Petronas wants cooperation among state oil companies

Petronas wants cooperation among state oil companies

Dow Jones, Bandar Seri Begawan

Asia's national oil companies should work together to better
compete against the global supermajors and ensure security of
supply, Mohd. Hassan Marican, chief executive of Malaysia's
Petroliam Nasional Bhd., or Petronas, said Monday.

Hassan encouraged cooperation between national oil companies,
especially among the three main gas producing countries -
Malaysia, Indonesia and Brunei - according to his keynote address
at the Gasex 2002 conference in Brunei.

"National oil companies in the region should get together to
leverage on our combined strength in order to better compete in
the marketplace, especially in liquefied natural gas, or LNG," he
said.

Cooperation makes sense for Brunei, Indonesia and Malaysia as
the three account for more than 65 percent of the total LNG trade
in the region. The three countries also share common customers in
North Asia - South Korea and Japan, he added.

Hassan said the three countries are already cooperating in the
LNG sector by "synchronizing their respective plant operations in
order to maximize plant availability to ensure continuous and
secure supplies to their customers."

Brunei, Indonesia and Malaysia also have agreed to pool their
shipping capacities in order to sell their excess LNG cargoes, he
said.

Together, the three producing countries have access to LNG
plants in four locations in the Southeast Asian region and 25 LNG
ships, which can ensure security of supply for its customers.

"We have already seen last year how the benefits of
cooperation alleviated possible problems that could arise from
the Arun shutdown by ensuring continuity of supplies to LNG
customers," he said.

Conflicts in the Indonesian province of Aceh where the Arun
field is located have posed security problems for gas operator
ExxonMobil Oil Indonesia Inc., forcing it to halt production for
five months in 2001 and disrupting LNG exports from Indonesia.
The long-standing dispute between local separatist group Free
Aceh Movement and the military remains unresolved.

Cooperation among the three gas producing countries can also
enable them to better compete as the LNG market shifts toward
spot trades. Most LNG deals in Asia are set for a 15- to 20-year
term period.

"The commoditization of LNG would provide an opportunity to
create additional values through the pooling of cargoes and
shipping capacity to respond to the market needs," he said.

This means Brunei, Malaysia and Indonesia would better be able
to respond to opportunities to make spot LNG sales to North
America and Europe if they pooled their resources.

Cooperation among Asia's national oil companies will also
allow them to better compete with supermajors, Hassan said.

"I believe that given time, the national oil companies will be
able to stand side by side with the more established players
either as partners or as competitors," Hassan said.

Customers would also benefit from a more formalized
partnership among the three producing countries, Hassan said in a
press conference later Monday.

In the case of supply disruptions, such as the one last year
from Arun, Malaysia and Brunei could step in and prevent a crisis
from developing in consumer countries, he added.

Natural gas industry officials and executives from more than
20 countries are meeting in Brunei for the five-day Gasex 2002
conference, which began Sunday.