Petronas signs 20-year deal to counter dwindling discoveries at home
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(SINGAPORE) Malaysia, the world's second-biggest exporter of liquefied natural gas, will import the fuel from Australia to meet rising domestic demand and counter dwindling domestic discoveries.
The Santos Ltd-led Gladstone LNG venture (GLNG) signed an accord to sell 2 million tonnes a year of the fuel to its partner Petroliam Nasional Bhd (Petronas) for 20 years beginning 2014, with an option for an additional million tonnes, the companies said in separate statements yesterday.
The LNG will be used in the Malaysian domestic gas market, they said.
'If they plan to bring it they will need at some point a regassification facility, floating or land-based,' said Tony Regan, an independent oil consultant based in Singapore, who earlier worked for Royal Dutch Shell's LNG business.
Malaysia increased exports of LNG to a record 22.87 million tonnes last year, valued at RM40.7 billion (S$16.8 billion) from its LNG complex in Borneo, according to Bank Negara Malaysia, the central bank.
In the meantime, domestic gas discoveries off Peninsular Malaysia, which accounts for more than three-quarters of the country' gas demand, are dwindling.
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The purchase is part of Petronas's efforts to ensure secure and reliable gas supply to meet the future demand of Malaysia's domestic market, the Malaysian state oil company said in a statement yesterday.
Malaysia is joining Singapore, Thailand and Indonesia to boost imports of gas to meet growing industrial demand.
BG Group plc won a 20-year contract to provide the fuel to Singapore's first import terminal starting in 2012, the government said in April 2008.
Thailand's PTT pcl may import LNG from Qatar among others by 2011 into a proposed import facility while Indonesia, the world's third-biggest LNG supplier, has announced plans to build a receiving facility on Java, its most populous island.
Malaysia must increase domestic gas prices or subsidise supplies as the fuel from Australia will be more expensive, Mr Regan said.
'Malaysian gas prices must increase between now and 2014 to make the economics of importing LNG from Australia work,' Mr Regan said.
'Malaysia could become a gas-trading hub.' he added.
The oil and gas resources, especially in the peninsular side on the continental shelf, are depleting 'quite rapidly,' Petronas's chief executive officer Hassan Marican said last week in Kuala Lumpur.
Petronas is carrying out 'many initiatives' to maintain output over a longer period, he said, with exploration activity increasing in deepwater areas off Borneo island.
The peninsula is not linked to Borneo by pipeline for gas transportation and the entire LNG output from Bintulu is exported.
LNG is natural gas chilled to liquid form, reducing it to one-six-hundredth of its original volume at minus 161 degrees Celsius (minus 258 degrees Fahrenheit) for transportation by ship to destinations not connected by pipeline.
It is turned back into gas for distribution to users. -- Bloomberg
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