Datuk Seri Abdullah, who is also the Finance Minister, said several companies had submitted proposals to build a pipeline across the country to transport Middle East oil to East Asia, bypassing the congested Malacca Strait.

State news agency Bernama quoted Datuk Seri Abdullah as saying that the project 'is expected to be difficult and the cost involved is very high'.

The apparent shift of stance by the Prime Minister contrasted with earlier remarks by government officials indicating full support for the project.

In early May, when asked by reporters, Datuk Seri Abdullah said: 'Yes, we have agreed to the pipeline.'

He added that the project was a part of the government's move to develop the Northern Corridor involving Perlis, Kedah, northern Perak and the land-side of Penang state.

In late May, Datuk Seri Abdullah and Indonesian President Susilo Bambang Yudhoyono witnessed a memorandum of understanding signed by the Malaysian leaders of the consortium and two Indonesian companies.

The pipeline to transport Middle East oil to North-east Asia was expected to cost US$7 billion (S$10.6 billion).

The 300km line is to run from the Kedah coast across Perak to the Kelantan coast facing the South China Sea.

PM Abdullah said yesterday the private initiative would have to be studied carefully as a lot of factors are involved, including the difficult task of laying a pipeline across the northern mountain range.

The project's promoter, Malaysian firm Trans-Peninsula Petroleum, in May said the pipeline will have facilities for storage and transit of crude oil on both coasts.

Malaysia's Ranhill Engineers and Constructors and Indonesia's Tripatra are to build the pipeline, while Al-Banader International Group of Saudi Arabia will provide the oil, Trans-Peninsula said.

When completed in 2014, the pipeline is expected to divert about 20 per cent of the oil transiting through the Strait of Malacca.

The oil is for the hungry East Asian market, especially China and Japan, its promoters say.

But oil industry players gave only cautious approval to the multibillion-dollar project, citing slowing oil demand in the Asian region and cost concerns.

Some analysts also noted that Malaysian national oil company Petronas has indicated it was not keen on the project.

Petronas president and chief executive officer Hassan Marican, when asked about the plan, said last month: 'We are not eyeing it. We only know what we read in the newspapers about the project.'

Datuk Seri Abdullah said yesterday that detailed studies needed to be carried out since the construction of the marine facilities required huge investments.

'The cost difference between using the oil pipe and a crude carrier to transport the oil will also have to be considered,' he said.

He added that attention must be given to environmental studies, including the risk of pollution in the event of a leak in the pipeline or oil storage tanks.

For large projects in Malaysia, companies have to carry out studies to show that they would not damage the environment.

AGENCE FRANCE-PRESSE