Malaysia seized $330m from Chinese state firm over pipeline project: Mahathir

The seizure comes nearly a year after Malaysia suspended two pipeline projects, valued at US$2.3 billion, on which China Petroleum Pipeline Engineering Ltd was the lead contractor. PHOTO: REUTERS

KUALA LUMPUR - Malaysia has seized RM1 billion (S$330 million) from a bank account of state-owned China Petroleum Pipeline Engineering Ltd (CPP), Prime Minister Mahathir Mohamad said on Monday (July 15), confirming a Sunday Times report.

The report said the Pakatan Harapan (PH) government had earlier this month instructed the funds be seized from a CPP account held with global banking giant HSBC in Malaysia, and transferred to Suria Strategic Energy Resources, a company wholly owned by the Ministry of Finance.

The report, citing lawyers and bankers familiar with the situation, said the order was made in connection to an ongoing dispute involving two multi-billion-dollar energy pipeline projects that were suspended last July. CPP was the lead contractor in both projects.

One was a 600km multi-product pipeline along the west coast of peninsular Malaysia costing RM5.35 billion, and the other a gas pipeline network in Sabah costing RM4.06 billion.

The projects were awarded to CPP in November 2016 by the previous Barisan Nasional government, but have been in limbo since the PH alliance took office in May last year.

Tun Dr Mahathir told reporters on Monday that the funds were seized because CPP was paid for 80 per cent of the projects when it had only completed 13 per cent of the work.

"Since the projects were cancelled, we have the right to get back money for parts that were not implemented," said Dr Mahathir, as quoted by The Star.

Bankers familiar with the situation said certain bank accounts held by CPP, including the monies in HSBC, were frozen by the Malaysian government after the projects were suspended.

CPP, a unit of China's state-owned oil and gas giant China National Petroleum Corp, had confirmed that the funds were transferred out, while the HSBC corporate office in Kuala Lumpur declined comment, citing client confidentiality.

Malaysian media have alleged that the monies initially paid out by Suria were diverted to third-party Cayman Island companies linked to the scandal at 1Malaysia Development Berhad. But CPP has denied those allegations.

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