Chinese Oil Company Linked to Human Rights Abuses in Burma (Myanmar)

Contact: 

Paul Donowitz, paul@earthrights.org (Thailand) +66.83.867.5901
Naing Htoo, nainghtoo@earthrights.org, (Thailand) +66.89.444.7041

Landmark Decision Recommends Norway Divest Millions from CNPC Subsidiary PetroChina Due to Risk of Abuses in Burma

Bangkok, Thailand – In a landmark decision released in Oslo this week, the government-mandated Norwegian Council on Ethics (“Council”) recommended the Norwegian government divest US$90 million held in the Norwegian Government Pension Fund Global (GPFG) from the Chinese oil giant PetroChina due to human rights abuses connected to controversial oil and gas pipelines under construction in Burma. This follows a December 2010 report by EarthRights International exposing Norway’s US$ 3.7 billion investments in 15 oil companies linked to human rights abuses in the country’s problematic oil and gas sector, including US$ 457 million invested in companies linked to the controversial Shwe Natural Gas and Burma-China Crude Oil pipelines.

The influential Council on Ethics is a global leader in ethical investment. In its report submitted to Norway’s Ministry of Finance, the Council on Ethics found that:

“[T]he construction of onshore oil and gas pipelines in Burma will entail severe and systematic human rights violations, including forced labour and extensive abuses against the civilian population. Even though it is the Burmese authorities and not the company who in principle will commit the violations, there is a link between the violations and the company’s operations in the sense that the violations take place to facilitate the company’s future operations.”

On Wednesday, however, Norway’s Ministry of Finance declined to act on this recommendation, finding that PetroChina and CNPC should not be regarded as a single entity despite the unity of management between the companies, and financial  that makes them essentially  one company. The Ministry is not obligated to uphold the recommendations of the Council on Ethics, but it rarely rejects them.

“Norway’s decision to continue investing in PetroChina was based on its belief that CNPC and PetroChina should be regarded as separate companies,” said Paul Donowitz, EarthRights International’s Campaigns Director, “and EarthRights International disagrees.” Donowitz added, “It is important to note that the Ministry did not deny that the pipelines posed serious human rights concerns to civilians in Burma. Their stated concern was in the corporate structures.” Donowitz went on, “Norway’s continued investments in problematic oil companies in Burma violates its own Ethical Guidelines, and means that Norway remains complicit in abuses in Burma through its investments in the GPFG.”

The Council predicted that human rights abuses caused by constructing the Shwe Natural Gas and Burma-China Crude Oil pipelines would be more extensive than those associated with construction of notorious Yedana pipeline (1995-1998). French oil giant Total and U.S. energy major Chevron (then Unocal) settled lawsuits alleging complicity in human rights abuses in 2005.

“These new pipelines in Burma are already contributing to systematic human rights abuses,” said Naing Htoo from EarthRights International. “The Council was right to single out the Chinese companies, but it appears they have completely ignored the other companies invested in the project,” he added. “Norway must assess its ties to all the companies involved in the pipelines and take strong action to prevent further complicity by the people of Norway, whose money is being invested in these companies. Until then, Norway is making money from Burma’s suffering.”

The Council on Ethics and the Norwegian Ministry of Finance have given no indication that they are preparing to act on other companies involved, including Korea-based Daewoo International (25%) and its parent company POSCO, state-owned Korea Gas Corporation (4%), and GAIL of India (4%).

Extensive human rights abuses connected to the pipelines to China have been consistently reported by EarthRights International and others, including land confiscation, arrests and intimidation of Burmese citizens opposed to the project, and fighting that erupted in northern Shan State in north-eastern Burma in areas along the upper reaches of the pipeline route between the Burmese Army and non-state ethnic armed groups and has contributed to an estimated 30,000 internally displaced people.

A villager in Gone Chwein, where Daewoo International is constructing the onshore gas terminal and the starting point for the onshore gas pipeline, told EarthRights International in September 2011:

“In January, 2011, the captain, Aye Thaung from Light Infantry Battalion 534 confiscated my two acres of farming land. The reason is that they need that farm to practice for the soldiers in shooting. Of course, they do not use that land to practice for the soldier. They want money for the company Myanmar Golden Crown [hired by Daewoo International].  That area is very closed to the mountain. The captain Aye Thaung and the Land Department went to the company to sell that land. They have already got the compensation from the company. The real owner gets nothing.”

Another villager in Gone Chwein told EarthRights International, in February of 2011:

“When they confiscated my farm, I was very sad. I could not sleep the whole night. Farms are very important in our life. If we don’t have our farm, how we can survive our life? Now we don’t have enough rice because [we only have] one acre [left]....Everything has being destroyed. ”

Recently, the Burmese authorities arrested a number of activists who planned to stage peaceful protests in western Burma, demanding Burma’s vast deposits of natural gas be used to provide domestic electricity instead of being exported to China. In late November, in response to the local opposition to the project, the Burmese authorities in Sittwe, Arakan (Rakhine) State deployed extra police forces around the city. “This intimidated local people from expressing their opposition to the project,” said EarthRights International’s Naing Htoo.

In 2009, an Arakan youth was arrest, tortured, and sentenced to six months imprisonment for organizing awareness raising workshops about the project.  He told EarthRights International: ““[Military intelligence] blindfolded me for four days. For four days I couldn’t see anything. I was beaten nonstop, always being questioned, nonstop for four days..”

EarthRights International renews its call for the Norwegian Council on Ethics to maintain its role as the world’s leader in responsible investment and to enforce its own investment rules by taking immediate action related to companies in the GPFG that are operating in Burma’s oil and gas sector. Immediate action by the Council could be to recommend the Norwegian Ministry of Finance exclude these companies from its Fund, or to recommend the Norges Bank begin active engagement with the companies.

EarthRights International hopes public action on this issue in Norway will encourage other investors to similarly scrutinize their holdings in the oil and gas sector in Burma and ultimately lead to more responsible business practices in the extractive industries in Burma and elsewhere.

News of the Ministry of Finance decision comes days before the expected release of the 2011 holdings by the Norwegian Government Pension Fund Global (GPFG).

Background

The Norwegian Pension Fund-Global is made up of Norway’s oil wealth and is the second largest sovereign wealth fund in the world, exceeding US$ 500 billion.  The Council on Ethics was created to evaluate the holdings of the Government Pension Fund Global and determine whether or not investment in specified companies is inconsistent with the established ethical guidelines. The Ministry of Finance makes decisions on the exclusion of companies from the Fund's investment universe based on the Council's recommendations. 

According to EarthRights International, as of December 31, 2010, Norway has US$ 693 million invested in seven companies involved in the Burma-China pipelines, and nearly US$ 5 billion invested in 15 oil companies operated in Burma.

The projects evaluated by the Council in this case are the highly controversial Shwe Onshore Natural Gas Pipeline being developed jointly by China National Petroleum Co. (CNPC) (China; 50.90%) and Shwe Offshore Natural Gas Project partners Daewoo International Co. (25.04%), ONGC Videsh Ltd. (8.35%), GAIL (India) Ltd. (4.17%), KOGAS (4.17%), and MOGE (7.37%).  On June 25, 2010, CNPC partnered with the companies involved in the Shwe Offshore Natural Gas Project to create the Hong Kong-registered joint venture Southeast Asia Gas Pipeline Co. Ltd. (东南亚天然气管道有限公司), which is the entity that has since represented each of these companies’ participating interests in the Shwe Onshore Natural Gas Pipeline. The Shwe Onshore Natural Gas Pipeline is currently under construction and is slated to come online in 2013.  A separate 771kilometer-long Burma-China Crude Oil Pipeline is also being built by CNPC (50.90%) and MOGE (49.10%) that will run alongside the Shwe Pipeline from Burma’s Arakan State to China’s Yunnan Province, transporting Chinese imports of crude oil from the Middle East and Africa.