MUCH hot air has been expended recently on the anticipated higher prices for natural gas that was finally announced on Friday.
The Economic Planning Unit (EPU) had conceded to industrial users' requests for “a staggered rise” in gas prices, by giving timeframes of 11 years for large industrial users and 13 years for small and medium enterprises (SMEs) for a gradual move to market prices.
Minister in the Prime Minister's Department Tan Sri Amirsham Abdul Aziz, who oversees the EPU, said it was important that the Government supported large industrial users and SMEs. “If we push the timeframe any further, we may find that some industries would not survive,” he said.
The decade-long timeframe, however, may only be a respite from rising natural gas prices as the EPU feels that after 11 to 13 years, industrial users would be exposed to market prices
Petroliam Nasional Bhd (Petronas) had told StarBiz last week prior to the announcement that before 1997, natural gas was supplied to Malaysian customers at market prices indexed to medium fuel oil (MFO).
It was only since May 1997 during the Asian financial crisis that the Government decided that natural gas be sold at a subsidised regulated fixed prices. “So, market prices for gas is not something new for customers in the country,” the spokesman had said.
Some industrial users are not against paying the market rate for gas.
Glovemaker Kossan Rubber Industries Bhd group corporate affairs senior manager Edward Yip said: “We in the industrial sector recognise the need to pay market rates but the rise should be gradual.”
Currently, glove and tile manufacturers are among industrial non-power users of gas in Malaysia.
There also remains the issue of insufficient supply.
According to Petronas estimates, the demand for gas in Peninsular Malaysia has increased by 97% since 1997, which has put a strain on supply facilities.
Petronas had said that its offshore production facilities and the Peninsular Gas Utilisation (PGU) system were running at full capacity to meet increasing demand.
“As our production is unable to meet demand, we have increased the purchase of gas from other sources beyond offshore Terengganu,” a spokesman said.
In 2007, 23% of Peninsular Malaysia's gas demand was met through imports. By Petronas' estimates, demand that already outstrips supply will grow to 4,900mmscf (million standard cubic feet) per day by 2027. Meanwhile, gas supply from offshore Terengganu can only be sustained at 2,000 mmscf per day (see chart).
Amirsham, at Friday's announcement, had said the issue was not the subsidy costs to Petronas, which the national petroleum company could afford, but one of economic viability and sustainability.
“There is not enough gas in any country that you can point to, so it is important we have economic viability (of industries using the gas),” he said.
As such, some sources have said that independent power producers (IPPs), who use up to 60% of natural gas in the country, need to be encouraged to seek other sources of energy.
The Association of Independent Power Producers in Malaysia (Penjanabebas) president Dr Philip Tan said: “Under the purchasing power agreements, Malaysia's IPPs receive all fuel requirements directly from Petronas or TNB Fuel Supplies. At no time are they at liberty to secure their own fuel requirements.”
Petronas, on the other hand, told StarBiz the subsidised prices of gas had hampered the objectives of the National Energy Policy, in particular the Five-Fuel Energy Policy for electricity generation.
The share of gas in the Five-Fuel energy mix policy remains consistently above official targets as compared to the share of other fuel sources, namely oil, coal, hydro and renewable sources, the spokesman said.
Source : The Star
