Oct 27 2022
The concern over Malaysia LNG supply has receded among buyers in Japan amid emerging prospects of receiving alternative supplies from the seller following the recent force majeure on some of its supply, sources familiar with the matter told S&P Global Commodity Insights Oct. 27.
The change in sentiment comes as a number of Japanese buyers of Malaysia LNG have recently been informed by the seller about the likelihood of ensuring their scheduled supply including from other sources in coming months, sources said.
"Now I am hearing that all affected [cargoes] from the force majeure will likely be supplied until March," one source said. "This was an unexpected move by Malaysia."
However, some Japanese off takers noted that there is uncertainty over the size of alternative cargo deliveries beyond January.
Multiple Japanese buyers of Malaysia LNG have recently been told that they now expect to receive scheduled shipments in the coming months, including alternative supplies from the Petronas Floating LNG Satu, PFLNG Dua plants and the Gladstone LNG in Australia, sources said.
"It remains unclear to see whether those cargoes will actually be supplied but at least we have been told about such talks," one source said.
Petronas did not immediately respond to an Oct. 27 request for comment on the supply impact to Japanese buyers from Malaysia LNG's recent force majeure.
The news of the Japanese buyers' increased prospects of receiving alternative cargoes to Malaysia LNG supply comes to light after at least a few Japanese buyers have already purchased their supplementary cargoes recently.
In a signal of ensuring alternative supply to affected Japanese buyers of Malaysia LNG, one Japanese buyer was receiving a cargo from Petronas following changes in its annual delivery program, said a source familiar with the matter.
The seller's move to ensure supply affected by the Malaysia LNG force majeure is decreasing some Japanese buyers' appetite for spot LNG procurements during the upcoming winter demand months, sources said.
"This appears to be Petronas' maximizing efforts in its response to a request from the Japanese government seeking alternative supplies to Malaysia LNG," said Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp.
"Should such moves continue, Japanese end users' needs to procure incremental LNG from other sources will be reduced to make up a supply shortfall from Malaysia LNG following its declaration of force majeure, with the approach of winter heating demand season," Nogami said.
The Japanese government has demanded Malaysia's Petronas secure alternative LNG, including from its other supply points, to cover the loss from its recent force majeure on gas supply to MLNG Dua, Minister of Economy, Trade and Industry Yasutoshi Nishimura said Oct. 11.
"We have made a strong request to the company [Petronas] from the government for a speedy restoration as well as to minimize the impact from the supply suspension through securing alternative supply for Japan," Nishimura told a press conference in Tokyo.
"We are requesting [the company] to minimize the impact by securing alternative supply from its several LNG supply points," Nishimura said.
Malaysia LNG has declared force majeure on supply to several customers, including Japanese buyers, following the suspension of supply from the Sabah-Sarawak Gas Pipeline, a spokesperson for Mitsubishi, which has stakes in Malaysia LNG's Satu, Dua, and Tiga projects, said Oct. 6.
Malaysia's Petronas declared force majeure on gas supply to MLNG Dua due to a pipeline leak, impacting gas supply to Petronas LNG Complex in Bintulu and subsequently impacting delivery commitments to some LNG buyers, the national oil company said in a statement on Oct. 8.
Petronas said the force majeure was due to a pipeline leak caused by soil movement in the vicinity of the exploration block KP201, at the SGP, that occurred on Sept. 21.
The bulk of Malaysia's LNG cargoes are exported from the Bintulu LNG complex comprising three trains each at MLNG and MLNG Dua, two trains at MLNG Tiga, and a ninth train operated by Petronas LNG 9. Bintulu LNG boasts nearly 30 million mt/year of capacity, which is among the largest LNG export capacities of its kind at a singular location.
The PFLNG Satu has a 1.2 million mt/year capacity at the Kebabangan Gas Field, 90km offshore Kota Kinabalu, Sabah, with the PFLNG Dua at a 1.5 million mt/year capacity at the Rotan Gas Field, 140km offshore Kota Kinabalu.
Petronas also has a 27.5% stake in the Gladstone LNG project in Australia.
Malaysia was Japan's second-largest LNG supplier in 2021, accounting for roughly 14% of the country's total imports of 74.32 million mt, according to the finance ministry data.