On Aug 9, 2006, the military junta of Burma signed an agreement with Malaysia's national oil corporation to conduct a feasibility study on refining and transporting natural gas to neighbouring countries.

State-owned New Light of Myanmar reported that the memorandum of intent with Petroliam Nasional Bhd (Petronas) of Malaysia was to study commercial and technological issues related to selling natural gas from Burma through pipelines to neighbouring countries.

The agreement was also to consider the prospects of manufacturing liquefied natural gas from existing and potential future deposits in Burma.

Petronas had officially revealed its role in the Yetagun Gas project on Aug 19, 2002, saying it had been awarded four Production Sharing Contracts (PSCs) for Blocks M-15, M-16, M-17 and M-18 in the Tanintharyi area, off southern Burma.

Under the PSCs, Petronas Carigali Myanmar II Inc - a wholly-owned subsidiary of Petronas Carigali Sdn Bhd, the exploration and production arm of Petronas - would hold 100 percent equity in the four blocks and would be the operator for these blocks.

In the event of commercial discovery, the Myanmar Oil and Gas Enterprise (MOGE) would have the option to participate with equity of up to 20 percent during the development and production phases of the blocks.

These contracts were signed in Yangon by Petronas president and chief executive Mohd Hassan Marican and Burma's Deputy Energy Minister U Tin Tun. The ceremony was witnessed by then Malaysian premier Dr Mahathir Mohamad and Burma's Secretary 1 Lt-Gen Khin Nyunt.

Profitable field

Petronas' involvement began when it acquired a 30 percent interest in the project in 1997 from Texaco Inc. The project covers a production area designated Blocks M-12, M-13 and M-14 in the Gulf of Martaban.

Its partners are Petroleum Authority of Thailand E & P International (14.17 percent), Nippon Oil (14.17 percent) MOGE (15 percent) and Premier Petroleum Myanmar Ltd (27.67 percent).

Premier Petroleum, which operates the project, is a wholly owned subsidiary of Premier Oil Ltd - an associate company of Petronas. Premier became the first oil company to sign an exploration deal with Burma's military for exploration of the Yetagun offshore gas field in May 1990.

Its partners comprised Petronas, Nippon, Petroleum Authority of Thailand and MOGE. Premier's share in the consortium was 26.67 percent. A US$650 million capital investment was required to finance the project and the gas started flowing in May 2000.

The Yetagun field is currently producing 200 million standard cu ft of gas per day. It is estimated the field will continue to produce gas for at least 20 years. UK energy consultants, Wood Mackenzie, have estimated that Burma's earnings from Premier's Yetagun field will be around US$823 million through 2025. But Premier Oil pulled out of Burma in September 2002.

Petronas Carigali Myanmar Inc owns a 40.9 percent stake in the Yetagun field.

Adding to suffering

The award of the four blocks reflects Petronas' serious commitment to strengthening its presence in Burma and building strategic partnerships in the country's oil and gas fraternity.

In their partnership with the Burmese military government, Petronas and the Malaysian government are said to be guilty of working against the interests of democracy, human rights and environmental protection, especially in Arakan State in western Burma.

Any government, company or financial institution involved in the project will be responsible for perpetuating the severe environmental and human rights abuses that the people of Burma suffer under authoritarian rule.

In the early 1990s, the Burmese government partnered with oil companies Unocal of US and Total of France to construct the Yadana and Yetagun pipelines through southern Burma.

This large project had a disastrous effect on the people, as it led to increased militarisation and systematic human rights abuses by the military.

Forced labour was widely used along the pipeline to build access roads, helipads and military barracks; land was confiscated from local farmers; entire communities were forcibly relocated; and Burmese soldiers committed rape, torture and extrajudicial killings.

In an unprecedented victory for human rights, Unocal in 2005 agreed to pay an undisclosed sum in compensation to Burmese villagers who had sued the firm in the US courts for complicity in forced labour, rape and murder.

This victory hinged on the fact that there was clear evidence that Unocal knew that the military government held a poor human rights record prior to joining the project, thus making it complicit in the egregious abuses directly associated with the project.

Failed responsibility

Petronas' involvement in Burma raises a serious question about its Corporate Social Responsibility (CSR), and is also seen as inconsistent with the government's position on the human rights and democracy situation in Burma.

The CSR concept closely resembles the business pursuit of sustainable development. It involves integration of corporate structures and processes to create innovative and pro-active solutions to societal and environmental challenges.

Human rights compliance is becoming a strategic importance in bench-marking CSR. Human rights are the thread running through the economic, environmental and social standards that form the 'triple bottom line'.

This is a commitment increasingly expected of companies by the market, governments and courts.

It is regrettable that Petronas has ignored its CSR and openly contributed to the problems in Burma. Could this be part of the corporate culture that Petronas inherited from Mahathir who is known to have ignored human rights principles during his premiership?

It is time for a regime change in Petronas and for Malaysia to end a legacy that remains a point of hypocrisy in its aspirations to bring democracy and human rights into Burma.

K SHAN is a human rights activist attached to various organisations working with refugees.