Published June 9, 2009

LNG buyers cancelling cargo deferments

Petronas chief cites signs of recovery in global economy

	Email this article
	Print article
	Feedback

(SINGAPORE) Liquefied natural gas (LNG) buyers are cancelling deferments of cargoes on signs of a recovery in the global economy, Petroliam Nasional Bhd chief executive officer Hassan Marican said.

Mr Hassan: 'While there are deferments of cargoes from traditional buyers in North Asia, there is demand for cargoes from China'

'We see some of the deferments being clawed back,' he told reporters at the Asia Oil and Gas Conference yesterday. 'While there are deferments of cargoes from traditional buyers in North Asia, there is demand for cargoes from China.'

China and India may purchase additional cargoes this year as their economies continue to grow while Japan, South Korea and Spain slash purchases of the cleaner-burning fuel as demand for electricity declines. China's gross domestic product grew 6.1 per cent in the first quarter from a year earlier.

The global recession has sent volumes and prices of LNG lower, Mr Hassan said. New LNG producers may cause instability in the market as they sell spot cargoes at low prices, he said without elaborating.

Malaysia, the world's second-biggest exporter of LNG, increased shipments of LNG to a record last year to 22.87 million metric tons from a year earlier, Bank Negara Malaysia, the central bank, said in its 2008 annual report in March. The value of shipments jumped 56 per cent to RM40.7 billion (S$16.9 billion).

Petronas, as the company is known, may ship the first LNG cargo to China National Offshore Oil Corp's Shanghai LNG terminal before the end of the year, Mr Hassan revealed. Petronas is currently shipping cargoes to the Shanghai Gas Group Corp-operated Wuhaogou terminal which handles smaller vessels, he said. The Malaysian state oil company will remain in the South Pars project in Iran and review the development with new partners, he added.

The Islamic Republic News Agency reported on June 3 that China National Petroleum Corp signed a US$4.7 billion agreement to develop Phase II of Iran's South Pars natural-gas field, replacing project partner Total SA after delays.

In Australia, the Santos Ltd-led Gladstone LNG venture may take a decision to sanction the project in the first half of next year, Mr Hassan said.

Petronas will maintain its spending to prevent a slide in oil and gas production in Malaysia, he noted. According to him, Malaysia may produce about 650,000 barrels a day this year including condensates.

Crude oil and condensate production gained 1.7 per cent to 694,000 barrels a day last year, the central bank said. Gas output fell 5.2 per cent to 5.6 billion cubic feet a day.

'The oil resources, especially in the peninsular side on the continental shelf, is depleting quite rapidly,' Mr Hassan said. Petronas is carrying out 'many initiatives' to maintain output over a longer period, he added.

The company signed an agreement with Exxon Mobil Corp last week to boost oil recovery from ageing areas for seven fields off the coast of Peninsular Malaysia. The two companies agreed to spend at least US$2.1 billion to increase production, drilling activities and a 'rejuvenation' of facilities, Petronas said on June 3.

Petronas has expanded overseas in Africa and Central Asia to expand output. The company plans to start producing about 500 million cubic feet a day of natural gas in the first phase from the B-1 block in the Caspian Sea in Turkmenistan in the third quarter of next year, Mr Hassan said. The gas will be exported via Turkmenistan's gas company.

Malaysia is the largest oil and gas producer in South-east Asia after Indonesia. Condensate is a type of light oil produced in association with gas. Qatar is the world's biggest LNG exporter. -- Bloomberg