Kedah-Kelantan pipeline carrot for Umno men, claims US cable

By Clara Chooi
The Malaysian Insider
Sep 29, 2011

KUALA LUMPUR, Sept 29 — A leaked US diplomatic cable issued in 2007 said that Malaysia’s RM21 billion trans-peninsula oil pipeline was likely launched as a means to reward Umno loyalists with lucrative contracts if Kelantan’s PAS government fell in Election 2008.

The cable pointed out that no Environmental Impact Assessment (EIA) reports were prepared nor economic viability studies conducted for the project as ecological risks were not a major concern to the then Abdullah administration.

“Domestic politics may be a bigger driver for the project than the potential economic payoff,” said the cable, leaked by whistleblower site WikiLeaks and published by the Malaysia Today news portal today.

It said the government viewed the pipeline, which was to run from Kedah to Kelantan, as an opportunity to reward Umno supporters “regardless of whether or not the project makes long-term sense”.

“The refinery and pipeline in Bachok would be seen as a potential Umno deliverable and might just tip the balance in a PAS-controlled state shortly before the election,” the cable said.

It added that such order of business for major projects in Malaysia was “typical”.

“Someone has vision, companies rush in to acquire ‘exclusive rights’ and only after that are feasibility studies conducted, numbers crunched, and environmental impacts (possibly) assessed,” it said.

According to the cable, the proposed 309km pipeline launched in 2007 was to run from Yan in Kedah to Bachok in Kelantan, with a storage facility in Jeli. The first phase of the project, estimated to cost some RM7 billion, was to be operational this year in order to finance phases two and three, it added.

But it claimed numerous oil and gas industry experts had already expressed doubt over the feasibility of the megaproject, which was to be developed by Trans-Peninsula Petroleum Sdn Bhd (TPP), a “small, loss-making company owned by two little-known Malaysian businessmen”.

TPP, it said, was not listed on Bursa Malaysia and “parliamentary sources” had characterised the company as a “very small entity” registered in Perak with a listed capital base of RM150,000.

One shipping industry executive reportedly told the US envoy that he was sceptical of the project’s economic viability, given the high costs involved in building it and the minimal time and distance saved.

“However, he pointed out that economic viability might not be the driving factor. Rather, he saw the project as part of a broader attempt by Malaysia’s leaders to cosy up to the Islamic world,” he said.

The cable added that a local executive working for a large energy company here had also claimed of speculation that TPP was merely a “front company for someone else” and expressed doubt over how a “small, unknown company” could have the capacity to develop the massive, multibillion ringgit project.

“At this stage, deals have been struck on paper, but there appears to have been no solid analysis of the economic viability or the environmental risks of this project.

“However, these might not be the deciding factors. If Malaysian federal and/or state governments step in to assist, construction contracts and other deliverables to favoured parties may become more important than the payoff from the completed project,” the cable said.

According to a media report last year, Putrajaya announced on March 31 the cancellation of the pipeline project and the withdrawal of the approval in principle granted to TPP.

  1. #1 by Loh on Thursday, 29 September 2011 - 8:21 pm

    The refineries are stationed at the two ends of the pipeline. So the only attraction the refineries offer is the shorter time taken for oil to flow along the 309 KM of pipeline compared to the 1500 km around the coastline of the Peninsular. It was estimated that a very large vessel carrying 200,000 barrels of crude oil will take up to 40 hours to unload it, say at Yan. Together with the time for the oil to flow across, and to upload from the other end at Bachok, it would take up to 100 hours for the vessel to be filled-up. That might be the same time for the vessel to complete its journey from Kedah to Kelantan, without having to make use of the RM 7 billion facilities. So the pipeline makes no economic sense, when it is used solely to transport oil produced by other countries. No wonder Petronas is not involved in the project.

  2. #2 by yhsiew on Friday, 30 September 2011 - 12:08 am

    Blatant daylight robbery of taxpayers’ money!

  3. #3 by boh-liao on Friday, 30 September 2011 - 12:10 am

    No big surprise what, standard practice of UmnoB, dat’s Y they want NEP mah, kaya raya

  4. #4 by HJ Angus on Friday, 30 September 2011 - 5:39 am

    Here is what I wrote at the time.
    This type of mega-project that is rushed through has unintended results like the Crooked Bridge of JB.

  5. #5 by waterfrontcoolie on Friday, 30 September 2011 - 6:11 am

    Without doubt, it was numbskull ptoject to start with. What saving could be derived from such distance? The Bapa Economiy Malaysia must be behind such grandeur thinking then. While we thought of all such crony and money=wasting projects, our neighbour up North has steadily implemented its logistics related projects which will steal our glorified piratized ports into secondary ports. Under the Greater Mekong Region plant, it would appear that Thailand will become the main logistics hub for movements of goods from and into the Southern and Western regions of China; with this project in mind, you can forget about getting them to create the Kra Canal. The Boleh syndrome has created self-imagined self-greatness and thought others are equally foolish and wanton, let’s see what the 2020 programme bring in 0 years’ time!!

  6. #6 by boh-liao on Friday, 30 September 2011 - 8:46 am

    NEP benefits d rich UmnoB Malays, makes them richer, while d poor Malays remain poor

  7. #7 by dagen on Friday, 30 September 2011 - 9:30 am

    So our Mr Clean really was a coffer cleaner in disguise huh. Woow. How stupid for those of us who were duped into voting him and giving him big time victory in GE11. Not again, umno. Not this time, jib. The duping trick is spent (thanks to Mr “Not So” Clean); and it is now completely unusable.

  8. #8 by Loh on Saturday, 1 October 2011 - 1:19 am

    PKFZ was thought to be the vehicle for making easy money from the Middle East investors. Now the government has to bear a RM 12 billion debt.

    The oil pipeline was a scheme to milk Middle East oil funds. We have not heard about the cost of land purchase yet. PKFZ grew from a RM 1 billion project to RM 12 billion debt. The RM 7 billion pipeline will soon cost the government RM 70 billion. Has the Saudi Arabian investors withdrawn from the project yet? Was Middle East investment only a story to deceive the PM, such as the former MCA minister was charged?

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