Gas and go: Plans to become a regional centre for natural gas

As natural gas consumption growth in Asia continues to outstrip average global demand by a wide margin, Malaysia is making a strong play to not only secure its own domestic supply of the gas but to establish itself as a regional transportation and trading centre.

REGIONAL DEMAND: Gas demand in the Asia-Pacific region rose by 5.9% from the 2010 level of 557.9bn cu metres (bcm) to 590.6 bcm in 2012, nearly triple the 2.2% global growth rate, according to BP’s “Statistical Review of World Energy 2012”. International Energy Agency figures point to continued growth, with Asia’s primary demand increasing from 357 bcm in 2009 to 531 bcm in 2015 and a world-leading 1063 bcm by 2035, ahead of both North America (projected at 951 bcm) and Eastern Europe/Eurasia (830 bcm). These projections assume a compound average annual growth rate of 4.3% from 2009 to 2035 for Asia, the highest of any region and well above the global average of 1.7%.

In a bid to capitalise on this trend, the Malaysian government envisions the country as the natural gas centre of Asia, replete with a host of liquefied natural gas (LNG) facilities and supporting infrastructure complemented by expanded energy commodity trading capabilities. As the world’s second-largest LNG exporter in 2011 at 33.3 bcm (behind Qatar’s 102.6 bcm) according to the BP review, Malaysia already has a strong foothold. The primary export markets are Japan (20.3 bcm), South Korea (5.6 bcm), Taiwan (4.5 bcm), China (2.1 bcm) and India (0.2 bcm).

CAPACITY-BUILDING: In order to boost these capabilities, a massive investment effort is under way to aid both the country’s import and export prowess. Construction of the first regasification plant began in the second quarter of 2011 and is expected to be operational in 2012. Operated by Petronas, the Sungai Udang facility is located in Malacca on Peninsular Malaysia and will be able to receive, store and vaporise LNG at a maximum capacity of 3.8m tonnes per annum (mtpa). The terminal will be managed by the wholly owned Petronas subsidiary Regas Terminal (Sg Udang), which was incorporated in December 2011 and will be composed of two floating storage units berthed at a new purpose-built jetty, as well as the regasification units and transportation pipelines. There are plans to construct a second and third import terminal by 2015 in southern Johor and Lahad Datu in east Malaysia.

Another ambitious plan Petronas is considering is for the nation’s first floating LNG facility, which is scheduled to be deployed by 2015 with an annual capacity of 1.2m tonnes. The facility will operate in the Kanowit gas field 180 km offshore Bintulu in Sarawak and will enable access to previously unconnected resources while forgoing expensive fixed infrastructure.

These projects will augment the Borneo-based export LNG complex already in place. One of the largest such operations in the world, the Bintulu plant is adding a ninth LNG train to its existing eight trains, which should be ready to start operations by the fourth quarter of 2015. The new train will boost capacity from 24m tonnes per annum (mtpa) to 27.6 mtpa with the additional gas feedstock of 850m standard cu feet per day (mscfd) sourced from fields offshore Sarawak.

The additional LNG will be stored and exported through existing infrastructure, which includes three separate terminals of Malaysia LNG, Satu, Dua and Tiga.

Each terminal is a joint venture led by Petronas, with a 65% controlling stake, along with myriad other partners owning minority stakes of various sizes which include Japan’s Mitsubishi, Diamond Gas Netherlands, Shell, Japan Petroleum Exploration Company, Nippon Oil and the state of Sarawak.

PIPELINES: Petronas Gas is expanding its pipeline network in Borneo through the creation of the 550-km Sabah-Sarawak Gas Pipeline project, which will transport natural gas from the Sabah Oil and Gas Terminal in Kimanis to the LNG complex in Bintulu. The company also operates the 2455-km Peninsular Gas Utilisation pipeline system and associated infrastructure in Peninsular Malaysia, along with a smaller 45-km pipeline network serving Miri as well as the Bintulu complex.

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The Report: Malaysia 2012

Energy chapter from The Report: Malaysia 2012

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