Malaysia Freight Transportation Report Q2 2008

Iran's Pars Oil and Gas Co. (POGC) and Malaysia's SK Ventures signed an agreement late in December to develop the large Golshan and Ferdows gas fields in southern Iran. Total investment in offshore and onshore development, including the construction of an LNG (Liquefied Natural Gas) plant, was estimated to range up to US$16bn. The significance of the deal was that it represented an eventual major new source of demand for LNG tanker freight. The Golshan field, some 65km from Iran's Busherh port, is believed to have 50 trillion cubic feet (tcf) of gas reserves with potential output of 2.5bn cubic feet/day (cfd), while Ferdows has reserves of 10 tcf and potential output of 880mn cfd. Iranian Oil Minister Gholam Hossein Nozari said the deal was one of the biggest in the Iranian energy sector and reflected growing oil and gas import demand from the Asian region. He also said it showed US efforts to isolate his country, due to the dispute over Iran's nuclear programme, were failing. Politics aside, for the Malaysian freight sector it represented a significant boost to future shipping. BMI's newly released Malaysia Freight Transport Report concludes that in terms of freight carried, shipping traffic will grow by an average 7.3% per year in 2008-2012. The total number of containers handled at Malaysia's ports will grow more strongly at 10.5% per year. The continuing export drive and the dynamism of China and other regional trading partners will underpin strong demand.

We now expect total freight carried, measured in million tonnes-km (mntkm), to grow by an annual average of 6.7% over the 2008-2012 period. Total road freight turnover is expected to grow at an average annual rate of 6.3% in 2008-2012. The cross-Malaysia railway link project is being revived, but will not become operational until after 2011. We expect rail freight traffic to perform reasonably well, with annual growth averaging 6.3%. Air freight will grow by a strong 7.5% per annum, with pipeline throughput not far behind at 6.7%. Malaysia scores reasonably on our overall freight rating at 56.1 out of a theoretical maximum of 100. It is at the top end of the spectrum in terms of expected freight transport growth and scores well as far as long-term economic risk, transport infrastructure growth and the regulatory and competitive environments are concerned.

For the 2008-2012 forecast period, we expect the transport and communications sector to continue outpacing the economy as a whole by a small margin. It will achieve average annual growth of 5.4%, versus 5.3% for overall GDP. The total value of the transport and communications sector will rise to US$20.3bn in nominal terms by 2012, representing 7.4% of Malaysia's GDP.