Friday, 23 December 2011

Malaysia eyes first gas in 2013 for $5.1 bln project


Tue Aug 23, 2011 2:57am EDT

* Petronas to develop nine offshore marginal gas fields
* Will also build a 200 km pipeline to transport gas
* Says subsidised gas prices have curbed investment
* Says offshore production facilities running at full capacity 
By Niluksi Koswanage
KUALA LUMPUR, Aug 23 (Reuters) - National energy company Petronas will develop a $5.1 billion gas project off Malaysia's east coast with first delivery expected in two years, helping to bolster the country's slowing output and meet soaring power demand.
The North Malay Basin project was unveiled on Tuesday as the Southeast Asian gas exporter faces a shortage due to frequent maintenance shutdowns, forcing state utility Tenaga Nasional to import costly fuels for power generation.
The new project comprises nine discovered gas fields about 300 kilometres (186 miles) off the east coast of peninsula Malaysia. Petronas will also develop a 200 km pipeline to transport the gas from the fields to Terengganu state.
The project is part of a greater drive to secure gas including that with high CO2 content and from marginal domestic fields, as well as taking stakes in overseas fields with an eye for LNG production.
Petronas recently made two other gas discoveries in shallow waters off the Borneo coast, and inked preliminary deals with Qatargas to supply 1.5 million tonnes of liquefied natural gas (LNG) annually over 20 years.
"Petronas expects the additional volume of gas from the North Malay basin project would help sustain supply to its customers in peninsula Malaysia," it said in a statement.
"The project, which entails numerous upstream commitments, is expected to encourage more investments by industry players."
Petronas and its production sharing partners will accelerate the process with first delivery of 100 million standard cubic feet (mmscfd) of gas per day expected by 2013, ramping up to 250 mmscfd by 2015, the company said.
It did not name its partners in the project but Petronas has previously inked production sharing contracts (PSCs) with the likes of oil majors Exxon Mobil Corp and Royal Dutch Shell (RDSa.L).
Shares in Petronas Gas , which controls the gas production facilities and pipelines in the country, rose 0.5 percent to 13.5 ringgit by midday.
LOW GAS PRICES CURB INVESTMENT
Gas demand from Malaysia, the world's No.2 LNG exporter behind Qatar but fell to third place last year, has risen by more than 30 percent thanks to regulated domestic prices that are significantly lower than global market rates.
Prime Minister Najib Razak's government has pledged to raise gas prices every six months, making it more economically feasible to industry players to invest in developing marginal gas fields such as the North Malay Basin project.
"The planned price reform measures will benefit Malaysia by stimulating upstream investment off the peninsular and provide the long-term price signal to ensure security of supply by attracting LNG as well," said Graham Taylor, analyst with Wood Mackenzie in Singapore.
Petronas is scheduled to complete a 3 billion ringgit regasification terminal with an annual capacity of 3.5 million tonnes on mainland Malaysia by the middle of next year. It is studying plans for the second terminal.
Petronas also has long asked for the government to allow it raise gas prices in order to reduce the hefty annual subsidies of about 18-19 billion ringgit it pays out.
"These subsidised gas prices have resulted in minimal investments in the exploration and development of gas projects by oil and gas players, constraining growth in supply capacity," the company said.
"Compounding this tight situation, Malaysia's offshore production facilities have been running at full capacity, exerting tremendous pressure on gas production systems."
Last week, Tenaga Nasional bought 130,000 tonnes of fuel oil for power generation, the third time it has bought large volumes this year, at higher price levels.
The purchases, which started in the second quarter, have been due to a prolonged gas shortage that has resulted in the country's power sector receiving a third less of its allocation by Petronas. ($1 = 2.970 Ringgit) (Additional reporting by Rebekah Kebede in PERTH; Editing by Liau Y-Singand Ramthan Hussain)



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