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Securing Malaysia’s energy security with a fully liberalised gas market

October 25, 2022 0 Comments

KUALA LUMPUR: The global supply of liquefied natural gas (LNG) will remain tight at least until end-2025 or 2026 before the market is balanced again as Qatar Petroleum boosts its output by 40 per cent a year by 2026, a top industry executive said.

Qatar Petroleum is the world’s top LNG supplier and with the expansion, it would take the company’s LNG production capacity to 110 million tonnes per annum (mtpa) from 77 million mtpa, Petronas Energy & Gas Trading chief executive officer Mohd Khairuddin Abdul Khalik said.

The limited supply has seen spot LNG prices have spiked to an average of about US$40 per million BTU (MMbtu) this year.

Khairuddin said demand for natural gas in Peninsular Malaysia alone stood at 2.3 billion cubic feet per day, with the country outsourcing some of its gas needs from Thailand.

“We get gas supply from Kerteh (in Terengganu), which is our very own domestic production that can produce up to 1.75 billion cubic feet per day. Our natural gas requirement is also being fulfilled from piped gas flow from Thailand that can supply around 300 million cubic feet per day.

“PEGT needs to bring in between three to four liquified natural gas (LNG) cargoes on monthly basis to fully meet the 2.3 billion cubic feet requirement,” he told the New Straits Times.

“If demand grows and it is greater than supply, we have to bring in more LNG and that means more money is involved,” Khairuddin added.

Hence, he said there must be a concerted effort by the government and industry players in the energy industry to ensure sustainability of the natural gas market in Malaysia.

As Malaysia moves to a greener energy solution which includes the retirement of coal power plants, natural gas will be the most likely option for the country to transition to renewable energy and other clean energy such as hydrogen.

Nevertheless, Khairuddin said PEGT was taking measures to ensure the supply and demand of natural gas in the country was fully met while incurring less cost.

Besides the limited supply of domestic natural gas, he said the growing demand from the power sector was also a concern for the industry.

Demand from the power sector stands at about 40 per cent of the total contracted demand in Peninsular Malaysia.

Khairuddin said it was crucial for the company to also supply affordable natural gas to the non-power sector instead of relying on LNG to meet demand.

“The non-power sector such as petrochemical, glass factories and metal industry also require gas and that segment is very much the area where the country can attract more foreign investment.

“That is why we have to be very fair and balanced in ensuring the best way to allocate the limited supply to manage the growing demand.”

He said demand for natural gas in Malaysia was steadily growing with the main driver being the power sector at least in the next 10 years.

“Based on my knowledge, the fuel mix for the power sector is about 55-60 per cent coal and 35 per cent gas. The remaining 10-15 per cent comes from hydropower, solar or renewable energy.

“I think this is one area of focus by the government to grow the renewable part of the fuel mix for the power sectors so that we can promote cleaner air in the near future.”

Khairuddin said PEGT was one of the strongest proponents in Malaysia to push for full market liberalisation and third-party access arrangement (TPA) to make LNG more accessible.

He said there are two regas terminals in the country and both are currently fully underwritten on long-term basis by PEGT.

“We are open to share the facilities with whoever has a term of contract for LNG from any suppliers, through a proper arrangement of the TPA.

“When there are more players supplying gas and LNG, we can see the market will move towards market parity and this will ensure sustainability of gas supply in the country,” he added.

In support of the New Energy Policy, Mohd Khairuddin said the push for effective TPA as well as full market liberalisation would ensure the sustainability of natural gas in the country.

“I think we have to sit down and find ways to best manage  the power sector if it is liberated because this means more players would come in but the industry tariff may be higher than today.

“We have to think about this especially as we are entering the end of a decade whereby coal power plants will start to retire. Where can we find gas to power up all of the power stations. Everyone should be concerned and there needs to be efforts made to ensure sustainability of the gas market in Malaysia,” he added.