Signs Technical Evaluation Agreement with Petronas

POSCO International, which is accelerating its efforts to expand its liquefied natural gas (LNG) value chain, is set to explore and develop new gas fields in Malaysia. This move aims to strengthen upstream capabilities, which form the foundation of a stable supply chain, as global demand for LNG expands as an intermediate step in the transition to environmentally friendly energy.

According to foreign media reports including Upstream on June 25, POSCO International recently signed a technical evaluation agreement (TEA) with Petronas, Malaysia’s state-owned oil company, for the Layan-Layan Basin off the eastern coast of Sabah. A TEA is an agreement to evaluate the technical and commercial feasibility of resource development in a specific area. The Layan-Layan Basin is understood to have a geological structure with source rocks capable of converting organic matter into oil and natural gas. If the actual evaluation results indicate a high possibility of resource development, it will lead to full-scale exploration and development of the gas field.

This marks POSCO International’s second venture into Malaysian gas fields. Malaysia ranks 15th globally in terms of natural gas reserves, and local companies are actively developing gas fields. POSCO International first entered the Malaysian gas field development market in 2021 by acquiring an 80% stake in the PM524 block, located off the eastern coast of Peninsular Malaysia, through competitive bidding, securing exploration and operating rights. Since then, the company has been working on selecting promising drilling locations through technical evaluations and reportedly began its first exploratory drilling last month. After confirming the presence of natural gas and other resources during the exploration process and completing commercial viability assessments, full-scale development work is expected to commence.

POSCO International is accelerating the development of overseas gas fields to become the next lucrative revenue source following its successful Myanmar gas field. The company began gas field development in the A-1 block off the western coast of Myanmar in 2000, discovering the Shwe, Shwe Phyu, and Mya gas fields, and commenced full-scale gas production in 2013. As of the second quarter of last year, the operating profit from the Myanmar gas field business was 137.6 billion won, accounting for 40% of the total operating profit, with an operating profit margin of over 70%. The company embarked on the fourth phase of development last year, aiming for production by 2027.

Through the acquisition of Senex Energy, POSCO International is also engaged in onshore gas field development projects in Australia. Commercial production began last year at the Atlas and Roma North fields located in Queensland, with plans for gradual production increases starting from the second half of this year. The goal is to achieve an annual production of 60PJ (petajoules) by next year, which corresponds to 10% of the gas demand in eastern Australia. To ensure profitability after the production increase, long-term supply contracts have been signed with local power company AGL and steel companies BlueScope and Liberty Steel. In addition to these gas fields, exploration and evaluation are ongoing in the nearby Rocky Bar and Range blocks.

As POSCO is putting efforts into building an LNG value chain at the group level, POSCO International is expanding its related businesses. In Korea, the company is investing 930 billion won to expand LNG tanks at the Gwangyang LNG terminal, enhancing its trading business capabilities. POSCO International plans to invest a cumulative 1.99 trillion won by next year and 3.25 trillion won by 2030 in LNG terminal construction. Furthermore, as demand for LNG vessels increases due to stricter maritime environmental regulations, the company is in the process of establishing infrastructure to operate bunkering and sea trial businesses. According to market research firm Grand View Research, the global LNG market size is expected to grow from 122.6 billion dollars (about 167 trillion won) last year to 227 billion dollars by 2030.

Source: Businesskorea