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LNG market gets boost as Mubadala starts first gas from Pegaga in Malaysia

© Supplied by ShutterstockSilhouette of children waving the national flag in conjunction with Malaysia Independence Day.
Silhouette of children waving the national flag in conjunction with Malaysia Independence Day.

The outlook for liquefied natural gas (LNG) production in Asia has taken a positive turn following Mubadala Petroleum starting first gas flows from Pegaga to the Petronas-led Bintulu LNG export complex in Malaysia.

The news is positive as Bintulu has been operating well below its export capacity as Petronas has struggled to source enough gas to boost LNG production.

Asian LNG demand is expected to remain bullish as temperature forecasts are now trending at or below normal at a time when most North Asian buyers are likely running low on inventory after months of limited spot buying activity and previous production upsets at Bintulu and Shell’s Prelude FLNG facility offshore Australia, Rystad Energy said in a note.

Significantly, Prelude FLNG is expected to restart in the coming weeks, while more output from Bintulu will also help ease the pressure on the tight regional market for LNG. This is a positive development for a region badly in need of every LNG molecule it can get its hands on, said Rystad.

“The (Pegaga) project, which undertook its Final Investment Decision at the time when the oil market was still recovering in 2018, demonstrates the confidence of investors in Malaysia’s upstream industry. The country’s ecosystem also proved its resiliency with the successful design and fabrication of facilities completed during the peak of the COVID-19 pandemic,” Petronas senior vice president of Malaysia Petroleum Management, Mohamed Firouz Asnan said yesterday.

Mubadala Petroleum has been present in Malaysia since 2010 and is the operator of Block SK 320 with a 55% interest. Petronas Carigali, a subsidiary of Petronas holds 25%, with Shell (LON:SHEL) holding the remaining 20% share.

The Pegaga gas field is in the Central Luconia province, offshore Sarawak, Malaysia at about 108-meter water depth. The development concept comprises of an Integrated Central Processing Platform (ICPP) consisting of an 8-legged jacket. The facility is designed for gas throughput of 550 million standard cubic feet of gas per day plus condensate. The produced gas will be evacuated through a new 4 KM, 38-inch subsea pipeline tying into an existing offshore gas network and subsequently to the onshore Petronas LNG complex in Bintulu.

Petronas seeks to appease ConocoPhillips and Shell with $3bn floating LNG unit

At the height of the pandemic in Malaysia, the jacket and wellhead deck, which were constructed in Lumut and Kuching fabrication yards, were installed in April 2020 followed by the Pegaga Development Drilling campaign. The ICPP float-over and installation was then safely completed in August 2021.

The Bintulu LNG plant, which can process about 30 million tonnes per year (t/y) of LNG, operated at around 80% of its capacity last year due to a gas supply shortage. Efforts to boost supply from offshore Sabah to Bintulu have been thwarted due to constant outages at the Sabah-Sarawak Gas Pipeline (SSGP, which has failed to work properly since 2014. As of mid-2021, Bintulu was exporting at a little over 24 million t/y, with the lack of supply from Sabah being one of the key factors behind the shortfall.

Malaysia’s state-owned energy company Petronas is planning to build a third multi-billion dollar floating liquefied natural gas (FLNG) unit to help solve challenges commercialising gas offshore Sabah in Malaysia as part of an effort to appease ConocoPhillips and Shell following losses related to an upstream development.

Petronas said yesterday that “beyond the Pegaga field, Petronas is pursuing its Upstream Ambition 2030 to increase Malaysia’s production level to two million boepd from its current level of approximately 1.8 million boepd through the development of various opportunities that are in the pipeline.”

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