Regional LNG: A new milestone for Petronas

The completion of Petroliam Nasional Bhd's (Petronas) third liquefied natural gas (LNG) plant in Tanjung Kidurong, Bintulu, last month marks another milestone for the national oil company. The three LNG plants within its Bintulu LNG Complex make the company the world's largest LNG producer in a single location, Malaysia's The Star On Line reported Tuesday.

The combined production of the three LNG plants ? MLNG, MLNG 2 and MLNG 3 ? is 23 million tonnes per year, and the biggest buyers are Japan, South Korea and Taiwan.

Malaysia is currently the world's third largest LNG exporter, accounting for 13 percent or 15 million tonnes a year (2002) of global exports, after Indonesia and Algeria. Last year, LNG earned RM12.4bil, making up 5.6 percent of the country's gross national product.

?In fact, last year alone LNG exports accounted for 3 percent of Malaysia's total exports, which is quite a significant amount considering that it comes from one single producer and one single location,? Petronas president and chief executive officer Tan Sri Mohd Hassan Marican said at a media familiarisation visit to the Bintulu LNG complex in Sarawak on Monday.

He said Petronas' total investment in its LNG business over the last 20 years ? which includes upstream gas production facilities, downstream gas liquefaction facilities, and LNG transport and port facilities ? amounted to RM37.5bil.

He pointed out that Petronas, as a company, was currently the world's largest net producer of LNG, with an output of 16.9 million tonnes a year, followed by Shell with 9.6 million tonnes and ExxonMobil with 6 million tonnes.

Hassan said one factor for the success of Petronas' LNG business was its commitment and reliability as a supplier of LNG to its buyers.

?Although we are not a big producer like Indonesia, Petronas has never failed to deliver a cargo and also never missed a single scheduled delivery since we started our first Malaysia LNG project in 1983,? he said.

Malaysia's share of the LNG market in Japan is 25 percent, in Taiwan 49 percent, and South Korea 21 percent.

Since inception to the end of last month, Hassan said, some 188 million tonnes of LNG had been shipped generating US$36.1bil in revenue.

Going forward, Hassan said the company, with its three fully integrated LNG plants, was well positioned to take on the tough new challenges ahead, and maintain its global player status and world-class capabilities.

?We will also continue to explore and develop new gas fields in anticipation of the growing demand in new, non-traditional markets, such as Europe and North America,? he said.

For North East Asia alone, total LNG demand is about 77.1 million tonnes, equivalent to 68 percent of global demand.

In terms of supply, LNG fields in Brunei, Bintulu and Bontang (Indonesia) have a total capacity of 52 million tonnes, representing 48 percent of global supply.

Hassan described competition in the LNG business as growing quickly, with new producers coming into play to take advantage of low-cost production and new huge markets like China and India, ?which everybody is going for.?

For example, on the first LNG contract in China won by an Australian plant, Hassan said: ?The new price quoted was very low and even set a new benchmark in the pricing of LNG, which has become so competitive.?

Hassan said that producers from the Middle East were also now able to compete with other Asian players due to their low-cost feed.

To counter these new challenges, he said that Petronas would need to find new ways of competing and look for support in terms of lower port charges and rates, and seek new markets.

In addition, as the LNG business moved towards becoming a spot commodity, the flexibility that had been required by customers in the new contracts Petronas recently entered into, had brought forward a lot of challenges that the traditional LNG business had not seen over the past 25 years, Hassan said. (*)