April 19, 2007

Malaysia to build $14B oil pipeline

KUALA LUMPUR, MALAYSIA

A proposed oil pipeline project to pump oil across northern Malaysia could lower transportation costs and avoid risks of pirate attacks on tankers.

The US$14.2-billion project would involve building a 320-kilometre pipeline across northern Malaysia, linking ports on the two coasts, officials in northern Kedah state announced.

Kedah officials have said construction is expected to begin in August.

The plans, which have yet to be completed, also call for at least one coastal refinery that could process 200,000 barrels daily scheduled to be operational by the end of 2010.

Crude oil would be refined in Kedah, pumped through the pipe to Kelantan on the east coast and then loaded onto tankers bound for Japan, China and South Korea, completely bypassing Singapore and the Malacca Strait, which lies off peninsular Malaysia’s west coast.

The strait, which carries half the world’s oil and more than one-third of its commerce, is shared by Malaysia, Indonesia and Singapore. It is notorious for robberies and kidnappings by pirates, but attacks have fallen following increased security patrols in 2005.

Investors from China, Iran and Saudi Arabia are expected to take a stake in the project, which will allow Middle East oil shipments to reach the South China Sea without travelling through the Malacca Strait.

Investment bank Aseambankers, in a research report earlier this month, said about 70 per cent of fund for the pipeline project would likely come from foreign direct investment.

However, it warned laying the pipes could be an “arduous and challenging feat” as environmental and land issues would need to be addressed, the report said.

Malaysian firms Merapoh Resources Corp. and SKS Ventures will build the refineries, while Trans-Peninsula Petroleum will construct the pipeline.

ASSOCIATED PRESS

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