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Petronas considers shorter-term LNG contracts and smaller cargo sizes

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LNG Industry,

According to Reuters, senior company officials at Petroliam Nasional Berhad (Petronas) have stated that the company may try shorter-term LNG contracts and smaller cargo sizes in order to attract buyers.

This comes at a time when the Malaysian company has a number of major contracts coming up for renewal, and when the market is brimming with supply.

Reuters claims that the LNG ‘marketing drive’ at Petronas is occurring simultaneously with increasing production after the start-up of Train 9 at the company’s Bintulu export facility, as well as its first floating LNG (FLNG) facility.

The Vice President of Petronas’ LNG Trading & Marketing, Ahmad Adly Alias, reportedly said: “New demand creation is becoming a norm.

"We have recently restructured our organisation to put a lot more focus on Middle East and South Asia... We've also set up a team to cover Southeast Asia.”

Reuters reports that Petronas’ Upstream Chief Executive Officer, Mohd Anuar Taib, said that the company sees a possible increase in demand in areas such as India, Bangladesh, Pakistan and parts of Southeast Asia. In addition to this, Petronas is reportedly looking to work with a partner in China to sell smaller cargoes to meet small buyers’ demands.

Company officials reportedly also noted that the company is looking into sales of LNG for truck and ship fuel.

Reuters claims that producers previously sold cargoes on long-term contract, but have now become increasingly flexible in terms of selling terms. This includes permitting customers to swap contracted supplies, as well as allowing the sale of more cargoes in the spot market.

Soon, Petronas will commence negotiations with Japanese customers, as a number of contracts with these buyers will expire next year. Some of these customers are reportedly even looking to decrease the volumes of LNG that they purchase.

Tokyo Electric Power Co. is Japan’s largest utility, and has a contract to purchase up to 4.8 million tpy of LNG. Tokyo Gas Co.’s contract, meanwhile, is for the purchase of up to 2.6 million tpy. Reuters reports that both of these contracts will expire in March 2018.

Reuters claims that Shigeru Muraki, Executive Advisor at Tokyo Gas, said: “(Our) priority is to recontract in Malaysia but probably volume-wise it will be changed. And, how we can agree to new terms and conditions with better flexibility or pricing.

"We will compare with other sources, we will consider the diversification of supply sources or diversification of pricings."

Reportedly, Petronas’ Ahmad added that the company is presently looking to renew its contracts with long-term buyers, but did not provide any further details.

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