Regional LNG: Petronas's third LNG plant short of buyers: Report

Malaysia state-owned oil and gas company Petroliam Nasional Bhd., the world's third-largest supplier of liquefied natural gas, said half the output from its third LNG plant remains unsold as the facility nears completion by year-end, Bloomberg reported.

The plant, Malaysia LNG Tiga Sdn. at Bintulu in the eastern state of Sarawak, is now producing 3.4 million metric tons a year, and is scheduled to reach full capacity of 6.8 million metric tons by the end of this year. Tiga will boost Malaysia's total LNG capacity to 23 million tons.

Petronas secured orders from only Japanese utilities for 3.52 million tons so far, and it's in talks with ?several other potential buyers from traditional and non-traditional markets? to secure orders for the remaining half of its planned capacity, Azman Ibrahim, a Petronas spokesman, said in an e-mailed response to questions from Bloomberg News.

Petronas is competing with a growing number of LNG suppliers from Indonesia, Australia and the Middle East to find buyers in Asia. The rivalry helped China get a one-quarter discount below current-market levels in its first two contracts to buy LNG from Indonesia and Australia, after a bidding war that concluded last year.

Malaysia LNG Tiga is 60 percent owned by Petronas. Nippon Oil Corp., Japan's largest refiner, has a 10 percent stake, as does the Sarawak state government. Royal Dutch/Shell Group holds 15 percent, and a Mitsubishi Corp., Japan's largest trading house, unit has 5 percent.

Tokyo Electric Power Co., Japan's largest power producer and the world's second-largest LNG buyer, was the latest to sign up for liquefied gas from the Tiga unit. This month, Tokyo Electric said it will buy as much as 540,000 metric tons from Tiga under a one-year contract starting next month.

Tokyo Electric and Tokyo Gas Co. got an average 5 percent discount on LNG from Malaysia's older plants when they renewed their 20-year contract for another 15 years this month.

Tohoku Electric Power Co., Japan's fourth-largest power producer, earlier signed up for 900,000 metric tons per year of LNG from Tiga. That contract is for 20 years.

Separately, a group consisting of Tokyo Gas, Osaka Gas Co. and Toho Gas Co. agreed to buy 1.6 million tons of LNG from Tiga for 20 years starting next year.

Japan Petroleum Exploration Co., a Japanese government-owned oil and gas exploration company, also agreed to buy 480,000 tons of LNG from Tiga under a 20-year contract.

Petronas has yet to ?officially? conclude another agreement with Korea Gas Corp., the world's largest LNG buyer, to supply LNG from Tiga, Ibrahim said. Korea Gas said in January it reached a preliminary agreement to buy at least 1.5 million tons per year from Tiga for seven years starting in April.

The contract with Korea Gas would leave 1.78 million metric tons of Tiga's capacity unsecured.

Shell, an early investor in all three of Malaysia's LNG plants, said last month it can help Petronas find buyers for its fuel. Shell is currently negotiating with Petronas to buy back its 15 percent stake in Malaysia's first LNG plant that it was obliged to sell in February under a contract signed in 1978.

Shell, which is investing in LNG receiving terminals and ships in Asia and the Middle East, wants to stay invested in Malaysia's first LNG plant to continue with its technical and marketing links with Petronas, Shell's Singapore-based media relations manager Patricia Chua said last month.

Shell is bidding to sell 1.7 million tons of LNG to Taiwan Power Co. for 25 years starting 2008 from its Sakhalin LNG project in eastern Russia. (*)