Massive Oil Pipeline

$14 billion oil pipeline across Malaysia


A massive Malaysian oil pipeline project to process and pump oil shipped from the Mideast could lower transportation costs and avoid risks of pirate attacks on tankers at the Malacca Strait, Deputy Prime Minister Najib Razak said Tuesday.

The 50 billion ringgit (US$14.2 billion; euro10.6 billion) project would involve building a 320-kilometer (200-mile) pipeline across northern Malaysia, from the port of Kedah on the west coast to the east coast in Kelantan state, officials have said.

Plans also called for one coastal refinery that could process 200,000 barrels daily scheduled to be operational by the end of 2010.

Najib told reporters the project, which could help tankers sidestep the busy Malacca Straits, was still in a discussion stage and has not been finalized.

"There are proposals to have a refinery and a pipeline that will take it across. As far as I know, it is still at a discussion stage. Nothing has been finalized," he said.

"It's primarily for commercial purposes because they think they can transport the oil at a lower cost and also avoid some of the risks relating to heavy traffic at the Straits of Malacca."

Najib didn't say when the project will be finalized.

Kedah officials last week said construction was expected to begin in August.

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 traveling through the Malacca Strait, which lies off peninsular Malaysia's west coast, they said.

There have been global concerns that terrorists could link up with pirates in the Malacca Strait to blow up an oil tanker or use it as a floating bomb, but Najib said such threats were "almost quite negligible because incidences of piracy have no connection to regional and international terrorism."

The strait, which carries half the world's oil and more than a 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.

Investment bank Aseambankers, in a research report earlier this month, said about 70 percent 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, Kedah officials have said.

SKS Ventures already has links with the Middle East oil industry. The company recently signed a US$16 billion (euro12 billion) deal with Iran to develop two gas fields in southern Iran - AP.