Storm delays Petronas' MRU work at Pegaga gas field

Malaysia's state-owned Petronas has delayed the installation of an interim mercury removal unit (MRU) at the Pegaga gas field offshore Sarawak to 21 December because of stormy weather, according to some term offtakers of the 30mn t/yr Bintulu liquefaction and export project.

But Petronas is still targeting a 20 January start to gas production at the Pegaga field, unchanged from expectations last week, the offtakers said. The Pegaga field will supply feedstock gas to the Bintulu plant.

Petronas had early last week told some offtakers that it would likely commission the MRU on 16 December. But that was delayed because of stormy weather, a Japanese offtaker said. "There is a hurricane-like [phenomenon] in Malaysia ... so they couldn't install the MRU as planned," he said.

Several regions in Malaysia have been hit by heavy rains since 17 December, resulting in flash floods that have displaced more than 50,000 people as of 20 December. The Malaysian Meteorological Department issued a notice on 21 December stating that the tropical depression is expected to bring "continuous rains and strong winds" to the northern states and "can cause floods in low-lying areas."

"I am not sure if [Petronas] will still face difficulty installing the MRU today [given current weather conditions]," the offtaker said.

Petronas did not immediately respond to Argus' request for comment. But it told Argus on 1 December that the installation of the interim MRU at the Pegaga field was "progressing as planned" and that "the first gas is expected by Q1 2022", without specifying exact dates.

"The permanent mercury removal unit is targeted to be ready by Q4 2022 as per the current plan," it added.

Term buyers from Bintulu LNG include Japan's Tokyo Gas, Osaka Gas, Toho Gas, Jera, Tohoku Electric, Japex, Saibu Gas, Shizuoka Gas, Hiroshima Gas and Eneos — formerly known as JX Nippon Oil and Energy — along with state-controlled China's CNOOC, Taiwan's CPC and South Korea's Kogas.

High mercury levels detected at the Pegaga gas field in early September have delayed the start of production at the field and resulted in the cancellation of several cargoes for delivery up until next year. Shell, which has a 20pc interest in the Pegaga project, said in March that it expected to see first production from the gas field by the fourth quarter of 2021.

Around 7-8 cargoes/month for delivery in January and February are currently expected to be cancelled, in addition to cancellations of around 5-6 cargoes/month for delivery in March-May. This is a reduction from earlier expectations that more than 10 January-delivery cargoes would be cancelled, when the interim MRU was expected to be installed in March 2022, market participants said.

High mercury content at gas fields may poison catalysts in downstream process units and damage downstream equipment through corrosion, potentially resulting in equipment failure, unscheduled outages, or even fires.

By Joey Chua