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Malaysian pipeline offers Malacca alternative

Kuala Lumpur: Malaysia has confirmed that it will build a 312 km pipeline that will transport Middle East oil across the northern neck of its country from Yan in Kedah to Bachok in Kelantan.

The pipeline, connecting oil terminals in the two provinces, will allow shipping companies to bypass the piracy-prone Malacca Strait that runs southeast towards Singapore, and over 2000 km of sea travel on route to Asia.

The Malaysian Prime Minister Abdullah Ahmad Badawi told reporters that it has given the green light to the $7 billion project that will be built by Trans-Peninsula Petroleum.

Half of the world's oil shipments currently pass through the 960-kilometre Malacca Strait, the busiest seaway in the world. 85% of Japan's oil needs flow through the Malacca Strait.

Oil analysts gave a cautions welcome to the news, but suggested that the oil and shipping industries will have to study the details of the project before deciding whether it represents a solid commercial opportunity.

Yin Shao Yang, oil and gas analyst with Kenanga Research, told newswire AFP that any move to smooth the flow of oil from the Middle East to China would is a positive development, but cautioned that the "economics of the oil pipeline project is not determined yet."

"Let's say they want to transport Middle East oil to China, will it be cheaper through the oil pipeline and refining it in Malaysia or through Singapore. This is the burning question," he said.

"If it is cheaper by sea, oil tankers will go to Singapore," he added in an AFP report. [10/05/07]


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