Petronas expects LNG market to remain oversupplied until 2023

Petronas’ CEO says he expects the global LNG market to rebalance by 2023. Petronas photo.

LNG market swamped by US, Australian production

The chief executive of Malaysia’s state-owned energy company, Petronas, says he expects the global LNG market to remain oversupplied until as late as 2023.

With increased supply from Australia and the United States, prices have fallen; Asian spot LNG prices are now down by about 70 per cent from early 2014.

Last month, Petronas ditched plans to build a $29 billion LNG terminal in British Columbia.  The company said market conditions made the project “economically unviable”.

In an interview with Reuters, Chief Executive Officer Wan Zulkiflee Wan Ariffin said “Things are volatile, but at the moment we see 2023 (for LNG market balance).”

He said the market will tighten when “demand centres in developing economies start growing … as current low prices mean more take up” of LNG supplies.

As the sole manager of Malaysia’s oil and gas reserves, Petronas is the world’s third-largest LNG exporter, behind Qatar and Australia.  Its annual LNG capacity is 32 million tonnes and the company just started up Train 9 at its Bintulu export terminal and commissioned the worlds’s first floating LNG unit.

Petronas is now looking for new buyers beyond its customers in Japan and South Korea.

“The Far East, that is our traditional market, but we are also looking at markets in the subcontinent in India, Bangladesh and Pakistan,” Wan Zulkiflee told Reuters.

The LNG market in South Asia is emerging as a hotspot as Pakistan and Bangladesh increase their purchases of LNG, helping to tackle the global glut.

Wan Zulkiflee added “For both China and India, LNG makes up less than 10 percent of their energy mix. We see growth potential here.”

Despite lower oil and gas prices, cuts to operating expenses, project rollbacks and employee reductions helped Petronas post a higher profit in 2016.