Petronas to benefit from takeover of Shell's MLNG Dua stake

Muhibbah is shaping up to be a big beneficiary of Petronas' move, via the Refinery and Petrochemical Integrated Development (RAPID) project., to venture downstream.

KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) will benefit from its takeover of Shell’s 50% interest in the MLNG Dua liquefied natural gas (LNG) plant as the deal will enable the Malaysian national oil and gas producer to better match domestic gas production with regional LNG demand, BMI Research says.

“With Petronas and its subsidiaries now becoming the operator of the project, we see this development as a positive for the firm as it will allow it to consolidate its operations in Sarawak and aid its efforts in developing the region as a gas hub,” BMI Research, a global financial information services company, said.

“By taking control of MLNG Dua, Petronas will have better control over the gas production and export in the Sarawak region and will be able to better match gas production with regional LNG demand,” it added.

Petronas assumed full control of MLNG Dua after Shell transferred its 50% stake in the LNG plant to the company on Aug 21, 2015, after the expiration of a production sharing contract (PSC) between the two groups for the facility. 

Petronas and its subsidiary E&P Malaysian Ventures Sdn Bhd now owned 90% and 10%, respectively, of the PSC for MLNG Dua.

Despite the ongoing expansion in Malaysia's LNG capacity, BMI forecast Malaysia's net LNG exports to remain roughly stagnant up to 2021 before rising up to the end of our forecast period to reach 31.8 billion cubit metres (bcm) by 2024. 

“This is due to our expectation for a well-supplied LNG market over the next few years as well as a rapid increase in Australia's LNG exports from 2016, which will see Malaysia's market share being eroded in the region,” BMI Research explained.

It, however, noted that rising demand from large Asian LNG importers such as India over the medium-to-long term would help Malaysia's LNG exports grow from 2021. 

Petronas has three major LNG production facilities at the Bintulu LNG complex in Sarawak - MLNG Satu, MLNG Dua and MLNG Tiga. These plants have a combined capacity of 25.7 million tonnes per annum (mtpa) - translating to 35bcm. 

A few upcoming projects will expand Malaysia's LNG production capacity. 

The first is a floating LNG (FLNG) project designed to exploit the Kanowit gas field offshore Sarawak as well as the addition of a ninth train in Bintulu. These two projects will together add 6.6bcm to the country's LNG production capacity by 2016.

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Petronas is also planning a second FLNG facility - Rotan LNG - which is expected to be operational in 2018 and increase LNG capacity by another 2bcm.