BEIJING, Oct. 5 (Xinhuanet) -- Royal Dutch/Shell Group, Europe's second-largest oil and natural gas producer, said it may increase output in Malaysia by more than 5 per cent this year and next as demand increases in Japan and South Korea.

    Shell, which helped to turn Malaysia into the world's third biggest liquefied natural gas producer, expects oil and gas output in Malaysia to equal 767,000 barrels a day of oil this year, said Jonathan Chadwick, chairman of Shell Refining Co, the group's publicly traded Malaysian refining unit. The unit's shares rose to the highest in more than eight years, China Daily reported Tuesday.

    "The Japanese and Koreans are taking more LNG than they did a year ago," Chadwick said. Shell increased production in East Malaysia and started production from two new fields, he said.

    Global LNG demand is accelerating as China and the US switch to the fuel to overcome domestic shortages of pipeline gas. The newer markets are adding to increased demand from traditional buyers such as Japan, South Korea and Taiwan, prompting investment in new exports plants in countries including Malaysia, Indonesia, Russia and Australia.

    Shares in Shell Refining rose 45 sen, or 5.7 per cent, to 8.3 ringgit (US$2.18) at 11:49 am local time on the Malaysian stock exchange. The stock earlier rose up to 8.4 ringgit (US$2.21), the highest since May 30, 1996.

    The group is investing at record levels in Malaysia, spending about US$800 million a year, Chadwick said. About 45 per cent of Shell's spending on exploration and production in the Asia Pacific region is in Malaysia, he said.

    Some of Shell's gas production is turned into LNG at a plant on Malaysia's part of Borneo island. LNG is natural gas that has been chilled into liquid form so that it can be transported on a ship to markets that are too far away for a pipeline. Import terminals return the LNG to gas form so that it can be sent through pipelines to factories, power stations and households.

    Shell, which runs Malaysia's largest oil refinery, may also keep the profit it makes from turning each barrel of crude oil into oil products at current levels for the rest of the year, which analysts estimate at between US$7 and US$8 a barrel. Chadwick didn't give a figure for the so-called refining margin.

    Higher margins helped boost profit at Shell Refining Co, the group's publicly traded Malaysian refining unit, to a record of 175 million ringgit (US$46 million) in the second quarter, the company said in August.

    "We see margins in this area being maintained till the end of the year," Chadwick said. "Thereafter, it's a little bit more uncertain" whether demand in certain countries in the region will be maintained. "We see the supply-demand gap narrowing next year."

    The business of refining crude oil into gasoline, kerosene and other types of fuel has become more profitable in Asia this year because of greater demand for fuel by expanding economies such as China, Japan and South Korea.

    Supply this year has also been cut by a number of unplanned shutdowns at other refineries, Chadwick said.

    (China Daily)