Malaysia could become the world's largest supplier of flexible LNG by the end of the decade, according to consultants Wood Mackenzie, which cited new capacity additions both at home and abroad that will bolster its supply portfolio.
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Analysis from Woodmac this week suggests that state-owned Petronas' flexible LNG volumes could grow significantly in the coming years, reaching up to 26 million mt/year in 2022 from the 2.5 million mt/year registered in 2013.
Such growth could challenge Qatar's position as one of the largest flexible suppliers currently in the market, according to Woodmac.
The consultant estimates that Qatar had some 20 million mt/year of flexible LNG supplies in 2013, although concedes that who will have the biggest flexible volumes in 2022 will depend on contracting strategies in the interim.
Overall, Petronas' LNG supply is expected to increase over 55% to reach 42 million mt/year by 2022, up from 27 million mt/year in 2013.
The company will add new capacity in eastern Malaysia with a planned expansion of Bintulu and a new floating LNG liquefaction plant in the next two years. It also holds stakes in projects in Pacific North West LNG, Canada, and Gladstone LNG, Australia.
While some of this new supply is already committed to long-term offtakers, Petronas will still need to place more volumes with buyers.
Some of its existing term contracts are also due to expire in the next 10 years and may not be renewed, contributing more incremental supplies to its portfolio.
LONG POSITION A BOON?
A long LNG portfolio would also prove beneficial for Petronas in a market where supply is predicted by many analysts to be tighter in the next few years, the Woodmac release adds.
"Flexible supply from its existing portfolio could be used to support marketing of Petronas' PNW LNG project in Canada... this removes the pressure on delivery and provides customers with a diversity of supply sources," Woodmac Asia gas research analyst Chong Zhi Xin said.
While this could provide the seller benefits through supply diversification, Woodmac conceded that Petronas could face challenges with its flexible LNG portfolio should the market become oversupplied.
Zhi Xin added: "Petronas has the ability to find a market for its LNG domestically, an option not available to its competitors." Data from Platts unit Bentek shows that Petronas rarely imports cargoes from its own facility in Bintulu.
The 3.8 million mt/year Melaka terminal has received just one Malaysian cargo since its start-up in 2012, which arrived July 2014, suggesting that Petronas might already be exercising its option to supply its LNG into the domestic market.
The seller is widely heard to be holding surplus cargoes following the decline in demand from its term buyers in northeast Asia. Export data also reveals that Petronas has sold to Thailand, India and Kuwait in recent months -- non-traditional buyers of Malaysian cargoes -- as the seller looks to place incremental volumes after April annual delivery package re-negotiations.
Further out, Woodmac estimates that about 4 million mt/year of LNG is necessary to balance the Malaysian domestic market by 2022, providing Petronas with some outlet for cargoes.
The release adds that Petronas could also swap out existing piped gas supplies in favor of LNG, putting imports as high as 8 million mt/year.
However, Petronas currently has three LNG import agreements totaling more than 4 million mt/year with France's GDF Suez, Qatargas and Norway's Statoil.
The seller will also offtake 3.5 million mt/year from the GLNG project from 2015 onwards for 20 years.
Bentek data shows that Malaysia imported a total of 1.4 million mt/year through its 3.8 million mt/year Melaka LNG terminal in 2013. However, imports into the terminal are up significantly in the first seven months of 2014 versus the same period in 2013, hinting at a possible increase in demand.