July 7, 2021

Illustration - Petronas' FLNG unit - Credit: Petronas

Illustration – Petronas’ FLNG unit – Credit: Petronas

Malaysia’s state oil firm Petronas has signed a 10-year liquefied natural gas (LNG) supply agreement with a subsidiary of China’s offshore oil and gas major CNOOC Ltd valued at about $7 billion, the firm said on Wednesday.

Petronas, or Petroliam Nasional Berhad, said the deal with CNOOC Gas and Power Trading & Marketing Limited is for 2.2 million tonnes per annum over a 10-year period.

“This long-term supply agreement also includes supply from LNG Canada when the facility commences its operations by the middle of the decade,” Petronas said in a statement.

The deal is indexed to a combination of the Brent and Alberta Energy Company (AECO) indices, it said.

AECO is a Canadian natural gas price benchmark, similar to the Henry Hub index in the United States, but is not typically used as a pricing basis for LNG spot contracts.

In Asia, the S&P Global Platts’ Japan-Korea-Marker (JKM) has been increasingly used as a pricing basis in spot contracts.

Petronas signed its first LNG cargo using the AECO index to a buyer in the Far East in May.

The deal with CNOOC reflects the markets’ receptiveness and recognition of AECO indexed LNG into the world’s largest LNG market, said Shamsairi M. Ibrahim, Petronas Vice President of LNG Marketing & Trading.

(Reporting by Mei Mei Chu, editing by Louise Heavens)

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