Petronas Capitalises On Gas Upsides In 2022 Despite Uncertainty

Credits: Alexandr Popadin/ Unsplash
  • LNG prices to be in $7-$10/MMBtu range long run
  • Sabah Sarawak pipeline investigation outcome in H1
  • Petronas delivers 405 LNG cargoes from PLC in Bintulu

Petronas capitalizes on gas upsides in 2022 amid volatility, seeks further growth, says a Platts news source.

Malaysia’s Petronas

Malaysia’s Petronas said March 13 its gas business witnessed strong growth during fiscal year 2022 as the company capitalized on gas upsides despite heightened market volatility, with plans to augment its LNG business by servicing both core customers and tapping emerging markets.

“At its height, we were able to put things to spot in the order of 90 to 100/MMBtu … each cargo which was then also what we dispatched in these spot markets could either make or break utilities,” Petronas President and group CEO Tengku Muhammad Taufik said during a press briefing after announcing results for the financial year ended Dec. 31, 2022.

The Platt JKM DES spot price hit a record $84.762/MMBtu March 7, 2022, S&P Global Commodity Insights data showed, reflecting the impact of the Russia-Ukraine war. Asian spot LNG prices averaged $33.98/MMBtu in 2022, surging from $18.60/MMBtu in 2021.

“Over the long run, I think anywhere between $7 to $10/MMBtu depending on the distance to deliver is a more sustainable long-term price,” Taufik said.

It was important to note that LNG projects are now also weighed by the need to ensure emissions are contained, meaning that capex is going to go up amid continued supply risks, he said.

“And as markets move away from coal, there’s also a tolerance for how much and how quickly we [industry] can switch. So, we believe that runway between eight to low teens as the more reasonable output for prices to make [in the medium run],” he added.

Sabah-Sarawak pipeline impact

In October 2022, Petronas declared a force majeure on gas supply to MLNG Dua due to a pipeline leak caused by soil movement at the vicinity of KP201, Sabah-Sarawak Gas Pipeline that occurred on Sept. 21, 2022.

The Sabah Sarawak pipeline will take “quite a bit of time to get it fixed” even as repairs are ongoing, said Executive Vice President and CEO of upstream Datuk Adif Zulkifli.

While a timeline could not be shared for the restart of operations, the investigation outcome was likely to be out during first-half 2023, Taufik said.

However, Petronas was fulfilling its LNG supply commitments to its customers globally, including those in Japan.

Malaysia was the second-largest LNG supplier to Japan in 2022, accounting for about 17% of Japanese LNG imports, according to data from Japan’s Ministry of Finance.

“Despite the announcement of force majeure, we’ve made every endeavor to ensure that their supply is not disrupted and so far from the outlook of 2023. At this point, we do not believe we are unable to service the full contract requirements fully for our customers,” Taufik added.

LNG business ramp-up

The natural gas market is slated to be the only hydrocarbons to show continuous growth over the next two decades and Petronas will play a role to service not only its core markets, but also new emerging markets as many economies move away from coal, Taufik said.

Last year, there were market talks that Petronas had expressed an interest to participate in Indonesia’s takeover of Shell’s stake in the Inpex-operated Abadi LNG project.

“Yes, discussions did commence, and I think the Indonesian government was looking at participants within the Abadi project, in so far as the arrangements within the Abadi LNG project that will still come under scrutiny and assessment, economic hurdles,” Taufik said.

“We remain one of the top five and we want to preserve our market share with a longer-term aspiration of reaching 55 million mt planned,” he added.

Meanwhile, Petronas in its FY 2022 results announcement said it delivered 405 LNG cargoes from the PLC in Bintulu to customers globally.

The company concluded 136 MMscf/d of natural gas supply deals with new and existing customers from the non-power sector while also enhancing its LNG bunkering operations, it said.

Petronas has achieved final investment decision for Sabah’s first nearshore liquefied LNG facility. The engineering procurement, construction and commissioning contract for the project was awarded to a consortium comprising Japan’s JGC and South Korea’s Samsung Heavy Industries, being the winner of the dual FEED competition contracted out in October 2021.

Petronas, through its Petronas Marine subsidiary, has also inaugurated LNG bunkering business in China in partnership with Hong Kong-based Tiger Gas.

A maiden ship-to-ship LNG bunkering operation of around 500 mt LNG was completed for Tiger Gas’ Tiger Maanshan, the world’s largest dual-fuel deck cargo ship, Petronas said in a statement March 8.

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Source: Platts


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