By Siti Radziah Hamzah
KUALA LUMPUR, Feb 17 (Bernama) -- Petroliam Nasional Bhd's (Petronas) wholly-owned subsidiary Petronas Energy & Gas Trading (PEGT) is closely monitoring the low oil and gas production in Peninsular Malaysia and proactively collaborating with stakeholders to ensure a continued and stable gas supply in the country.
PEGT serves as the trading and marketing arm for processed gas from Malaysia to Singapore
PEGT chief executive officer Hisham Maaulot said while investments in upstream activities are crucial for replacing or adding to the current producing fields, there may come a time when importing liquefied natural gas (LNG) would become the more economically viable solution for meeting the country’s gas needs.
He noted that this shift is driven by the increasing challenges and costs of producing domestic gas, including fields with higher carbon dioxide (CO2) levels, and the prevalence of small and marginal gas fields. Therefore, “ensuring the competitiveness of our domestic gas market against the global arena is imperative.”
To secure long-term energy security, Malaysia’s gas industry must evolve towards full market liberalisation.
“An open and competitive gas market will enhance our attractiveness as an investment destination and build a more resilient energy system for the future," Hisham told Bernama.
He reckons that with the third party access (TPA) and market-based pricing already established for the non-power sector, the logical next step is to transition the pricing of fuel for the power sector towards a market-driven model.
In November 2024, Economy Minister Datuk Seri Rafizi Ramli said Peninsular Malaysia’s oil and gas production has dropped by half in the last decade, with new reserves now concentrated in Sabah and Sarawak.
From 700,000 barrels a day 10 years ago, the minister said the oil and gas production in the peninsula has decreased to 350,000 barrels daily and stressed that Malaysia needs to speed up its transition to clean energy as oil and gas remain key drivers of its economic growth and income distribution.
Domestic gas demand
Hisham said PEGT's primary focus is on ensuring a consistent and reliable supply of processed gas to meet growing demand in the domestic market. However, declining domestic resources and production challenges - such as higher emissions and the prevalence of small and marginal fields - have made it more complex and costly to maintain domestic gas output.
He said to address these challenges, LNG has become a critical part of the solution and PEGT is actively importing LNG to supplement the Peninsular Malaysia gas market, sourcing not only from Petronas's extensive LNG portfolio but also from third-party suppliers.
"As we acquire LNG at prevailing market prices, this underlines the importance of a fully liberalised market to ensure an uninterrupted gas supply which ensures energy security for the country,” Hisham continued. "While our sources are primarily our own, we do explore other potential channels to supplement our gas supply and maintain a balanced portfolio. These measures contribute to securing a sustainable and reliable source of gas for our domestic market."
To ensure the longevity of supply from the Petronas LNG complex in Sarawak, Hisham said PEGT has achieved its first gas at new fields such as Timi, Kasawari, and Jerun while continuing to develop new fields, such as Rosmari and Marjoram, to bolster future gas production.
He said the current partial liberalisation limits market liquidity as the power sector remains heavily regulated and pointed out that this restricts the full potential of the TPA and overall market efficiency.
Since 2021, Petronas Gas Bhd has offered capacity for release, whereby there are still opportunities for greater uptake, “we believe can be achieved with unregulated prices.”
"Expanding liberalisation to include both power and non-power sectors through a phased approach can enhance competition and create a more vibrant market while maintaining stability," Hisham advised.
Streamlining TPA process
There are two regas terminals in the country and both are currently fully underwritten on a long-term basis by PEGT.
Hisham said PEGT is actively engaged in initiatives to streamline TPA processes, facilitating seamless access for third parties to leverage its regasification terminals in Sungai Udang and Pengerang. He said this effort aims to promote equitable access, foster competition, and drive market growth.
"Since the introduction of the TPA framework and market-based pricing for the non-power sector in 2017, we’ve seen encouraging progress in third-party participation. However, more efforts are needed to fully unlock the potential of TPA and foster a more vibrant gas market in Malaysia," he added.
Among the key steps that PEGT has undertaken include a dynamic non-power gas market where Petronas, through PEGT, has supported a vibrant market by ensuring gas availability to suppliers. "This has attracted multiple players, increased competition, and provided end-users with better service and value," Hisham said.
He reiterated that liberalising the power market is key to increasing third-party supply in the country as it would make Malaysia’s gas industry more attractive and dynamic, encouraging new players to enter the market.
Challenges in achieving a fully liberalised gas market
Hisham stressed that to achieve the full potential of a competitive and efficient market, “there are certain challenges that we need to address.” This includes striking a balance between ensuring energy security and providing affordable energy to the people.
He pointed out that the challenge was not unique to Malaysia, as seen in developed markets like Europe and Australia, where governments have occasionally turned to more polluting energy sources to address affordability and supply concerns. "A gradual shift towards targeted subsidies can protect vulnerable groups while reducing fiscal pressures. This approach will encourage market participation, enhance liquidity and support the growing demand for gas," he said.
Another challenge was limited access to critical infrastructure, such as regasification terminals and pipelines, hindering third-party participation. Hisham said Malaysia’s economic growth also underscored the need to upgrade and expand gas facilities to meet rising demand.
"PEGT is actively streamlining TPA processes to enable seamless access to infrastructure like the regasification terminals in Sungai Udang and Pengerang. Ensuring equitable access will foster competition and support market growth," he added.
Hisham said aligning domestic gas prices with global prices gradually would also mitigate profitability risks, enable greater supplier participation and support market growth. He added that regulated gas prices for the power sector ensured affordability but created market distortions that deter competition.
The gap between global gas prices and Malaysia’s domestic levels poses risks for LNG shippers, limiting their capacity to utilise key infrastructure like pipelines and regasification terminals and the recent geopolitical events have widened this gap further. "Targeted subsidy policies can maintain affordability while fostering a competitive environment," he said.
According to Hisham, as of now, Petronas is not yet involved in any initiative that looks into converting coal-fired power plants to gas-fired power plants. "Nevertheless, Petronas is actively pursuing opportunities to meet the rising demand for natural gas in Malaysia, especially as coal-fired plants are phased out," he said.
-- BERNAMA
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