Petronas lines up EDF Trading for Malaysian LNG supply deal - sources

By Oleg Vukmanovic

MILAN, May 25 (Reuters) - Malaysia's Petronas has lined up the trading arm of French energy company EDF to buy limited liquefied natural gas (LNG) volumes over three years, two industry sources said.

The deal, which is expected to start this year, comes as producers work increasingly closely with traders and middlemen to offload surfeit supply at a time of receding demand in the world's biggest LNG market Asia, driving down prices.

London-based EDF Trading, which has LNG purchase deals in place with Qatar's Rasgas and import rights at several European terminals, is to take delivery of one cargo every quarter but has an option to decline two deliveries annually, one of the sources said.

Petronas is struggling with a growing fuel surplus as take-up has dipped somewhat relative to the 24 million tonnes a year it produces from eight existing plants.

It is also set to inaugurate a new floating LNG production plant soon, adding to supply.

Cargoes will go into EDF's global portfolio and are not destined for specific destinations such as France, the one source said.

EDF has a separate deal with another Asian LNG heavyweight, Korea Gas Corp, to handle up to 4 million tonnes of LNG between 2017 and 2024.

EDFT declined to comment and Petronas did not respond to requests for comment.

(Additional reporting by Sarah McFarlane; editing by Susan Thomas)