Bloomberg: Shell, Total May Have to Find More Gas for Brunei LNG (Update1) (*Shell’s business partner – corrupt Brunei Royal family)

By Dinakar Sethuraman

March 13 (Bloomberg) — Royal Dutch Shell Plc and Total SA may have to find more gas in Brunei to extend liquefied natural gas supplies to Asian customers, an official said.

Sales contracts to utilities in Japan and South Korea expire in 2013, Mohamad Damit, general manager of LNG marketing at Brunei LNG Bhd, said in Bangkok yesterday. Supplies from the 7.2 million metric tons-a-year plant fell 2.3 percent last year to 213 cargoes from 218 in 2006.

Dwindling gas discoveries in Southeast Asia may stall contract renewals by plants that supply a third of the world’s LNG. Demand for LNG is growing 10 percent a year, 14 times faster than that for crude oil, according to presentations by Shell and Total. Tokyo Electric Power Co. depends on Brunei LNG for 4.03 million tons of LNG a year or about two months of its consumption.

Brunei LNG plans to charge a premium to crude oil benchmarks for extensions made to existing contracts, Damit said. Current prices are at a discount to crude benchmarks, he said without giving further details.

LNG prices tripled in the last five years to an all-time high, said Fereidun Fesharaki, chief executive officer of Facts Global Energy, a U.S. consultant. Crude oil in New York reached a record $110.20 a barrel yesterday in New York, the highest intraday price since futures began trading in 1983.

The Brunei LNG venture, the first in the Western Pacific, is spending about $500 million to “rejuvenate the plant,” Jeroen van Duin, deputy general manager, marketing, said in an interview in Bangkok yesterday.

Gas Discovery

Shell and Brunei’s government found gas in the Bubut area about 9 miles from a joint-venture LNG plant, the company said in a statement Nov. 9. The Shell-led venture supplies 89 percent of Brunei LNG’s gas and the rest comes from a Total- operated field, Damit said.

Brunei LNG has ordered two new LNG carriers of 147,000 cubic meters in size this year to replace ageing 75,000 cubic meter vessels, Damit said. “The ships are part of a rejuvenation process where we are preparing to ship LNG for another 20 years up to 2033,” said Van Duin.

Brunei, which shares the island of Borneo with Malaysia and Indonesia, is the 10th-largest producer of LNG, down six places from 2000. The Brunei Sultanate owns 50 percent of the venture, Shell holds 25 percent and Mitsubishi Corp. owns the rest, a Brunei LNG report said.

LNG is natural gas chilled to liquid form, reducing it to one-six-hundredth of its original volume at minus 161 degrees Celsius (minus 258 degrees Fahrenheit) for transportation by ship to destinations not connected by pipeline. It is turned back into gas for distribution to users.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at [email protected]

Last Updated: March 13, 2008 02:30 EDT

*Headline comment in brackets added by John Donovan

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