Jun 13, 2007

Experts cautious on oil pipeline project

I wonder whether this is going to be classified as MEGA PROJECT?. Remember 2004 election manifesto, anyone?. From the opinions given by experts, hopefully this project will not turn out to be another white elephant.


Photo from MalaysiaKini


(AFP) Oil industry players have given only cautious approval to Malaysia's multi-billion-dollar northern pipeline project, citing slowing oil demand in the Asian region and cost concerns.

The owner of the project has said it will cost seven billion dollars over seven years to build, with the aim of transporting Middle East oil to East Asia by diverting it from the congested Malacca Strait.

"It saves you some money but it also costs a lot to build the pipeline," the chairman of the Asia Oil and Gas Conference, Fereidun Fesharaki, told AFP on the sidelines of the meeting, which has just been completed.

"Studies should be done to see if it is really economical," he said.

The project's owner, Malaysian firm Trans-Peninsula Petroleum, last month said the 300-kilometre (188-mile) pipeline will cut across the north of Malaysia's peninsula with facilities for storage and transit of crude oil on both coasts.

The oil will come mainly from the Middle East and also Africa for the East Asian oil market, especially oil-hungry China, the company said.

However, Fesharaki, an expert on Asia-Pacific energy markets and a former energy adviser to Iran's prime minister, downplayed rising energy demand in Asia.

With the exception of China, demand for oil in the rest of the region is slowing because of higher prices, he said.

"The pipeline assumes that demand will explode, but demand will not explode. That's the real story," he added.

The pipeline development will be complemented by the construction of two refineries in northern Kedah state on Malaysia's west coast, according to the state's chief minister.

Officials from Iran's state oil company said during the oil and gas conference that the firm will invest in the construction of one of the refineries.

They will also put money into a separate pipeline to transport Iranian-supplied crude from ships berthed in deeper waters off Malaysia's west coast to the refinery.

Ghanimi Fard, the executive director for international affairs with the National Iranian Oil Company (NIOC), said the success of the trans-peninsular pipeline would depend on the amount of oil demand from East Asia.

"When we had a growing market for energy, it made sense but based on today's information ... we may not be as sure of the viability of this pipeline," he said.

Koh Ban Heng, the chief executive of Singapore Petroleum Company Limited, said the pipeline was a good alternative to the Malacca Strait, but expressed concerns over the cost of the project.

"We would welcome the pipeline for the sake of energy security because of the limited capacity of the Malacca Strait (but) a big company has to get involved in this, as the capital expenditure is huge," Koh told AFP.

Malaysia's Prime Minister Abdullah Ahmad Badawi first announced the development last month as part of the government's efforts to develop the country's northern region.

Trans-Peninsula has said the pipeline project will be operational by 2011, with a maximum capacity of 180 million barrels of storage and six million barrels per day throughput.

Malaysia's Ranhill Engineers and Constructors Sdn Bhd and Indonesia's PT Tripatra are to build the pipeline, while Al-Banader International Group of Saudi Arabia will provide the oil, Trans-Peninsula said.

On completion in 2014, the pipeline will divert about 20 percent of oil transiting through the Strait of Malacca, it said.

Half of the world's oil shipments currently pass through the 960-kilometre strait, the busiest seaway in the world, which links the Indian Ocean and the South China Sea.

The Strait was notorious for pirate attacks but security officials, who fear the economic and strategic ramifications of any disruption to the vital maritime traffic, say security has vastly improved, though threats remain.

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1 comment:

Anonymous said...

The real objective of the pipeline is to take out Kelantan's recently discovered inshore (read: atas darat/on land) oil reserve and process it in Kedah, thus Kelantan is not entitled to any royalty or 'wang ihsan' from the oil revenue. And oil royalty + good governance = actual development, as oppose to Terengganu's condition before 1999 i.e. oil royalty + not-so-good governance = povetry. It takes the loss of the state for Terengganu's BN to wake up and bring some development to the people.

The 'attraction to invest'e.g. pirate attacks, terrorist hijacking oil tanker, or even closure by foreign power to cut off oil supply to China are just bogus threats meant to justify the mega project.