A unit of Malaysia's state-owned oil firm Petroliam Nasional (Petronas) signed an agreement yesterday to sell 900,000 tonnes of liquefied natural gas a year to Japan's Tohoku Electric Power for 20 years.

The value of the deal would be $4.2 billion at current market prices, said Petronas president and Malaysia LNG Tiga chairman Hassan Marican. Malaysia LNG Tiga will start delivering LNG to Tohoku from 2005 and the gas will be shipped from Bintulu Port in the eastern state of Sarawak on Borneo island.

"The signing of this (agreement) marks the first LNG supply contract for Malaysia LNG Tiga," Hassan said. Construction of Malaysia LNG Tiga, 60 per cent owned by Petronas, started in 1999 and production is expected to begin by 2003, with an annual capacity of 3.4 million tonnes.

The plant is part of the country's LNG complex in Bintulu where two other production facilities re already operating. Completion of Malaysia LNG Tiga will make the Bintulu complex the world's single largest LNG production facility with a capacity of about 23 million tonnes a year.

Royal Dutch/Shell group is the second largest shareholder of Malaysia LNG Tiga with a 15 per cent stake while Nippon Mitsubishi Oil Corp owns a 10 per cent stake. Other shareholders are the Sarawak state government with a 10 per cent stake and Diamond Gas Netherlands BV with five per cent. The agreement with Tohoku will boost the Japanese company's annual import of LNG from Malaysia to 1.4 million tonnes a year.

Tohoku, Japan's fourth largest electricity provider, currently buys 500,000 tonnes of LNG from Malaysia under a 20-year contract signed in 1996. Tohoku's agreement to buy more LNG from Malaysia comes just as the closure of ExxonMobil's gas fields in Indonesia's troubled Aceh province in March forces the company to look for alternative sources.

Besides Tohoku, Malaysia LNG Tiga is also in final stages of concluding sales contracts with three other parties. The three buyers - India's Metgas, a Japanese Gas Consortium made up of Tokyo Gas Co Ltd, Toho Gas Co Ltd and Osaka Gas Co Ltd, and Japan Petroleum Exploration Co - had previously signed confirmations of intent to buy 2.6 million, 1.6 million and 500,000 tonnes of LNG respectively.

"We hope that during the course of this year, we would have signed most of the sales and purchase agreements," said Hassan. Japan, the world's largest importer of LNG, currently gets 25 per cent of its supply from Malaysia, Hassan said.