Malaysia’s national oil company Petronas subsidiary Petronas LNG on Wednesday secured a 10-year term deal to supply liquefied natural gas to CNOOC Gas and Power Trading & Marketing Limited, a subsidiary of China National Offshore Oil Corporation (CNOOC).
The contract is for 2.2 million tonnes per annum of LNG over a 10-year period, indexed to a combination of the Brent and Alberta Energy Company (AECO) indices. The term deal between Petronas and CNOOC is valued at approximately $7 billion over the decade.
This long-term supply agreement also includes volumes from the grassroots LNG Canada, which is expected to star commercial operations in the mid 2020s.
“Petronas is proud to strengthen our decade-long relationship with CNOOC through this term LNG supply. Importantly, it reflects the markets’ receptiveness and recognition of AECO-indexed LNG into the world’s largest LNG market; as we seek to grow the use of LNG as a cleaner and cost effective form of energy,” said Petronas vice president of LNG marketing and trading, Shamsairi M Ibrahim.
The company hailed the AECO index, housed on the ICE NGX commodity exchange platform, as one of the most liquid spot and forward energy markets in North America.
It is the leading price marker for natural gas in Canada similar to the US’ Henry Hub, which is the benchmark for natural gas prices used as an indexation to LNG prices.
Petronas introduced the AECO index to its customers in May following the sale of a spot cargo from Bintulu, Malaysia to a mystery buyer in the Far East.
Petronas added the agreement with CNOOC, China’s largest LNG importer, reflects its commitment to ensure security of supply through an established transparent and stable price index such as AECO in the LNG market, while providing additional pricing options for its customers.
Once ready for operations, the LNG Canada project paves the way for Petronas to supply low greenhouse gas emissions LNG to the key demand markets in Asia.
The deal also further strengthens the ongoing relationship established since 2006 and reflects our commitment in supporting the endeavour of CNOOC and its associated companies to meet the fast-growing demand for cleaner energy and support China’s national aspiration of peak emissions and carbon neutrality, said Petronas.