MoF reveals suspicious transactions involving Trans-Sabah Gas Pipeline and Multi-Product Pipeline

PETALING JAYA: The Ministry of Finance (MoF) revealed today that two multi-billion projects, the Multi-Product Pipeline (MPP) and Trans-Sabah Gas Pipeline (TSGP) were done on lopsided terms which led to about 88% of the projects total value of RM9.4 billion paid out, even though only 13% of work on the three-year projects have been executed.
The MPP involves a 600km multi-product petroleum pipeline connecting Melaka and Port Dickson to Jitra, Kedah costing CNY4.53 billion and RM2.53 billion, or approximately RM5.35 billion.The TSGP, on the other hand, was to build a 662km gas pipeline from Kimanis Gas Terminal to Sandakan and Tawau, costing CNY3.08 billion and RM2.14 billion, or approximately RM4.06 billion.
Both projects were awarded to China Petroleum Pipeline Bureau (CPPB) on November 1, 2016 and work started in April 2017.
"We have discovered that the payment schedule for the above contracts are based almost entirely on timeline milestones, and not on progressive work completion milestones. Worse, based on the agreements signed, 85% of the project value would be paid by March 1, 2018," Finance Minister Lim Guan Eng said in a statement earlier.
He said RM4.71 billion and RM3.54 billion for the MPP and TSGP projects respectively have been drawn down and
paid to CPPB. The total sum paid of RM8.25 billion constitutes a staggering 87.7% of the total project value. This is despite an average completion rate of only 13%, with another 2 years of the contracts to go.
The above does not yet include two other consultancy agreements signed for the same projects above worth approximately RM312 million and RM213 million, and a maintenance agreement worth RM476 million, awarded to companies from China,
totalling an additional RM1.0 billion.
Suria Strategic Energy Resources Sdn Bhd, a unit under the MoF set up to undertake the two projects, secured funding from China EXIM Bank amounting to 85% of the project value on March 22, 2017. The balance of the 15% of funds required were
to be raised via sukuk issuance. Both the China EXIM Bank borrowings and the sukuk are secured with Federal Government Guarantees.
MPP and TSGP contracts were negotiated by the Prime Minister’s Department, without involving Treasury officials. The Attorney General’s Chambers confirmed that these contracts were signed despite numerous unanswered questions and red flags raised.
"Based on the highly suspicious transactions above, I instructed my officers to file a report with the Malaysian Anti-Corruption Commission last week. The Prime Minister, Tun Dr Mahathir Mohamad has been briefed on the scandal," Lim said, adding that the Ministry will seek the assistance of China's government to help trace the flow of funds in there, in order to investigate the possibility of money laundering.