The deal signed on Monday highlighted how Burma has exploited the energy needs of its two biggest neighbours, India and China, to weaken western sanctions.
Both Asian giants have made substantial investments in the country. Burma possesses significant untapped natural gas reserves off its coast.
India has also provided supplies for and helped to train Burma's military in the hope that it will act against anti-Indian rebels who slip between the jungle border shared by the two countries.
Earlier this month the Indian foreign minister, Pranab Mukherjee, refused to put pressure on the Burmese junta to take steps towards democracy.
"The cardinal principle of our foreign policy is non-interference in the domestic affairs of any country," he told reporters in Bangkok.
British officials in India have been exasperated by New Delhi's realpolitik handling of the situation. One official recently told the Guardian that India had "put aside preaching for essentially strategic reasons".
