Wood Mackenzie: Malaysia could overtake Qatar on the LNG market
Wood Mackenzie asserts that by 2020, Malaysia has the potential to be the largest supplier of flexible LNG to the global market, larger even than Qatar.
The supply capacity of Malaysia’s Petronas is growing through new capacity additions in eastern Malaysia as well as Canada, offtake agreements with other suppliers and projects such as GLNG in Australia. Its supply potential could grow by over 55%, from 27 million tonnes per annum (mmtpa) in 2013 to 42 mmtpa in 2022. Some of this new capacity is committed to buyers, but some is not. In addition, some of its existing commitments to buyers will expire over the next 10 years.
Wood Mackenzie’s analysis suggests that Petronas’s flexible LNG volume will grow from 2.5 mmtpa in 2013 to 26 mmtpa in 2022. By contrast Wood Mackenzie estimates that Qatar’s flexible LNG volumes in 2013 were 20 mmtpa. Whether Qatar or Malaysia will have the biggest flexible volume in 2022 will depend on their contracting strategy in the interim. Wood Mackenzie’s Asia gas research analyst, Chong Zhi Xin, says, “In addition to challenging Qatar, Malaysia’s growing volume of uncontracted LNG will provide strong supply competition for new LNG projects, such as from the US, Canada and East Africa.”
Zhi Xin cites some of the additional advantages of Petronas having a long LNG portfolio. “Should other new supply struggle to get developed, a long LNG portfolio would position Petronas well for a tight global gas market. Also, flexible supply from its existing portfolio could be used to support marketing of Petronas’s Pacific North West (PNW) LNG project in Canada, prior to production start-up. This will differentiate Petronas’s project to other greenfield projects with uncertain start up times. It also removes pressure on delivery and provides customers with a diversity of supply sources. In addition, Petronas has the opportunity to supply LNG to Peninsular Malaysia when legacy offshore gas supply inevitably declines.”
Petronas could face challenges with its flexible LNG portfolio should we see a market oversupply. However, Wood Mackenzie recognises the unique advantage domestic markets offer Petronas. Zhi Xin elaborates, “As a reliable LNG supplier, Petronas will likely secure contract renewals for a proportion of the volume under contract that expires. Also, Petronas has the ability to find a market for its LNG domestically, an option not available to its competitors.”
According to Wood Mackenzie’s analysis, about 4 mmtpa of LNG is necessary to balance the Peninsular Malaysia market by 2022. However, Petronas’s management of indigenous pipe gas, both new supply and existing contracts, could enable some piped gas to be backed out in favour of LNG. This would enable Petronas to increase Peninsular Malaysia LNG imports to as much as 8 mmtpa by 2022.
Zhi Xin concludes, “Therefore, Peninsular Malaysia could be Petronas’s hidden trump card to accommodate ‘excess’ LNG.”
Press Release, August 26, 2014; Image: Petronas