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Malaysia’s Petronas defers some LNG cargo deliveries from Bintulu for Japan

Malaysia’s national oil company Petronas has deferred the delivery of some LNG cargoes, loading from the Bintulu LNG complex in the state of Sarawak, which are headed to its Japanese customers, according to LNG traders and market sources.

At least three Japanese offtakers received requests from Petronas to defer cargoes originally due to be delivered from August onwards, mainly from Train 9 of the nine-train Petronas LNG Complex at Bintulu, two of its Japanese offtakers said.

The offtakers said they had consented to the deferrals, ranging from 10 days to September and October, because the number of cargoes were relatively small. Japanese utilities are well supplied in the current market and did not require these shipments immediately.

When contacted, Petronas did not immediately confirm any Train 9 disruptions or cargo deferrals.

The cargo deferments came amid tight supply-demand fundamentals in the Asian LNG market, with spot prices teasing the $20/MMBtu level at the start of September, which is a record high for this time of the year. The S&P Global Platts JKM for October was assessed at $19.250/ MMBtu on Sept. 2, down from $19.66/ MMBtu on Sept 1.

Any supply constraints are likely to be bullish for LNG prices as Asia, the largest LNG importing region, heads into early procurement for winter in the October-November months. It also underscores feed gas issues that have dogged the Bintulu facility in the past, including the Sabah–Sarawak Gas Pipeline.

“Any supply outage in Asia Pacific tends to have an outsized impact on JKM because those volumes have to be sourced from outside the region,” Asia LNG manager at S&P Global Platts Analytics, Jeffrey Moore, said.

“Although Japanese demand is expected to decline this winter compared to last given higher nuclear output and an assumption of normal temperatures, if the production issue lingers for several more months, it could certainly put upward pressure on spot prices,” he added.

Malaysia’s LNG cargo loadings have already fallen over the past month, with exports averaging close to 80 mmcm/d in July and August, down over 15% from June, Platts Analytics data showed

Production issues

The offtakers affected by cargo delays from Bintulu did not provide a reason for Petronas’ deferral requests.

However, oil and gas industry executives based in Malaysia pointed to multiple outbreaks of COVID-19 that have disrupted Sarawak state’s offshore oil and gas sector. In August, COVID-19 was reported among oilfield service contractors involved in servicing, or constructing, offshore platforms in Sarawak and Sabah, according to local media reports.

Malaysia’s COVID-19 rules call for any infrastructure, either onshore or offshore, connected to a cluster of cases to temporarily shut for cleaning, local industry sources said.

Bintulu’s Train 9, where some of the cargo delays originated, according to traders and offtakers, draws significant output from Block SK316, which hosts the trillion cubic feet-class discovery, Kasawari, deemed instrumental to boosting the facility’s utilization.

Upstream sources viewed the tighter COVID-19 controls at Sarawak as holding back in-field construction work at the Kasawari gas project, which has already seen its production start up deferred for over a year to the first half of 2022.

Meanwhile, Southeast Asia is among the world’s worst hit regions for COVID-19, across Malaysia, Indonesia, Vietnam, Thailand and the Philippines. Malaysia’s Sarawak state continues to post record high case numbers in the week of Aug. 30-Sept. 3.

Petronas’ LNG Complex at Bintulu is one of the world’s largest LNG production facilities in one location, with production capacity at 30 million mt/year. Malaysia, the world’s fifth largest LNG exporter, was the second largest source of shipments to Japan in 2020 after Australia, according to Platts Analytics data.

The bulk of Malaysia’s LNG cargoes are exported from the Bintulu complex, that is operated by Malaysia LNG which is made up of MLNG, MLNG Dua, MLNG Tiga and PETRONAS LNG 9. PETRONAS LNG 9 owns the 3.6 million mt/year train 9 in Bintulu that began commercial operations in January 2017, while JX Nippon Oil & Energy holds a 10% interest.
Source: Platts

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