The project would enable Middle Eastern shippers to reach East Asian markets without risking cargoes along the busy, pirate-prone Malacca Strait.

"Yes, we have agreed to the pipeline," Abdullah told reporters, saying the project was part of the government"s move to develop the much-touted Northern Corridor. "We"ve always wanted to do more for that area, and this also will take care of the Eastern Corridor," he said, confirming earlier press reports.

Malaysia"s News Straits Times newspaper reported May 6 that Trans-Peninsula Petroleum would construct the pipeline, investing up to $7 billion in the project over 8 years. According to the report, the project will involve construction of two refineries with the pipeline crossing three states, linking Yan in Kedah to Bachok in Kelantan.

"The initial phase of 2 million b/d of oil is expected to cost about $2 billion, and the investment will increase to $4.5 billion and $7 billion upon completion of the second and third phases of the project, respectively," TPP chairman Rahim Kamil Sulaiman told the newspaper.

"Investors will also be invited, among them the key oil producers of the Middle East, Islamic funds, and major consumers in East Asia," Rahim said, confirming earlier reports. Last month, a senior Malaysian official said a proposed refinery complex and pipeline across northern Malaysia were at the discussion stage (OGJ Online, Apr. 17, 2007). At the time, Deputy Prime Minister Najib Razak said the proposed project was intended to reduce transport costs and security risks for tankers on the Malacca Strait.

PIN/OGJ.COM