Thai-Malaysia Pipeline Contracts Progress Macro Asean Plan

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). After a decade of off and on negotiations, and environmental and community protests, the Thai-Malaysian element of the Trans ASEAN gas Pipeline (TAGP) finally appears to be going ahead. The selection of companies for the four engineering, procurement, and construction contracts for the pipeline and the gas separation plant have been made by the Trans-Thai Malaysia company (TTM). The company is a joint venture between Malaysia's state oil company Petronas and the Petroleum Authority of Thailand (PTT).

The contracts, which are expected to be signed 'soon' are based on the letter of intent of 2001, where it was estimated that Nacap's (Eelde, Nederland) onshore pipeline contract would come in at $90 million. South Korea's Samsung Engineering's (KSE:00830) (Seoul, Korea) contract for the gas separation plant would be $180 million. Italy's Saipem (MILAN:SAP) (Milan, Italy) offshore pipeline contract would be $100 million and the Italian steel company ILVA (Taranto, Italy) would provide pipeline for $100 million. The letter of intent estimates a total expenditure of $470 million. The project costs have been reported in 2003 as having increased to anything between $560 million and $670 million with the proposed two-unit gas separation plant expected to cost $260 million.

TTM expects the first gas to flow through the 366 kilometer pipeline in mid 2005 after construction starts in early 2004. The pipeline will go onto Kedah state in northern Malaysia after landfall at Songkhla in southern Thailand. It will take the selected companies up to six months to mobilize their equipment and prepare for construction, after the contracts have been signed.

In the $8 billion macro plan of TAGP, seven interconnections have been outlined and endorsed by ASEAN ministers with construction to start on all these projects before or by 2009, and commissioning of the connections to proceed from 2005 to 2016.

The seven pipeline interconnections are:

- Duri-Melaka scheduled for commissioning in 2005
- West Natuna-Duyong construction started early 2001 and now commissioned.
- East Natuna- joint development area (JDA)-Erawan to start construction 2005 and commence operations by 2012.
- East Natuna-west Natuna-Kwerteh-Singapore to start 2003 and operate by 2010.
- East Natuna-Sabah-Palawan-Luzon starting 2008 and commissioned in2015
- JDA-block B of the Malaysia-Thai border (starts in 2009 and commences operations by 20126)
- Pauh-Arun in Indonesia starts 2005 in operation by 2010.

The ten ASEAN members are Brunei, Cambodia, Indonesia, Laos, Myanmar, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. The ASEAN Center for Energy (ACE), an inter-governmental organization, oversees the development of energy resources in the region and facilitates and coordinates the work of the ASEAN council for petroleum, which handles TAGP. Core funding, is provided by an Energy Endowment Fund established from equal contributions of the 10 member countries and managed by a private funds manager.

With over 6,000 kilometers of pipelines in operation and another 7,000 kilometers in the construction and planning stages the ASEAN countries see the demand for natural gas increasing from 12.8 billion cubic meters per annum in 2000 to between 38 billion and 69 billion cubic meters in 2020.

The southern province of Songkhla in Thailand, where the gas separation plant is to be sited, is one of the least industrialized regions in the country with an economy reliant on agriculture and fishing (and the breeding of its famed cooing doves). It has been targeted by the Thai government along with other southern provinces as a new industrial center.

Industrialization is seen as the key to fully developing the economic potential of the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT) and ASEAN initiative to narrow the gap in the levels of development among the ten member states and to reduce socio-economic disparities in the region.