Thursday, July 15, 2010

Plan for LNG pipeline from Malaysia to South Korea

PRIVATELY-OWNED Distinct Objective Sdn Bhd has put up a plan to lay some 4,000km of subsea liquefied natural gas (LNG) pipeline from Malaysia to South Korea, a project with an estimated worth of US$50 billion (RM160 billion) and said to be the "missing link" for the Trans Asean Gas Pipeline (TAGP) project.

Its president and chief executive officer Shaharuddin Abd Manan said the establishment of such a pipeline project would complement the TAGP project, which currently involves only gas producers within the Asean grouping.

"Some said that TAGP is a pipe dream. They only talk about gas producing but never about the commercial side.

"On the other hand, our Trans Oriental Gas Pipeline (TOGP) project is a commercial line. That is why we called it the private sector and private funding. We have found the missing link for TAGP," he told Business Times in an interview in Kuala Lumpur recently.

If the plan materialises, TOGP will deliver LNG to primary users of gas in China, Japan, South Korea and Taiwan, which consumed a combined 68 per cent of natural gas production in the world.

TOGP is an undersea LNG pipeline project, which spans over a period of five years and expected to be completed within 60 months. The 36-inch diameter undersea pipeline will stretch about 4,000km off the coast of Malaysia to China, Taiwan, and South Korea and later expanded to Japan.

Shaharuddin said Distinct Objective's aim to embark on TOGP is to serve as one of the offshore connecting pipelines for the transportation of LNG in the Asean and Asian regions.

"Both buyers and sellers will have the use of TOGP to transport their LNG," he said, adding that the LNG business is estimated to be worth over US$119 billion (RM380.8 billion) next year.

Shaharuddin said currently, Distinct Objective is in the process of identifying the engineering, procurement and construction (EPC) contractors and Environment Impact Assessment consultants.

"We have also signed up a number of memorandums of understanding (MOUs) and memorandums of agreement with interested parties relating to the supply of pipes and investment in order to launch the project.

"It is proposed that the commencement of the project will take place in the first quarter of 2011 and to be completed by 2015," he said.

Shaharuddin said Distinct Objective is close to securing a deal with pipe manufacturers from India and China, namely Welspun Gujerat Steel Rohren Ltd (Welspun) and Panyu Chu Kang Steel Pipe Co Ltd (PCK) respectively to supply customised pipes for the TOGP project.

"We have signed an MOU with Welspun and PCK in April and January respectively this year and expect to sign an agreement with them soon," he said.

He said Welspun is expected to supply some 2,500km of pipes for the first phase of the TOGP project, spanning from Malaysia to North Vietnam, while PCK for another 1,500km for the second phase of the project, spanning from China to South Korea.

At the same time, he said DOSB is negotiating with Det Norske Veritas (DNV), a global provider of services for managing risk, to become its engineering consultant.

"DNV, an international standard certificate authority, will design the customised pipes and submit the data to Welspun and PCK who will produce the pipes based on recommendations and specifications.

"It should be noted that to transport LNG, the temperature should be below zero degree celcius. Thus, we need to customise the pipes and acquire an international accreditation or certification from a well respected and recognised standards consultants," he said.

Shaharuddin also said the TOGP, which will serves as the main independent pipeline, will be connected with other pipelines to be constructed by companies or EPC contractors from the participating countries.

"We will allow companies from these participating countries to tap their respective pipelines to our main pipeline. Definitely, this would provide a spin-off economics to participating countries," he said.

For instance, he said, the transfer of LNG technology into Malaysia in building the pipeline would benefit many areas of activity including engineering, information technology, gas, transportation, communications and bring about employment opportunities to more Malaysians involved or interested in participating in these areas.

On funding, Shaharuddin said a number of MOUs have been entered into with contractors in China, India and South Korea and new ones are being worked out in other Asian countries, including Japan.

"Funding arrangements made for the project are progressing as planned and upon completion of the project, the contractors are to hand over the pipeline to Distinct Objective," he said.

He said the utilisation of offshore pipeline is considered a faster, cheaper, safer and cleaner mode of transportation of LNG with minimum risk involved.

"The competitive advantage of using pipeline to ship LNG is its ability to reduce delivery time, minimise storage time and reduce loss of cargo during transport," he said, adding the Malaysian government is aware of the TOGP project, although the project will be located within international waters.

Distinct Objective has also obtained the approval from the Malaysian Security Council.

By Kamarul Yunus
Business Times

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