KUALA LUMPUR (DPA) -- Malaysian, Indonesian and Saudi companies have signed contracts to begin work on building a 7-billion-dollar pipeline that was expected to reduce tanker traffic in the Malacca Strait by about 20 percent, officials said Tuesday.

Malaysia’s Trans-Peninsula Petroleum Sdn Bhd signed the agreement late Monday with Malaysia’s Ranhill Engineers and Constructors Sdn Bhd and Indonesia’s PT Tripatra to build the 300-kilometer pipeline over seven years, company officials confirmed.

Trans-Peninsula Petroleum, the owner and promoter of the project, also signed separate agreements with the Indonesian firm Bakrie and Brothers for the supply of steel pipes and Al Banader International Group of Saudi Arabia, which is to provide the oil.

The pipeline is to stretch across the north of peninsular Malaysia from the state of Kedah to Kelantan, just south of the Thai border with Thailand, and was expected to ease congestion in the Malacca Strait.

Half of the world’s oil shipments currently pass through the strait, the busiest seaway in the world with an annual traffic of more than 60,000 ships.

Malaysian Prime Minister Abdullah Ahmad Badawi witnessed the signings of the contracts with Indonesian President Susilo Bambang Yudhoyono on the sidelines of the annual World Islamic Economic Forum, a meeting aimed at boosting cooperation among Muslim communities that is being held in Kuala Lumpur.

‘The savings in using our pipeline to the oil producers, to oil traders, is enough to even pay for one month of storage,’ said Mohamad Kamil Sulaiman, chairman of Trans-Peninsula Petroleum. ‘Work would begin in 2008 with land acquisitions made in cooperation with the respective state governments,’ Mohamad Kamil was quoted as saying by Malaysia’s official Bernama agency. ‘There will be three phases in the construction spanning a period of seven years altogether.’

The 48-inch-diameter pipeline would have a capacity of 6 million barrels per day throughput of crude oil.

After four to five years of operation, capacity could be upgraded to a maximum of 180 million barrels of storage and 6 million barrels per day throughput, the company said.