Malaysia’s role in global LNG trading is poised for growth as Petronas expands investments in overseas LNG projects, analysts at BMI, a unit of Fitch Solutions, said in a report sent to Rigzone by Fitch Group.
“Driven by a long-term global demand growth outlook, Malaysia is seeking to expand its footprint in the global LNG business,” the analysts said in the report.
“We expect Malaysia’s LNG trading business to expand further as the state-owned Petronas has been seeking to raise its global LNG portfolio through investments in overseas LNG projects,” they added.
In the report, the analysts highlighted that Petronas has already invested in Australia’s Gladstone and LNG Canada projects. They also pointed out that Petronas’ most recent foreign investment in an overseas LNG project was a 15 percent equity participation in the Masela Production and Sharing Contract (PSC), which they noted includes the 9.5 million ton per annum (mtpa) Abadi LNG project in Indonesia.
“The Indonesian government approved Masela plan of development in December 2023 and Petronas and its partners have yet to make a final investment decision (FID) on the Abadi LNG project,” the analysts said in the report.
“In September 2022, Petronas signed a memorandum of understanding (MoU) with Argentina’s state-owned YPF to develop a 5.0 mtpa LNG project in Bahia Blanca in the first phase,” they added.
“In September 2023, Malaysia’s private player, Bumi Armada, signed a deal with Pertamina’s natural gas trading subsidiary, PT Davenergy Mulia Perkasa, to jointly develop a floating LNG project utilizing feed gas from the Madura and its surrounding fields in Indonesia,” they continued.
“However, the investment plans are in the early stages of development and have yet to progress further,” they went on to state.
The BMI analysts noted in the report that a review of Petronas’ participation in overseas LNG projects indicates that most of the equity investments are intended to build a global LNG portfolio for trading.
“As a mature LNG player, Petronas’ appetite for investment risks in the LNG business seems to be growing strongly, as it is directly undertaking equity investments in upstream gas projects integrated with liquefaction plants,” the analysts said.
“Petronas’ interest in the Abadi LNG project is driven to a certain extent by the potential benefits in terms of securing LNG supplies at lower shipping costs for domestic consumption,” they added.
Consumer Partnerships, Malaysia LNG Production Capacity
The BMI analysts also noted in the report that growing competition in the global LNG market prompted Petronas to pursue strategic partnerships with LNG consumers.
“In May 2024, Petronas entered into Memoranda of Understanding (MOUs) with Sinopec to cooperate on LNG trading and petrochemical products,” the analysts said in the report, adding that the MOUs could enable Petronas to expand its market share in the Chinese market.
“In the LNG bunkering business, Petronas has already established a partnership with China’s Tiger Gas to cooperate in LNG bunker sales to international shipping lines in 2020,” the analysts stated in the report.
“The partnership began when the two companies signed a sale and purchase agreement to supply the Chinese market with LNG via ISO tanks. In March 2023, Petronas and Tiger Gas launched an LNG bunkering business, capitalizing on Petronas’ LNG supplies,” they added.
The BMI analysts highlighted in the report that Petronas is currently developing a 2.0 mtpa nearshore floating LNG project in Sabah, noting that Malaysia’s total LNG production capacity will increase to 34 mtpa by 2027.
“Based on Petronas’ investment plans domestically and abroad, its total LNG production capacity is estimated to rise further to 40 mtpa by 2025, excluding planned LNG investments in Indonesia and Argentina,” they said.
“Should the large-scale projects in these two countries materialize, Petronas’ equity LNG production capacity is likely to see a significant increase, thereby enhancing the company’s ability to trade larger portfolio volumes on a global scale,” they added.
LNG Output
In a report sent to Rigzone earlier this month by Fitch Group, analysts at BMI stated that Malaysia’s LNG output is poised for incremental growth in 2024, “bolstered by increased production from the Bintulu LNG complex”.
In that report, BMI analysts said the first quarter of 2024 saw the country’s LNG exports surge to a record high since 2013.
“Estimates put total LNG exports for the quarter at 8.0 mtpa marking an 8.6 percent year over year increase from the same period in 2023, according to Bank Negara Malaysia,” the analysts stated in the report.
“A key driver of this growth in LNG production and exports is the availability of feed gas for the Bintulu LNG plant. Mubadala Development Company Oil and Gas Limited, which operates Block SK320, commenced first gas production from the Pegaga gas field in March 2022, supplying the Bintulu LNG plant,” they added.
“The Pegaga gas field, with reserves of 3.16 trillion cubic feet (tcf), is expected to reach peak production of 550 million standard cubic feet per day (mmscfd) in early 2025,” they continued.
The analysts highlighted in the report that, last year, Malaysia produced approximately 31.3 mtpa of LNG, “reflecting a robust growth rate of an eight percent year over year increase from 2022”.
“Projections indicate that Malaysia’s LNG production could rise to 32.5 mtpa in 2024, with the majority of incremental production originating from the Bintulu LNG complex,” the analysts said in the report.
In another report sent to Rigzone back in May by Fitch Group, BMI highlighted that recent deepwater oil and gas discoveries in the country “present significant potential benefits for oil and gas production”.
To contact the author, email andreas.exarheas@rigzone.com
