Petronas strikes first AECO-indexed LNG deal

Petronas strikes first AECO-indexed LNG deal
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KUALA LUMPUR (May 7): Petronas LNG Ltd, a unit of Petroliam Nasional Bhd (Petronas), has introduced the Canada Alberta Energy Company (AECO) index as a new liquefied natural gas (LNG) price indexation for its customers, following the sale of a spot LNG cargo from Bintulu, Malaysia to a buyer in Far East for August 2021 delivery.

In a statement, Petronas said AECO is a leading price benchmark for natural gas in Canada, similar to the US’ Henry Hub, which is the natural gas price benchmark used for indexation of LNG prices.

The index is transparent as it is traded in real time, said Petronas, with high liquidity backed by large gas reserves.

The introduction of AECO is part of the oil major's plan to include an additional pricing option for its customers, allowing them to enjoy its associated benefits. With AECO, an LNG buyer has the flexibility to further diversify its price exposure from established key price indices, such as the Japanese Crude Cocktail (JCC), Brent, Japan Korea Marker (JKM), US Henry Hub and UK National Balancing Point (NBP), it said.

“As a customer-centric LNG solution provider, we continuously seek to provide customised solutions in meeting our customers’ energy demand, while offering them a competitive pricing structure,” said Petronas LNG chief executive officer (CEO) Ezran Mahadzir.  

The sale of the spot cargo at an AECO-linked price was a significant step towards establishing a transparent price index in the LNG market, said Petronas, to not only complement the group's pricing diversification for cargoes but also for supply of LNG from Canada when it commences commercial delivery, which is expected in 2024. 

"Petronas sources LNG cargoes from its global portfolio of supply from Malaysia, Egypt, Australia and soon Canada, and is no stranger in offering a variety of LNG price indices to suit its partners’ needs and preferences," the statement read.  

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