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Statoil in Pact for LNG Supply

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Norwegian energy giant Statoil ASA has inked a long-term agreement with state owned company Petronas for the export of liquefied natural gas (LNG) in the latter’s Malaka import terminal in Malaysia.

The deal denotes the first attempt by Statoil to deliver LNG to the lucrative markets of Asia. Per the agreement, Statoil will supply about 1 billion cubic meters of gas that is equal to the utilization of two 400-megawatt power plants. The supply pact extends for a period of three and a half years. Statoil wants to position itself advantageously to benefit from the growing demand for LNG in Asia.

Malaysia has been a major exporter of LNG for a long period of time through its long-term supply deals with Asian neighbors Japan, South Korea and Taiwan. However, the growing domestic demand has led to the building of the country’s first import terminal at Melaka, expected to be commissioned in August 2012. Statoil has scheduled its first assignment under the new contract soon after the completion of the terminal.

The pact could even signify a declaration of intent by Statoil prior to its decision on the construction of a second train at the Snohvit LNG facility on the island of Melkoya, off Hammerfest in northern Norway. The verdict is expected in the second quarter of 2012.

Statoil is seeking new export alternatives as it has augmented its 2012 projection for recoverable gas reserve by 20 billion cubic meters at the Snohvit field. The company expects further boost in the projection in near future, with opportunities of new discoveries in the frontier Barents Sea.

Statoil anticipates a second Snohvit train to expedite the export procedure to meet the escalating demand in the Asian markets.

Statoil holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. Longer term, we maintain our Neutral rating on the stock. The company faces tough competition from Eni SpA (E - Free Report) .

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