Kuala Lumpur: Petroliam Nasional Bhd's (Petronas) wholly-owned subsidiary Petronas Energy and 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.
According to BERNAMA News Agency, PEGT serves as the trading and marketing arm for processed gas from Malaysia to Singapore. PEGT chief executive officer Hisham Maaulot stated that while investments in upstream activities are essential for replacing or adding to the current producing fields, there might come a time when importing liquefied natural gas (LNG) becomes a more economically viable solution for meeting the country's gas needs. This shift is driven by increasing challenges and costs of producing domestic gas, including fields with higher carbon dioxide levels and the prevalence of small and marginal gas fields. Ensuring the competitiveness of the domestic gas market against the global arena is deemed imperative.
To secure long-term energy security, Malaysia's gas industry must evolve towards full market liberalisation. An open and competitive gas market is expected to enhance Malaysia's attractiveness as an investment destination and build a more resilient energy system for the future, Hisham told Bernama. With the third-party access (TPA) and market-based pricing already established for the non-power sector, transitioning the pricing of fuel for the power sector towards a market-driven model is seen as the logical next step.
In November 2024, Economy Minister Datuk Seri Rafizi Ramli highlighted that Peninsular Malaysia's oil and gas production has halved over the last decade, now with new reserves concentrated in Sabah and Sarawak. From 700,000 barrels a day ten years ago, production has decreased to 350,000 barrels daily. The minister stressed the need for Malaysia to expedite its transition to clean energy, as oil and gas continue to be key drivers of economic growth and income distribution.
Hisham noted that PEGT's primary focus is ensuring a consistent and reliable supply of processed gas to meet growing domestic demand. Declining domestic resources and production challenges, such as higher emissions and small and marginal fields, have made maintaining domestic gas output more complex and costly. To address these challenges, LNG has become a crucial part of the solution. PEGT is actively importing LNG to supplement the Peninsular Malaysia gas market, sourcing from both Petronas's extensive LNG portfolio and third-party suppliers. Acquiring LNG at prevailing market prices underscores the importance of a fully liberalised market to ensure an uninterrupted gas supply and energy security for the country.
To ensure the longevity of supply from the Petronas LNG complex in Sarawak, PEGT has achieved its first gas at new fields such as Timi, Kasawari, and Jerun, while continuing to develop new fields like Rosmari and Marjoram to bolster future gas production. However, the current partial liberalisation limits market liquidity as the power sector remains heavily regulated, restricting the full potential of TPA and overall market efficiency. Since 2021, Petronas Gas Bhd has offered capacity for release, with opportunities for greater uptake believed to be achievable with unregulated prices.
Hisham explained that expanding liberalisation to include both power and non-power sectors through a phased approach can enhance competition, create a more vibrant market, and maintain stability. 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. 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, there has been 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. Among the key steps taken by PEGT include supporting a vibrant market by ensuring gas availability to suppliers, attracting multiple players, increasing competition, and providing end-users with better service and value.
Challenges remain in achieving a fully liberalised gas market. To realise the full potential of a competitive and efficient market, Malaysia needs to strike a balance between ensuring energy security and providing affordable energy. This challenge is 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, encouraging market participation, enhancing liquidity, and supporting growing gas demand.
Limited access to critical infrastructure, such as regasification terminals and pipelines, hinders third-party participation. Malaysia's economic growth underscores the need to upgrade and expand gas facilities to meet rising demand. PEGT is actively streamlining TPA processes to enable seamless access to infrastructure, ensuring equitable access to foster competition and support market growth. Aligning domestic gas prices with global prices gradually could mitigate profitability risks, enable greater supplier participation, and support market growth. Regulated gas prices for the power sector ensure affordability but create 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, with recent geopolitical events widening this gap further. Targeted subsidy policies are suggested to maintain affordability while fostering a competitive environment. According to Hisham, Petronas is not yet involved in any initiative to convert coal-fired power plants to gas-fired plants but is actively pursuing opportunities to meet the rising demand for natural gas in Malaysia as coal-fired plants are phased out.