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Malaysia's Dialog Group Bhd. has announced that its subsidiary Dialog Pengerang Sdn Bhd has entered into a development cum joint venture agreement agreement (DJVA) with the Johor state government to commence land reclamation work to develop an independent deepwater petroleum terminal in Pengerang, Southeast Johor.

The agreement is the culmination of a Memorandum of Understanding (MOU) entered into with the Johor State Government on 8 June 2009.

The DJVA grants the right to start the reclamation work and the use of the reclaimed land for the construction of the petroleum terminal. Dialog said the facility will serve as a springboard for other industries to be developed and that it was in line with the Johor State Government's plan to develop Southeast Johor into a regional oil and gas hub.

The new terminal will be developed on contiguous onshore and seabed land located between Tanjung Ayam and Tanjung Kapal, Pengerang, with a harbor port, jetty and other marine facilities.

With a water depth of up to 26 meters, the facility will be capable of handling Ultra Large Crude Carriers, Very Large Crude Carriers and other vessels. It will also have tankage facilities for the handling, storage, processing and distribution of crude oil, petroleum, petrochemicals and chemical products.

The combined investment in the project is estimated at RM 5 billion (US$1.66 billion) over a 7 year period. Dialog said the total investment is to be financed by project financing, whereby the terms of financing structure are still being discussed with financial institutions. Dialog envisages that it will use both its internally generated funds and borrowings to fund its portion of equity investment.

The project is an Entry Point Project under the Malaysian Government’s National Key Economic Areas and part of the Economic Transformation Program.

Details of the agreement

The Johor State Government and Dialog have agreed on the respective rights and obligations to carry out, implement and realize the project, including:

(a) Land reclamation, engineering, construction and development on contiguous onshore and seabed land located between Tanjung Ayam and Tanjung Kapal, Pengerang, in phases for the realization of the onshore and offshore portions of the project.

(b) Rights of Dialog to parcel and grant each phase of the project to one or more nominated companies to carry out and implement each phase of the offshore and/or onshore portions of the project.

(c) The Johor State Government will grant a lease or leases for each phase of the land for a term of 65 years in favour of each nominated company to carry out the engineering, development, construction, operation and maintenance of the onshore and/or offshore facilities of the project.

(d) Each nominated company shall be solely and wholly responsible for securing complete financing for the reclamation works, engineering, development and construction of the onshore and offshore facilities relating to each phase of the project.