Malaysia plans refineries and pipeline to cater for Middle East oil

Malaysia will soon start building two refineries and a pipeline to process and pump oil from the Middle East -- a major project that could help tankers sidestep one of the world's busiest shipping routes, an official said.
Investors from China, Iran and Saudi Arabia will each take a stake in the ringgit 50 bn ($ 14.2 bn; EUR 10.6 bn) initiative in northern Malaysia, according to a government official in the north-western state of Kedah. Construction should begin in Kedah in August, with at least one coastal refinery that can process 200,000 bpd scheduled to be operational by the end of 2010, the official said.

The creation of the 320-km (200-mile) pipeline, cutting from Kedah to north-eastern Kelantan state, would allow Middle East oil shipments to reach the South China Sea without travelling through the Malacca Strait, which lies off peninsular Malaysia's west coast. The strait, which now carries half the world's oil shipments, is shared by Malaysia, Indonesia and Singapore. It is notoriousfor robberies and kidnappings by pirates, but attacks have fallen following increased security patrols in 2005.
About 70 % of the funds to build the refineries and pipeline will likely come from foreign direct investment, creating "ample opportunities of income and job creation for growth and development," investment bank Aseambankers said in a research report earlier this month.

The crude oil will be moored off Kedah, refined and be transmitted through the pipelines to Kelantan and subsequently be loaded on to tankers and shipped to South Korea, China and Japan, bypassing Singapore, the report said. However, laying the pipes could be an "arduous and challenging feat," the report noted, stressing that environmental and land issues would need to be addressed.
Malaysia's national oil-and-gas company, Petronas, is not involved in the project because the crude oil would be coming from the Middle East, not Malaysia, Aseambankers said.

Malaysian firms Merapoh Resources Corp. and SKS Ventures will build the refineries, while Trans-Peninsula Petroleum will construct the pipeline, the Kedah official said. The entire project's deadline will be finalized later, he said.
SKS Ventures already has links with the Middle East oil industry. The company recently signed a $ 16 bn (EUR 12 bn) deal with Iran to develop two gas fields in southern Iran.