, it also launched a multi-pronged diplomatic effort. Bangladesh approached China and requested it to persuade Myanmar to stop exploration, and at the same time also requested the South Korean government to convince Daewoo to stop work.

Beijing has requested both countries to sort the issue out diplomatically and in an amicable manner, after Bangladesh’s foreign advisor met the Chinese envoy in Dhaka. After a standoff of nearly a week, Myanmar has stopped exploration work in the disputed area, though it claimed that the necessary exploration work has been done and that plans for the remainder of the programme will be on schedule. At the same time, it has started building up armed forces along its land borders with Bangladesh. For their part, Bangladesh’s border guards are preparing for any eventuality. The crisis is thus far from over.

From the Indian perspective, a most important aspect of this crisis is the key role that China seems to have played. Bangladesh sought to influence the Myanmar government through Beijing. It did not bother to even consult India, probably because it has a similar dispute over its maritime borders with India as well. But the fact remains that China is quietly stealing a march over India in its own backyard.