Regional LNG: Brunei LNG keeps focus on traditional buyers - Report
Friday, August 29 2003 - 01:25 AM WIB
"We prefer to sell to established markets such as Japan and South Korea, whom we have long-term contracts with. They are much more profitable for us than spot sales," Hamdillah Abdul Wahab told Dow Jones Newswires in a telephone interview.
BLNG?s traditional business is dominated by existing long-term contractual agreements. Spot gas sales are rare given that LNG business usually exists under 10-20 year contractual agreements.
BLNG hasn?t done any spot LNG sales outside of Asia this year. In May 2002 it made LNG spot shipments for the first time to the U.S. and Spain.
"Spot sales don?t deliver as much as we hoped for. The sales to those places involved high shipping costs, three or four times more than sales, say to Asian buyers," Hamdillah said. "Often, when we netback the values, the profit is much lower."
He said BLNG has enjoyed lucrative long-term contracts with Japan, particularly for this year when Tokyo Electric Power Co. increased its demand for LNG following unexpected shutdown at its nuclear reactors due to safety scandal.
According to Japan?s official import statistics, imports of LNG from Japan, in the wake of the shutdown increased 21.4 percent to 5.85 million metric tons in July this year, compared to July 2002.
"We shipped seven extra cargo shipments to Japan alone this year, compared with last year," Hamdillah said, adding that each cargo usually consists of about 75,000 cubic meters of LNG.
Brunei?s current gas output is estimated at close to 27 million cubic meters per day, and 90 percent of it is exported to Japan - namely Tepco, Tokyo Gas Co. and Osaka Gas Co.
"I don?t think we will have any spare capacity available to do any spot business outside of Asia this year, when the bulk of our volume is mainly to satisfy our term customer?s needs first," he said, adding that BLNG is contracted to supply to Japan term LNG until 2013.
South Korea is BLNG?s biggest natural gas consumers. Between them, Japan and South Korea imported 6.7 million tons of gas from BLNG in 2002.
Brunei LNG plans to build its sixth LNG train and raise its overall production capacity more than 50 percent by 2008. Currently, Brunei has a total production of 7.2 million tons a year and the sixth train could add 4 million tons of capacity to this.
Brunei is the world?s fourth largest LNG producer. It is 50 percent owned by the Brunei government, 25 percent by Royal Dutch/Shell Group and 25 percent by Mitsubishi Corp. (*)