Kuala Lumpur: Malaysian state energy company Petroliam Nasional Berhad expects the global liquefied natural gas (LNG) market to remain oversupplied until as late as 2023, its chief executive said on Tuesday.
Rising LNG production over the last two years, mainly from Australia and the United States, has exceeded demand and depressed prices. Asian spot LNG prices LNG-AS are now down by around 70 percent from early 2014.
Petronas, as the company is better known, only last month scrapped a proposed $29 billion LNG terminal project in western Canada, saying market conditions made the project “economically unviable”.
“Things are volatile, but at the moment we see 2023 (for LNG market balance),” Chief Executive Officer Wan Zulkiflee Wan Ariffin said.
The market will tighten when “demand centers in developing economies start growing … as current low prices mean more take up” of LNG supplies, he said.
Petronas is the sole manager of Malaysia’s oil and gas reserves, making it the world’s third-biggest LNG exporter after Qatar and Australia.
The company is now looking for new buyers for its LNG output, beyond its long-time customers in Japan and South Korea, the CEO said.
“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 said.
South Asia is emerging as the new hot spot for LNG, with Pakistan and Bangladesh set to join India as major consumers, helping to eat away some of the global oversupply.
“For both China and India, LNG makes up less than 10 percent of their energy mix. We see growth potential here,” he said.
Petronas started up Train 9 at its Bintulu export terminal this year and commissioned the world’s first floating LNG unit, bringing Malaysia’s annual LNG capacity to 32 million tonnes.
Petronas is budgeting for an oil price of $45 a barrel for this year, expecting a slight higher budget assumption in 2018, Wan Zulkiflee said.
Petronas, like other oil majors, has taken a hit from lower oil prices. Brent crude oil prices LCOc1 are at less than half the levels of mid-2014, trading at around $50 on Tuesday and averaging $52.17 a barrel so far this year.
“It may be a few dollars higher (than $45) in the next year,” said Wan Zulkiflee, adding that Petronas along with other oil and gas service providers in Malaysia should still be profitable at these levels.
Despite the low-price environment, lower operating expenses, job cuts and project rollbacks helped the company post a profit increase in 2016.
Earlier this year, Petronas said it maintained a “conservative” outlook for 2017 and that it will continue to pursue lower costs as oil prices are likely to remain uncertain.