Petros becomes Sarawak's aggregator, and China's natural gas exports have been hit

Sarawak Petroleum (Petros) became the only local gas aggregator (gas aggregator).

Islamic Bank Securities believes that this may have a negative impact on Malaysia's liquefied natural gas (LNG) exports, but it is not expected to affect upstream investment by Petronas (Petronas).

An Islamic Bank securities analyst pointed out that the Sarawak government may use locally produced natural gas more to meet internal demand, thereby reducing Malaysia's overall natural gas exports.

“If this were the case, CNPC's revenue from the natural gas or liquefied natural gas business would face a negative impact.”

A so-called natural gas aggregator is a merchant that aggregates and processes natural gas trading activities within the relevant region. Therefore, after becoming the sole aggregator in Sarawak, all natural gas transactions within the region need to be carried out through Petros.

Today, Petros is about to begin implementing the 10-year Sarawak Natural Gas Roadmap (SGR), with the goal of increasing the domestic gas consumption share to 30% by 2030.

In response, the analyst said that no matter who becomes the aggregator, whether SGR can meet the standards, it is necessary to rely on a long-term stable supply of natural gas.

“The Sarawak government needs continuous upstream oil and gas investment, especially new oil and gas field projects, to ensure long-term stable gas supply. Considering that Sarawak still requires large-scale oil and gas investments, we believe it is very unlikely that CNPC will reduce capital expenses in its upstream business by losing the right to distribute natural gas in Sarawak.”

The analyst believes that once CNPC reduces its upstream capital expenses, not only the natural gas business, but the revenue from other businesses will also be impacted.

“Therefore, if CNPC reduces upstream investment, it will be a policy that harms others and harms itself.”

Analysts also said that considering the current environment where oil and gas prices are rising, it is still profitable to develop new oil and gas fields. It would be an extremely strange decision to cut upstream investment at this time.

The analyst believes that as long as oil prices remain above 60 to 70 US dollars per barrel, the prospects for China's offshore oil and gas projects are still optimistic.

At the same time, analysts also maintained an “gain” rating in the oil and gas sector.