Competitive local natural gas prices by 2019

KUALA LUMPUR: Natural gas prices are likely to be more competitive by 2019 in the local market with the participation of more industry players following the introduction, last year, of a Third Party Access (TPA) mechanism, says the Malaysian Gas Association (MGA).

Secretary-General Rosman Hamzah said the TPA, introduced in January 2017, was aimed at opening the gas supply market to third parties including foreign companies, to sell gas to any consumer in Malaysia on a willing buyer-willing seller basis.

“With more market players involved, they will be able to increase competitiveness in the industry and hence, pull natural gas prices lower,” he told Bernama.

However, Rosman explained that despite the anticipation of lower gas prices, its movement was very much tied to the movement of crude oil prices.

Currently, the country’s natural gas is being supplied by Petronas and Gas Malaysia Bhd and those interested to participate in the TPA can apply for a licence from the Energy Commission (EC).

“So far, we have seen a couple of multinational companies, which are also members of MGA, applying for the licence from the EC”, he said.

On the regulated natural gas price which is increased by RM1.50 per one million British Thermal Units (mmBtu) every six months, Rosman said the move was aimed at bringing the local price to be at par with the international level.

At the same time, it will minimise dependency on government subsidy, he added.

“Currently, our natural gas price (RM28.05 per mmBtu) has yet to achieve the international market price (RM30 per mmBtu), and we need to bring the base tariff closer to the market price.

“But, looking at the current movement of gas and crude oil prices, we expect gas prices, by 2019,  to reach the market price level,” he said.

Meanwhile, the government is still providing a 30 per cent gas subsidy to the power sector.

The EC announced in December 2016 that the base tariff per mmBtu was pre-determined at RM26.71 for the period between January-June 2017; RM28.05 for July-December 2017; RM30.90 for January-June 2018; RM31.92 for July-December 2018; RM32.69 for January- June 2019; and RM32.74 for July-December 2019.

Asked on the impact this will have on manufacturers who would eventually pass the rate hike to consumers, Rosman did not expect it (impact) to be significant.

“This is because natural gas is mainly used by industrial users such as glove manufacturers, with most of their products being exported outside the country.

“So, the direct impact on local consumers will not be so great,” he stressed.

Besides,  he pointed out that only 12,000 households in Malaysia were using natural gas for cooking purposes.

“The rest are using petroleum gas (LPG), which is fully subsidised by the Ministry of Domestic Trade, Cooperative and Consumerism,” he said.

Asked if the country would face an oversupply of natural gas in the future with Petronas Gas’ Re-Gasification Terminal (RGT) 2 in Pengerang, Johor, expected to start commercial operations in January 2018, Rosman did not foresee any issue in the long-run.

“In fact, it could generate a higher utilisation rate of natural gas in the country. An area without natural gas pipeline , such as Kelantan was a high potential growth area that was waiting to be tapped.

“For instance, they could lay pipeline infrastructure in the underserved area and participate in the distribution ecosystem to improve the use of natural gas there,” he said.

Hence, Rosman believed the growth prospect for the utilisation of natural gas remained vast in the country. — Bernama

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