Aussie gas project to benefit MISC

Tags: LNG | MISC | Petronas

Written by Jose Barrock

Monday, 13 April 2009 00:00

Last month, Santos Ltd and its partner, Petroliam Nasional Bhd (Petronas), submitted a 13,500-page environmental impact statement to the Queensland Environmental Protection Agency for the production of liquefied natural gas (LNG) from coal seam gas. The statement was submitted under the name of Gladstone LNG Pty Ltd of Queensland.

If Santos and Petronas are given the green light, it could be the first project to produce LNG from coal seam gas, with the gas transported via a 450km pipeline to a plant in Curtis Island, Queensland. This, in turn, is likely to benefit MISC Bhd which is tipped to handle the transport aspects of the gas.

Coal seam gas, also known as coal seam methane, occurs naturally within coal deposits and can be used as feedstock for LNG plants. LNG is reduced to 1/600th of its original gaseous volume at temperatures of -160C, and is transported by tankers to destinations which are not connected by pipes. On arrival at the destination, LNG is turned back into gas for distribution to power plants, factories and households, among others.

The Gladstone LNG development is part of a US$5.3 billion (RM19 billion) project to build a LNG plant at Fishermans Landing on Curtis Island, and is slated to commence production in 2014. Petronas’ involvement came about when it bought 40% in the Gladstone LNG project for US$2.5 billion in May last year. Gladstone LNG, a basin rich in gas deposits, is forecast to produce between three and four million tonnes of LNG a year, with reserves of four trillion cu ft.

In the LNG business, planning is generally conducted at least five years ahead, with supply orders for 15 years being quite common. News reports have stated that Santos and Petronas have already commenced negotiations with LNG buyers in Japan and China, among others. With these ongoing negotiations, Petronas’ 62% unit, national carrier MISC, seems likely to be a beneficiary.

However, it is difficult to calculate the quantum of earnings for MISC as the destination of the LNG is still uncertain, which means the charter rates cannot be determined yet. The travelling time also depends on a whole host of factors. Sometimes, a vessel will take a longer time to reach its destination as it is being used as a storage unit.

MISC has a fleet of 29 vessels with a gross handling capacity of 3.7 million cu m or about 8% of the total global LNG transporting capacity. According to its annual report in 2007, when the company had 26 ships, it delivered about 22 million tonnes of LNG, or 444 shipments. The global LNG output in 2007 was 173 million tonnes.

Poten & Partners, a global broker and commercial adviser for the energy and ocean transport industries, has said that about 180 million tonnes a year of new LNG supply will be required on a yearly basis, which is about a 4% increase from 2007.

In its Monthly LNG Opinion released in March, Poten & Partners say that in 2008, charter rates for LNG vessels of between 138,000 and 150,000 cu m carrying capacity were at US$46,600 per day, down 17% from a year ago.

Out of MISC’s LNG fleet, 26 vessels have between 130,000 cu m and 157,000 cu m carrying capacity. Thus, taking a vessel of 150,000 cu m carrying capacity and assuming four million tonnes of LNG are produced, it would take about 25 shipments a year.

However, charter rates are declining as well. MISC’s vice-president for LNG, Gunaseharan Ganapathy had said that rates were at about US$35,000 to US$40,000 a day. This is in stark contrast to rates which were at about US$75,000 a day early last year.
For the nine months ended December last year, MISC posted a net profit of RM1.2 billion on the back of RM11.8 billion in revenue. In contrast to a year ago, net profits fell by about 26% despite revenue gaining 25.7%.

In its notes which accompany its financials, MISC says the weaker earnings were a result of the container and petroleum shipping arms. MISC’s LNG arm, for the same nine-month period, posted an operating profit of RM1.7 billion on the back of RM6.1 billion in revenue. With the current economic climate, MISC could go into acquisition mode and snap up LNG tankers at very good prices.

With its cash hoard of RM4 billion, MISC could snap up LNG vessels for a song. Alternatively, MISC could buy up companies with old vessels, especially now when charter rates have hit rock bottom, causing ships to be scrapped as junk. Due to the low charter rates, four LNG vessels were scrapped last year, something previously unheard-of.

MISC could also opt to acquire these older vessels and have them refurbished in its wholly-owned unit, Malaysia Marine and Heavy Engineering Sdn Bhd. The national carrier has already refurbished some of its Tenaga-class vessels which were built in the early 1980s.

This article appeared in the Corporate page, The Edge Malaysia, Issue 750, April 13-19,2009.

Should PLUS be nationalised?< Prev		Next >Qantas: MRO talks with MAS off

Last Updated on Tuesday, 28 April 2009 16:07

Sorry, you cannot post a comment unless you are a registered user.

JComments

Categories

Other Publications & Pullouts