By MARK RAO / Pic By BLOOMBERG

China Petroleum Pipeline Engineering Co Ltd (CPP) has denied allegations that funds from the bank loan procured for its two gas pipeline projects in Malaysia were used to finance 1Malaysia Development Bhd’s (1MDB) debts.

“We wish to make it very clear that all funds from Export-Import Bank of China (Exim Bank of China) were only paid directly to CPP’s bank accounts.

“This is in accordance with the strict anti-money laundering banking rules, regulations and signed legal agreements,” CPP said in a statement yesterday.

“There were absolutely no funds paid to any third-party Cayman Islands-based company and/or companies whatsoever. Any allegations or statements to the contrary are completely false,” it added.

CPP categorically denied all allegations of misappropriated funds in relation to the gas pipeline projects.

“We request that the media be factual in their reporting and not be influenced or pressured by unnamed sources to report based on false information that defames CPP,” it said in the statement yesterday.

The denial came amid reports that the RM2.7 billion sale of 94.7ha of Air Itam land in Penang by 1MDB to Silk Road Southeast Asia Real Estate Ltd — a company based in the Cayman Islands — was sealed despite the freeze by the state government on 1MDB-related transactions.

It is alleged that Suria Strategic Energy Resources Sdn Bhd (SSER) — the project manager for the RM9.41 billion gas pipelines — was used as the vehicle to launder money from the deal to finance 1MDB’s debt.

SSER was set up on May 19, 2016, under the purview of the Ministry of Finance (MoF) to oversee the RM5.35 billion Multi-Product Pipeline from Melaka to Jitra, Kedah, and the RM4.06 billion Trans-Sabah Gas Pipeline.

CPP’s unit, China Petroleum Pipeline Bureau, was awarded both projects on Nov 1, 2016. Both companies operate under China’s state-owned China National Petroleum Corp.

The gas pipelines came under scrutiny when it was discovered by the MoF in June this year that only 13%, or RM1.22 billion of the total project works, were completed despite RM8.3 billion (88% of the total projects’ value) having been awarded to the China-based firms.

This leaves RM7.08 billion unaccounted for and speculations are rife that the missing funds could have been misappropriated to help 1MDB pay its debt.

The Wall Street Journal in its report yesterday quoted two unnamed Malaysian officials who suspected that funds from the projects were used to pay 1MDB’s debts, citing the timing of the deal and persons involved as causes for suspicion.

It was reported that Malaysian financier and key 1MDB suspect Low Taek Jho (Jho Low) allegedly played a central role in negotiating the pipeline deals, as well as other Chinese- backed infrastructure projects.

The Malaysian Anti-Corruption Commission issued an arrest warrant for Low in June this year for his suspected involvement in the 1MDB scandal. It is alleged that Low organised a scheme to siphon at least US$4.5 billion from 1MDB between 2009 and 2015.