Regional LNG: Malaysia's LNG trading business set to expand with Petronas' overseas Investments

Malaysia’s liquefied natural gas (LNG) trading sector is poised for significant growth as Petroliam Nasional Bhd (Petronas) accelerates its investments in overseas LNG projects. This expansion is driven by a favorable long-term global demand outlook for LNG.

According to BMI, a Fitch Solutions Company, Malaysia’s LNG trading business is expected to grow as Petronas aims to enhance its global LNG portfolio through strategic investments. Petronas has already made substantial investments in the Gladstone LNG project in Australia and the LNG Canada project. Its latest venture includes a 15% equity stake in the Masela production and sharing contract (PSC), which comprises the 9.5 million tonnes per annum (mtpa) Abadi LNG project in Indonesia. The Indonesian government approved the Masela development plan in December 2023, though a final investment decision on the Abadi LNG project is still pending.

In addition to its projects in Australia and Indonesia, Petronas signed a memorandum of understanding (MoU) with Argentina's state-owned YPF in September 2022 to develop a 5.0 mtpa LNG project in Bahia Blanca. Further, in September 2023, Malaysia's private entity, Bumi Armada, partnered with Pertamina’s subsidiary PT Davenergy Mulia Perkasa to develop a floating LNG project using feed gas from the Madura fields in Indonesia. However, these initiatives are still in the early stages of development.

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BMI notes that Petronas is also exploring entry into China and other emerging markets, shifting its focus from Japan to sustain its LNG exports. China, recognized as a rapidly growing LNG market, presents substantial opportunities. By April 2024, Malaysia held an 11.5% share of China's LNG market, trailing behind Australia’s 32.5% and Qatar’s 25.9%. Petronas currently has a long-term LNG sales and purchase agreement (SPA) with China National Offshore Oil Corporation (CNOOC) after its agreement with JOVO Energy expired in 2023. Since 2021, Malaysia’s LNG exports to China have increased significantly, narrowing the export gap with Japan.

Beyond China, Petronas holds a 15-year contract with Thailand's PTT for 1.2 mtpa. With Thailand’s growing LNG demand and PTT's expanding regasification capacity, LNG exports to Thailand are likely to rise. Additionally, Petronas exports spot LNG to Taiwan, Bangladesh, Singapore, and Pakistan, and entered the Philippine market in 2023. Vietnam is also seen as a potential future market, which would further extend Petronas' reach in the spot LNG market.

Editing by Alexander Ginting