Malaysia to build oil pipeline so ships can bypass Malacca Strait

KUALA LUMPUR, April 10 Kyodo

Malaysia will begin construction of two oil refinery plants and a pipeline cutting across northern Malaysia in August, a project that will offer an alternative to the Malacca Strait in transporting oil from the Middle East to China and Japan.

The official news agency Bernama quoted northern Kedah State Chief Minister Mahdzir Khalid as saying that under the 50 billion ringgit ($14.5 billion) project, one oil refinery plant will be built in Yan in the west coast of Kedah and another in Bachok in the northeastern Kelantan State, with a pipeline linking both.

Tankers carrying oil from the Middle East will be able to anchor off Kedah, with their oil cargos being pumped through the 320-kilometer-long pipeline to Kelantan to be loaded into tankers from neighboring countries like China, Japan, or South Korea.

Mahdzir was quoted as saying that two local companies -- SKS Development Sdn. Bhd. and Merapoh Resources Corporation Sdn. Bhd. --will build the oil refinery plants while another local company Trans-Peninsula Petroleum Sdn. Bhd. will construct the pipeline.

The first phase of the project, the building of the refinery plants, is expected to begin in August.

The project in Yan alone covers an area of 600 hectares and will involve land acquisitions and the relocation of 300 households. The state government plans to launch a campaign touting the benefits of the project to the Yan residents.

''If we don't explain early, the government will have difficulty implementing the project,'' Mahdzir was quoted saying.

Funding will not be a problem as the project has attracted investments from the National Iranian Oil Co., which will partner with SKS Development in the construction of the oil refinery plant.

Investments are also coming in from Saudi Arabia and China, Mahdzir said.

Presently, oil from the Middle East has to pass through the narrow Malacca Strait, one of the busiest shipping lanes in the world, to get to countries in Northeast Asia like China and Japan.

More than 50,000 commercial vessels ply the strait each year including vessels that carry some 90 percent of Japan's energy supply.

Congestion aside, the strait is infamous for its piracy problem although tightened enforcement by Malaysia, Indonesia and Singapore, the three countries that share borders along the strait, has successfully curbed the menace.

COPYRIGHT 2007 Kyodo News International, Inc.
COPYRIGHT 2008 Gale, Cengage Learning