Malaysia Warns ASEAN Partners Of Supply Threats

Malaysia, an oil producer and promoter of a massive regional gas pipeline, yesterday urged fellow Asean nations to increase energy cooperation in the face of threats to supply.

"The current risk of supply disruption is very real and may perhaps carry greater repercussions than the 1973 oil embargo," Malaysia's Deputy Prime Minister Abdullah Ahmad Badawi told an energy conference.

"Asean should review the Asean petroleum security agreement ...to minimise exposure towards emergency situations owing to short term shortages in petroleum supply," Abdullah said.

He cited the Israel-Palestinian crisis, threats of terrorism and high-running tensions between India and Pakistan as factors that could lead to supply disruptions.

The two-day Seventh Asia Oil & Gas Conference is the first major gathering of Asian oil company leaders since the September 11 attack on the U.S.

Politics and economic factors largely outside the industry's control have rocked oil prices since the September assaults and sent them swinging between $18 and almost $30 a barrel.

Asia pumps only around one-third of its crude requirements of some 20 million barrels per day (bpd) and is dependent on the Middle East for 70 to 80 percent of imports.

President and CEO Hassan Marican of Malaysia's state oil company Petronas, said measures underway include a review of the Association of South East Asian Nations oil security agreement and closer upstream cooperation.

"What the 21st century oil and gas industry needs is not only a dynamic business plan, but also real time strategies that could swiftly respond to different scenarios," Hassan said.

He said the Asean energy security pact needed urgent review following expansion of the the group of Southeast Asian countries .

"The key thing is that Asean today is made up of 10 member countries compared to the four or five countries when this concept was introduced," Hassan said.

"It's timely for this provision to be relooked, redefined. It would result in a new set of understanding."

Hassan did not detail the arrangement but said it calls on member countries to provide mutual help during times of supply gaps. Only four Asean countries - Malaysia, Indonesia, Vietnam and Brunei - export crude oil.

Hassan said the petroleum security agreement had been activated only several times in the last 30 years, most recently when Indonesia's Arun liquefied natural gas plant was down after ExxonMobil withdrew staff because of local unrest.

The Malaysian deputy prime minister said border politics should be downplayed where energy is concerned.

"We need to speed up in implementation of cross-border oil and gas supply infrastructure," Abdullah said.

Malaysia, through Petronas, has championed the massive Trans-Asean gas pipeline project as well as recent cooperation with Indonesia, Thailand and Vietnam to explore for oil and gas in common areas.

Japan, Asia's largest oil consumer and virtually entirely import dependent, however, appeared not to share Malaysia's appetite for regional oil security cooperation.

"I don't think so. We have energy dialogue, not security," Kazuo Matsunaga, Director general of Japan's Agency of Natural Resources and Energy said.

Meanwhile, Petronas said yesterday it was interested in acquiring British Petroleum's stake in Singapore Refining Company (SRC).

Petronas president and chief executive Hassan Marican said it was known that BP planned to divest its downstream assets in the region, including its one-third stake in Singapore's smallest refinery SRC.

"If the opportunity exists, we as a major downstream player in Malaysia and in the region would be interested to consider it," he told reporters on the sidelines of the conference.

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