Daewoo International is contemplating the initiation of legal proceedings against the Burmese military regime following the junta’s decision to sell natural gas from the A-1 and A-3 blocks in the Arakan offshore area to China, according to a report by Indian Petro.

It is unclear what type of legal action is being considered, or what jurisdiction it would fall under.

South Korean and Indian firms, including Daewoo International, face heavy losses if natural gas from blocks A-1 and A-3 is sold to China. The proposed sale will be at a rate marginally over the $4.00 per million British thermal units (mBtu) agreed upon in an MoU signed by Burma and China on March 14, 2007. The gas should fetch at least $4.41 per mBtu, says Amitav Ranjan of the Indian Express newspaper.

Daewoo’s stock dropped more than 3 percent after the news emerged that China was picked to receive the gas.

Daewoo wants the consortium to be engaged with downstream projects of A-1 and A-3 blocks, including payment of a tariff from the proposed Chinese pipeline, the report says.

The report also claims that Daewoo has plans to offer an economic package to counter the latest Chinese offer to buy the gas from these blocks. This is Daewoo’s biggest energy project, and development costs for the gas fields are estimated to be between USD 2-3 billion.

Burma’s A-1 and A-3 blocks contain up to 10 trillion cubic feet of gas, which are planned for production starting in 2009, despite the fact that the potential end uses and modes of transport are as of yet officially undecided.

South Korea and Japan hoped to lift 2.7 tons of liquefied gas a year from these wells, in order to reduce their reliance on Middle East energy, while parties from India and Thailand have been wooing Burma to pipe the gas to them.

Analysts observed that the Burmese regime offered its gas to China due to its permanent position and veto power on the United Nations Security Council, where the United States has often been critical of Burma’s human rights record, and where China has effectively defended the regime.

Daewoo is the operator of the A-1 and A-3 blocks located offshore of Arakan State, with a 60 percent stake, while Korea’s KOGAS has a 10 percent interest. The remaining is held by India’s ONGC, which has a 20 percent stake, and the Gas Authority of India (GAIL), which has a 10 percent stake.