KUALA LUMPUR — With Peninsular Malaysia’s oil and gas reserves on the decline, Petronas Energy & Gas Trading (PEGT) is collaborating with stakeholders to ensure a continued and stable gas supply in the country.
PEGT, a wholly-owned subsidiary of Petroliam Nasional Bhd (Petronas), is the trading and marketing arm for processed gas from Malaysia to Singapore.
Its CEO Hisham Maaulot said there may come a time when importing liquefied natural gas (LNG) would become more economically viable for meeting the country’s gas needs.
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,” and investments in upstream activities remain crucial for replacing or adding to the current producing fields, he told Bernama.
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 oil and gas production in the peninsula has decreased to 350,000 barrels daily. Malaysia needs to speed up its transition to clean energy as oil and gas remain key drivers of its economic growth and income distribution, Rafizi said.
While PEGT’s primary focus is to ensure a consistent and reliable supply of processed gas to meet growing domestic demand, Hisham said declining domestic resources and production challenges complex and costly to maintain domestic gas output.
To address this, 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.
Challenges in liberalising the gas market
Moving towards full market liberalisation is part of ensuring long-term energy security for Malaysia, Hisham added.
“An open and competitive gas market will enhance our attractiveness as an investment destination and build a more resilient energy system for the future,” he told Bernama.
He reckons that as third party access (TPA) and market-based pricing are 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.
Among the challenges to address is striking a balance between ensuring energy security and providing affordable energy to the people.
The challenge is not unique to Malaysia, Hisham said, and in developed markets like Europe and Australia, 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 is 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.
“Targeted subsidy policies can maintain affordability while fostering a competitive environment,” he said.
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. Recent geopolitical events have also further widened this gap.
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, and there are still opportunities for greater uptake, which “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 said.
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.
PEGT is also exploring other potential channels to ensure longevity of supply from the Petronas LNG complex in Sarawak, through new fields such as Timi, Kasawari, and Jerun while continuing to develop other fields, such as Rosmari and Marjoram, to bolster future gas production. – February 17, 2025