KUALA LUMPUR: Malaysia is poised to record growth in the global natural gas trading as Petroliam Nasional Bhd (Petronas) expands investments abroad, said BMI.
BMI, a Fitch Solutions company, said Petronas is planning to raise its global liquified natural gas (LNG) portfolio through investments in overseas projects.
The national oil company has invested in Australia's Gladstone and LNG Canada projects.
Its most recent investment was a 15 per cent equity participation in the Masela Production and Sharing Contract which Abadi LNG project in Indonesia.
"A review of Petronas' participation in overseas LNG projects indicates that most of the equity investments are intended to build a global LNG portfolio for trading.
"As a mature LNG player, Petronas' appetite for investment risks in the LNG business seems to be growing strongly, as it is directly undertaking equity investments in upstream gas projects integrated with liquefaction plants.
"Petronas' interest in the Abadi LNG project is driven to a certain extent by the potential benefits in terms of securing LNG supplies at lower shipping costs for domestic consumption," said the firm.
BMI added that Petronas is looking to enter China and other emerging markets, shifting its focus away from Japan as these markets have become increasingly important for Petronas to sustain LNG exports.
Petronas currently has 12 long-term sales and purchase agreements (SPAs) with Japanese companies, of which eight contracts are due to expire between 2025 and 2027. Although
"Petronas has stated its desire to extend current SPAs in early 2023, it remains uncertain whether Japanese buyers will be keen to renew the contracts for a longer duration while
Japan's LNG market is experiencing a structural decline in demand.
"LNG buyers, such as JX Nippon, who hold equity stakes in LNG projects, are more likely to renew existing SPAs compared to Japan's power companies," it said.
As for China, Malaysia had a limited market share in the former's LNG market, accounting for 11.5 per cent of China's total LNG imports as at end-April 2024.
It added Petronas' memorandum of understanding with Sinopec to cooperate on LNG trading and petrochemical products could enable Petronas to expand its market share in the Chinese market. Both parties signed the MoUs in May.
In the LNG bunkering business, Petronas has already established a partnership with China's Tiger Gas to cooperate in LNG bunker sales to international shipping lines in 2020. The partnership began when the two companies signed a sale and purchase agreement to supply the Chinese market with LNG via ISO tanks.
In March 2023, Petronas and Tiger Gas launched an LNG bunkering business, capitalising on Petronas's LNG supplies.
Petronas is currently developing a 2.0 metric tonne per annum (mtpa) nearshore floating LNG project in Sabah.
"Malaysia's total LNG production capacity will increase to 34 mtpa by 2027. Based on Petronas' investment plans domestically and abroad, its total LNG production capacity is estimated to rise further to 40 mtpa by 2025, excluding planned LNG investments in Indonesia and Argentina.
"Should the large-scale projects in these two countries materialise, Petronas' equity LNG production capacity is likely to see a significant increase, thereby enhancing the company's ability to trade larger portfolio volumes on a global scale," it added.