Petronas pipeline leak hit part of Malaysia's LNG exports

A Petronas logo at their office in Kuala Lumpur, Malaysia August 15, 2017. REUTERS/Lai Seng Sin/File Photo

SINGAPORE, Oct 7 (Reuters) - Contracts to export Malaysian liquefied natural gas (LNG) that sources gas from the northern Borneo state of Sabah are under force majeure following a pipeline leak, trade sources said on Friday.

Malaysia LNG, majority owned by Petronas, declared force majeure on LNG supplies to its customers due to a leak on the Sabah-Sarawak Gas Pipeline on Sept. 21, a Mitsubishi Corp (8058.T) spokesperson said on Thursday.

This came after Petronas declared force majeure on gas supplies to Malaysia LNG, in which Mitsubishi also owns a stake. read more

The disruption comes ahead of the Northern Hemisphere's winter season, a peak demand period when countries aim to ensure sufficient LNG for heating while facing the threat of energy supply disruptions from Russia this year.

One source familiar with the matter, referring to Sabah, said only supply from the affected pipeline had been disrupted, adding: "There's still plenty more gas coming from Sarawak."

The 512-kilometre Sabah-Sarawak Gas Pipeline transports gas from the Sabah Oil and Gas Terminal to Petronas' LNG complex at Bintulu in Sarawak where LNG is exported.

The JKM price for November delivery gained on Thursday after the force majeure declaration.

It rose to $32.503 per million British thermal units (mmBtu), up $3.628/mmBtu from the previous day, according to Platt's JKM LNG price assessment, yet remained much lower than record levels hit in August.

"Currently, the force majeure is estimated to affect about two to three cargoes a month to Japanese buyers, which accounts for about only 3% of the average total of Japanese LNG imports during October to December," said Ryhana Rasidi, gas and LNG analyst at Kpler.

"However, while we haven't seen an uptick in Japanese buyers seeking replacement cargoes, the sentiment could easily change if the disruption turns out to be longer than expected."

Japan's Toho Gas (9533.T), which bought about 40% of its LNG from Malaysia in the 2021/22 financial year, said it had been informed by Malaysia LNG of the supply disruption.

"Since part of our long-term contracts are subject to it, we are working to ensure stable supply," said a spokesperson without giving further details.

Toho Gas has two long-term contracts with Malaysia LNG with combined volumes of 740,000 tonnes per year, and another long-term portfolio contract with Petronas for 420,000-540,000 tonnes of LNG.

A spokesperson from Tokyo Gas Co Ltd (9531.T), Japan's biggest city gas supplier, said the company is "checking the facts and assessing the impact of the force majeure".

Tokyo Gas bought 13% of its LNG supplies from Malaysia in the 2021/22 financial year.

Japan's biggest power generator JERA, which has a long-term contract to buy 400,000 tonnes per year from Malaysia LNG, declined to comment.

Reporting by Florence Tan and Emily Chow in Singapore, Yuka Obayashi in Tokyo; editing by Jason Neely

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