M'sian groups eye RM15b oil project

M'sian groups eye RM15b oil project

Pipeline scheme may cut carriage of oil through the Straits of Malacca

AT least three business groups are jostling for a RM15 billion (S$6.6 billion) oil pipeline project across northern Peninsular Malaysia in a development that could potentially cut the carriage of oil through the Straits of Malacca.

Businessmen familiar with the idea - approved late last year as a 'high-intensity' investment by a committee headed by Malaysian Deputy Premier Najib Razak - say it could also hasten the development of the northern states of Kedah, Perak and Kelantan in line with Prime Minister Abdullah Badawi's vision of a so-called 'northern corridor economic region'.

The three business groups are SKS Development, a private company controlled by tycoon Syed Mokhtar Al-Bukhary; UEM World, a listed company controlled by state investment agency Khazanah Nasional; and Trans-Peninsula Petroleum, a little-known private company controlled by former executives of state oil company Petronas.

The project partly mirrors a long-held dream to use the geography of the northern part of the Malay Peninsula to shorten shipping routes between the Middle East and North-east Asia. As far back as the 17th century there has been talk of cutting a Suez-style canal through the Isthmus of Kra as an alternative to the Malacca Straits. Thailand and London agreed in 1897 not to proceed with a canal to shield the dominance of the-then harbour of Singapore.



More than a century later, the canal idea still hasn't gotten anywhere. It would be hideously expensive at an estimated US$20-25 billion. There could be security issues given sporadic unrest in Southern Thailand.

The condensed Malaysian version of the scheme calls Middle Eastern tankers to moor off Kedah state, from which their oil would be pumped 300-plus km via pipeline to Kelantan, then loaded on to tankers from China, Japan and perhaps Korea on their way home.

The reasons for the plan may have less to do with cost savings than the need for an alternative route to transport oil. Analysts point out that the Straits of Malacca is one of the world's most congested and pirate-prone waterways.

The pipeline bids from the Malaysian groups differ. Mr Syed Mokhtar's proposal is probably the most ambitious, involving building a refinery - already licensed by the Malaysian Industrial Development Authority - on Pulau Bunting, off Kedah, from which oil products would be pumped to Bachok in Kelantan. The UEM World project is said to involve just a pipeline to a new port at Tumpat in Kelantan. Little is known about the Trans-Peninsula bid except that it, too, would involve a pipeline.

Even so, the undertaking would be an expensive and difficult affair, involving land acquisition in three states. But funding may not be a problem. Chinese interests are said to be 'very keen' to participate to promote their country's energy security.