TOKYO -- JX Nippon Oil & Energy will work with Malaysian state-run oil company Petronas to tap the Southeast Asian market for liquefied natural gas, aiming to take advantage of rising demand fueled by economic growth.
The Japanese company will invest roughly 60 billion yen ($552 million) in the operator of an LNG plant to be built by Petronas in northern Borneo. The plant, to debut in 2017, will have an annual capacity of 3.6 million tons, equivalent to 10% of Malaysia's LNG market.
The LNG will be sold through a Petronas subsidiary to local power companies as well as to gas companies in Japan, South Korea and Taiwan. JX Nippon Oil plans to team with Petronas to market to other Southeast Asian countries as well. The Japanese company hopes to earn more than 100 billion yen over the life of the contract, which runs until 2037.
JX Nippon Oil's parent company, JX Holdings, will merge in April with Japanese peer TonenGeneral Sekiyu, raising its share of domestic gasoline sales to more than 50%. But dwindling energy demand is a concern given Japan's aging population, among other factors. Southeast Asia's LNG market is seen growing more than 70% by 2035. JX aims to compensate for expected stagnation in Japan over the mid- to long term with new non-oil businesses in promising overseas markets.
Malaysia has exported LNG to countries such as Japan and South Korea. But Malaysia's energy consumption has risen with its economic growth, which is expected to boost gas demand for power generation. The nation has imported some LNG for domestic use recently and has worked to expand natural gas development and production capacity.
JX Nippon Oil aims to cultivate Southeast Asia as a new profit source, earmarking around 390 billion yen for capital spending between 2016 and 2018. Though the company's global LNG sales totaled just 800,000 tons in fiscal 2015, this represents a 50% rise from a year earlier.
Outside the LNG business, JX Nippon Oil will buy into state-run Vietnam National Petroleum Group and refine and sell oil in the country. The company plans to pour resources into growth markets overseas while "aiming for growth in mid- and downstream businesses where stable earnings are likely," JX Holdings President Yukio Uchida said.