May 20, 2020 / 3:47 AM / 16 days ago

Malaysia's Petronas to sell LNG to Chinese firm's tank facility

FILE PHOTO - A car passes by a Petronas petrol station in Kuala Lumpur, Malaysia, July 31, 2019. Picture taken July 31, 2019. REUTERS/Lim Huey Teng

KUALA LUMPUR (Reuters) - Malaysia’s Petroliam Nasional Bhd [PETR.UL] has signed a deal to supply liquefied natural gas (LNG) to an ISO tank-filling facility owned by China’s Tiger Clean Energy in the eastern state of Sarawak, the state energy firm said on Wednesday.

The binding sales and purchase agreement provides for the Chinese firm to distribute the fuel to remote locations in China using ISO tanks, Petronas said, an unusual strategy as it is typically more expensive than employing the bigger LNG vessels.

“Through this...approach, we established a virtual pipeline that effectively enables LNG to reach off-grid customers who are not directly served by the natural gas distribution system in China,” Ahmad Adly Alias, the vice president of Petronas’ LNG Marketing and Trading division, said in a statement.

Petronas did not reveal volumes or prices of the cargoes sold.

ISO tank containers, so called because they meet specifications set by the International Organisation for Standardisation (ISO), offer quick access to the cleaner super-chilled fuel for end-users in locations far from main pipelines who require smaller volumes.

Usually carried in container trucks instead of LNG vessels, they offer a back-up solution to meet excess demand faster than vessel deliveries that can be constrained by rigid schedules.

But traders said the method was rare for container-sized LNG cargoes, since added logistics costs and an absence of economies of scale boost expense.

Petronas said the deal, struck by video teleconference, was the first of its kind that it has done virtually, amid lockdowns worldwide that restrict people’s movements and travel.

LNG spot prices LNG-AS are hovering near record lows as global demand withers amid the coronavirus pandemic, spurring suppliers to write more flexible arrangements into deals as they try to lure buyers, industry sources have said.

Reporting by Jessica Jaganathan in Singapore and Mei Mei Chu in Kuala Lumpur; Editing by Clarence Fernandez

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