Malaysia signs $9-billion LNG supply deal with Taiwan
Malaysia signs $9-billion LNG supply deal with Taiwan
KUALA LUMPUR (AFP): National oil company Petronas secured its
biggest deal yet yesterday with a US$9-billion contract to supply
liquefied natural gas (LNG) to Taiwan, officials said.
Through its unit Malaysia LNG Sdn. Bhd.(MLNG), Petronas will
supply gas to the Chinese Petroleum Corp. (CPC) for the next 20
years. Indonesia is Taiwan's sole supplier at present.
"Malaysia will become the second supplier of LNG to Taiwan and
CPC will be fulfilling its objective of diversifying its sources
of LNG supply," said Azizan Zainul Abidin, chairman of Petronas
and MLNG.
Under the deal, Malaysia will ship 2.25 million tons of LNG
annually to Taiwan, about 60 percent of its present demand, said
Azizan.
Based on current LNG prices, the agreement is worth $450
million a year, or $9 billion for the duration of the contract.
The first cargo is scheduled to be sent on May 19, officials
said.
The LNG will come from the country's second largest LNG plant,
LNG Dua. The plant is a joint-venture between Petronas, which
holds a 60 percent controlling stake, Shell 15 percent,
Mitsubishi Corp. 15 percent and Malaysia's eastern Sarawak state
10 percent.
With the Taiwanese contract, Petronas has sold all its
expected production from LNG Dua, said Hassan Marican, Petronas'
president and chief executive officer.
Future contracts will derive from its third plant, LNG Tiga,
which is set to come onstream in 2000, he said.
Azizan signed the sale and purchase agreement on behalf of
Petronas while CPC was represented by its chairman Tzu Yuan
Chang.
Price
Meanwhile, Azizan dismissed a call by an international oil
expert for LNG producers to band together to push up LNG prices.
"Unless buyers work together with sellers, we will not achieve
higher prices," said Azizan, who favored talks between customers
and suppliers instead.
Subroto, former secretary general of the Organization of
Petroleum Exporting Countries (OPEC), was reported yesterday as
saying here that LNG producers should form a "loose consultative
grouping" to devise a new pricing system, independent of the
highly volatile prices of crude oil.
"It is fairly obvious that the producers, especially those
from Southeast Asia, should make an attempt to moot such an
organization," Subroto said, adding that the proposed body need
not be a cartel.
But Azizan rejected the idea of a producers' organization,
saying he preferred to work with buyers to convince them it was
in their interests to keep LNG prices high enough to finance
future plants.
He said buyers should understand that low LNG prices would
deter future exploration and investment in new LNG plants,
leading to a possible "crunch" as current LNG supplies ran out.
Demand for LNG in the Asia Pacific region alone is expected to
almost double by the turn of the century, from 46 million tons
per annum to 70-80 mtpa by 2000, officials said.
Azizan reiterated that LNG prices should not be linked with
oil as LNG production costs were much higher. Based on current
prices, only expansion projects are viable.
"We have used various forums to highlight that the present
price is inadequate to attract new investment," he said, adding
that shortages would not be easily overcome because of the long
lead time needed to build new LNG plants.