Malaysia will build a US$7 billion pipeline to transport Middle East oil across the north of its peninsula to East Asian countries, Prime Minister Abdullah Ahmad Badawi said.

"Yes we have agreed," Abdullah told reporters.

Abdullah, who is also the finance minister, said the project was one of the government's major initiatives to develop Malaysia's northern region.

"Anything that happens there is part of that, we take into account all of this. We have always wanted to do more for that area and that also will take care of the eastern corridor," he said.
Abdullah declined to elaborate.

The New Straits Times reported that Trans-Peninsula Petroleum Sdn Bhd, the company that will construct the 194-mile (312-km) pipeline, said it will invest as much as $7 billion in the ambitious project over 8 years.

The pipeline will run from northwestern Kedah state, across Perak state to northeastern Kelantan state which faces the South China Sea.

Chairman Rahim Kamil Sulaiman said the pipeline will bypass the piracy-prone Malacca Strait.

"The initial phase of two million barrels of oil per day is expected to cost about $2 billion, and the investment will increase to $4.5 billion and US$7 billion upon completion of the second and third phases of the project, respectively," Rahim told the newspaper.

Half of the world's oil shipments currently pass through the 596-mile (960-km) strategic Malacca Strait, the busiest seaway in the world.

Last month, Deputy Prime Minister Najib Razak said the proposed project was intended to reduce transport costs and security risks for tankers on the Malacca Strait.

"Investors will also be invited, among them the key oil producers of the Middle East, Islamic funds and major consumers in East Asia," Rahim said.

Rahim said tankers will offload crude oil from the Middle East in the coastal town of Yan in Kedah.

The oil will then be transported through the pipeline to Bachok on Kelantan's coast, for distribution to countries in the East Asian region, he said.

There will be three storage tanks located in Yan, and Jeli and Bachok in Kelantan, while the initial storage capacity of the pipeline will be around 60 million barrels of oil, the newspaper said.

"This will be upgraded later to serve as the regional strategic reserve of the East Asian countries, especially China, Japan and South Korea," it said.

Rahim also said that his company was not involved in the proposed construction of two oil refineries.

Earlier reports said SKS Development Sdn Bhd, owned by tycoon Syed Mokhtar Al-Bukhary, would build a refinery in Yan and another in Bachok, with a pipeline linking the two refineries.

Source: Channel NewsAsia

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