Putting the squeeze on gas: Russia and Malaysia have begun discussing Russian LNG supplies

Domestic and Malaysian companies are already working on the issue of Russian energy supplies, including LNG, the Russian Embassy in Kuala Lumpur told Izvestia. As Energy Minister Sergei Tsivilev noted in an interview with Izvestia, the Russian Federation offered Malaysia not only supplies, but also assistance in developing gas infrastructure to create a hub in the country. This will expand the opportunities for the sale of Russian liquefied natural gas, the demand for which is growing. It is reported that the Arctic LNG-2 plant has launched a second production line. How Moscow and Kuala Lumpur are developing energy cooperation.

Creation of a gas hub in Malaysia

Russia and Malaysia have begun working on the issue of purchasing Russian energy resources, including liquefied natural gas, the Russian Embassy in Kuala Lumpur told Izvestia.

"According to the information available to the Russian Embassy, discussions on Russian energy supplies, including LNG, are indeed underway between domestic and Malaysian companies," the diplomatic mission said.

They also stressed that the discussion and its details on the line of business entities are not disclosed for commercial reasons. The Russian side was thinking about LNG supplies to Malaysian partners a year ago. Then, in May, Dmitry Vakhrukov, Deputy head of the Ministry of Economic Development of the Russian Federation, reported that Moscow was also ready to consider supplies of low-carbon ammonia and hydrogen.

At the same time, Malaysia itself exports a large amount of LNG. So, in 2024, according to this indicator, it became the fifth with a result of 27.8 million tons, being only one position lower than Russia (33.3 million tons). The top three countries are the United States (88.9 million tons), Australia (79.6 million tons) and Qatar (79.2 million tons). Therefore, there are much more opportunities for cooperation with Malaysia in the field of gas energy. In particular, it is possible to develop the gas infrastructure together, which Russia has proposed to do.

— We are making such an offer not only in the delivery of LNG, but also in the development of the entire gas infrastructure, the creation of a gas hub in Malaysia for supplies to other countries. And the offer of investing in the receiving infrastructure, wires for gas storage facilities, the entire complex of gas infrastructure for the gas market. So there is also a great potential for joint cooperation, we have such technologies, we know how to do it," Sergey Tsivilev, the head of the Ministry of Energy, told Izvestia.

The Minister noted that the proposal on both LNG supplies and participation in the development of gas infrastructure is supported at the government level by both sides. Meanwhile, Russia's demand for the sale of liquefied natural gas is only increasing. On May 20, Bloomberg, citing sources, reported that the Russian Arctic LNG-2 plant, which is under EU and US sanctions, has launched a second production line.

— The total capacity is 13.2 million tons of LNG per year, which is large (our Sakhalin plant produces about 10.5 million tons per month). And when we talk about the gas hub, it is assumed that our LNG will also come there, because there is no other way to deliver it, and, accordingly, it will be sold to traders, and then it will be depersonalized," suggests Igor, a leading analyst at the National Energy Security Fund, an expert at the Financial University under the Government of the Russian Federation. Yushkov.

In general, the countries of Southeast Asia are becoming a key destination for Russian LNG supplies amid geopolitical changes and a reduction in gas exports to Europe due to sanctions and sabotage on the Nord Streams. The Philippines and Thailand are also showing interest in it. Demand for energy resources is growing throughout the region. According to analysts, by 2030, LNG imports to Southeast Asia may grow from 22.9 million tons in 2024 by 2.4 times, that is, to 53.5 million tons. Thus, according to Reksoft Consulting, ASEAN will become the fastest growing LNG market in the world by this point. The main drivers will be the Philippines, Thailand, and Vietnam.

What else can Russia offer Malaysia?

The recent meeting between Russian President Vladimir Putin and Malaysian Prime Minister Anwar Ibrahim gave an impetus to energy cooperation. Following the talks in the Kremlin, the Russian leader called energy a key area of cooperation. In particular, the Malaysian oil and gas concern Petronas is part of Rosneft's share capital and is developing partnership with this company and Gazprom.

Against this background, the parties are also working in other energy areas. So, Russia is ready to increase coal supplies to Malaysia, and there is a positive response from the authorities of the Asian country. By the end of 2023, coal exports from Russia to Malaysia have already amounted to 3.2 million tons. The parties are discussing increasing oil supplies, including to neighboring countries. There is potential in this area: for example, oil production in Malaysia in April amounted to 343 thousand barrels per day, which is almost 60 thousand b/d lower than allowed under the OPEC+ agreement, in which Malaysia participates.

The cooperation between Moscow and Kuala Lumpur in the field of peaceful atom is the most interesting. It is no coincidence that Vladimir Putin noted this area as particularly promising. For Malaysia, this is indeed of greater interest than cooperation in traditional areas such as the supply of oil or coal.

— Malaysia is probably not really interested in buying our oil, and we are not ready to lower the price there in order to enter this market. Iranian oil goes to China through Malaysia. Malaysia produces it itself. But a floating nuclear power plant is promising, because not many companies in the world can create something like this, especially a proven floating nuclear power plant," Igor Yushkov noted.

It is worth noting that only Rosatom worldwide has experience in building floating nuclear power plants. The only such nuclear power plant is located near the town of Pevek in the Chukotka Autonomous Region. As Alexey Likhachev, CEO of Rosatom, told Izvestia earlier, Malaysia is interested in Russian floating nuclear power plants due to the huge coastline and island structure in general. "We have offered a full range of large and small stations, both land-based and floating. For various reasons, Malaysians choose floating nuclear power plants with a capacity of 100 MW each, with a fuel cycle of up to 7-8 years. In fact, these are floating batteries," Likhachev said.

The Russian side benefits from such cooperation not only from a commercial point of view, but also from a reputational one. Rosatom can demonstrate the attractiveness of the project for other countries, especially in the context of the trend towards reducing the carbon footprint. This will make their products more competitive, Igor Yushkov emphasized.