Petronas, a Malaysian oil and gas company, has reportedly declared force majeure on gas supplies to its liquefied natural gas (LNG) production and sales division, Malaysia LNG, citing a leak on the Sabah-Sarawak gas pipeline on 21 September.
According to Bloomberg, a landslide last month damaged the pipeline, but the company may restore the infrastructure before the end of the year.
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Petronas said it would explore ways to mitigate the pipeline leak’s impact on the pipeline and restore the gas supply to its facility.
Following that, Malaysia LNG, of which Petronas is the majority owner, said that it would no longer supply LNG to its Japanese utilities and Mitsubishi, Japan’s largest trading company, which owns a stake in Malaysia’s LNG, Reuters says.
In the early aftermath of the landslide, Petronas asked several Japanese buyers to use the downward quantity tolerance option in their contracts, according to market participants.
Since Russia invaded Ukraine and disrupted global energy markets, competition between Asia and Europe for LNG has increased. Bloomberg reports that any cut in expected LNG imports could result in Asia finding alternatives and raising spot prices.
Spot LNG prices have been falling for more than a month. Last analysed on 5 October, Argus’ assessment for spot LNG deliveries to northeast Asia was at $34.40/million British thermal units, a 52 % reduction from a record high on 29 August.
“We will closely monitor the situation and provide full support to Malaysia LNG in order to minimise the impact on the Japanese market,” a spokesperson at Mitsubishi told Reuters.
