Peninsular Malaysia Gas Supply and Its Challenges: 19 December 2013 Pusat Konvensyen Antarabangsa Putrajaya (PICC)

Peninsular Malaysia Gas Supply
and its Challenges
19 December 2013
Pusat Konvensyen Antarabangsa Putrajaya (PICC)
© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)
All rights reserved. No part of this document may be reproduced, stored in a

retrieval system or transmitted in any form or by any means (electronic,
mechanical, photocopying, recording or otherwise) without the permission of the
copyright owner.
PETRONAS was formed as the custodian and manager of

Malaysia’s petroleum resources
Creation of PETRONAS Capability & Capacity Building A Global Player
1970s 1980s-2000s After 35 Years - Today
• Incorporation of PETRONAS on • Gas exploration & development • Fully integrated multinational oil
17th August 1974 activities and gas company
• The Malaysian Petroleum • Downstream gas projects • Worldwide expansion in more

Development Act 1974 vested than 30 countries
upon PETRONAS the exclusive • Expansion of other domestic
rights to explore, develop and downstream projects such as • Revenues from overseas
produce petroleum resources Refining, Petrochemicals & operations
within Malaysia Logistics & Maritime
• Production of oil and gas from
• First PSCs signed in 1976 • International Ventures international ventures
Since 1980s, PETRONAS began developing its own capabilities and

has evolved into a fully integrated multinational oil and gas company
Upstream Downstream Products

Transportation Sector :
Gasoline
Jet Fuel
Petroleum
Diesel
Products
Fuel Oil
OIL
Industrial Sector:
Ethylene
Refining
Petrochemical MTBE
Methanol
Polyethylene
Propylene
Condensates VCM / PVC
Sales Gas
Power Sector :
Methane
Exploration, Diesel
Development & LPG Fuel Oil
Production Processing
GAS Commercial &
Residential Sectors
LNG
Export
Liquefaction
Extensive infrastructure in place to support Peninsular Malaysia

gas market development
Major Facilities
Offshore Platform 106
Active gas well 203
Major pipelines 923 km
Capacity 2,520 mmscfd feed gas
Major Facilities
Pipelines 2,505 km
City Gates 27
Slugcatchers 3
Kertih GPPs 6 (2,060 mmscfd)
TTM GSP 1 (350 mmscfd)
Compressor stations 3
RGT-1 Melaka 3.8 MTPA
Total Investment
• ~RM 26 billion to develop
PGU system
RGT 1
• ~RM 2 billion to develop
PGU Projects
Phase 1 - 1984 Trans Thai-Malaysia facilities
Phase 2 - 1992 • ~RM 3 billion to develop
RGT 2
Phase 3 - 1997 RGT-1
JDA - 2005
RGT-1 - 2013
Unprecedented growth since late 1990 in Peninsular Malaysia can

no longer be sustained from indigenous gas production
Historical Evolution of Peninsular Malaysia Gas Production (Gross)

Unit: mmscf/d
Developing Unprecedented Sustaining @ Unsustainable
natural gas: the growth in gas: the 2Bscf gas gas
late 1970s to the late 1980s to the late sales, throughou supply, late
mid-1980s 1990s t 2000 2009
3500
2002: 1st gas fr
PM3 CAA 2002: Import fr
West Natuna
3000
1998: PGU 3
(GPP 5-6)
2500
2000 2005: 1st gas fr

1984: PGU JDA
1 (GPP 1)
1500 , TCOT
1991: PGU 2
(GPP 2-4)
1000
500
0
1970 1975 1980 1985 1990 1995 2000 2005 2010
Gas demand breakdown by customer type
Historical Gas Demand of Peninsular Malaysia

Unit: mmscf/d
Power Non-Power Export
Prior to RGT, gas supply in Peninsular Malaysia has not been able
to meet its demand due to a combination of issues
Supply
• Indigenous Peninsular Malaysia production is not able to meet demand
domestic producing fields are on rapid decline due to accelerated extraction
rate
• Over-stretching of the supply system has led to frequent supply interruptions
• Remaining reserves are technically & commercially challenging to be developed
Small in size
Scattered locations
High CO2 content
Demand
• Inappropriately priced gas has created unsustainably high demand
end users preference to gas have increased compared to other higher cost of
fuels such as coal, fuel oil, diesel or LPG
With RGT in Melaka, Peninsular Malaysia gas demand can be

met
Unit: mmscfd
4000
3500
3000
2500
2000
1500
1000
500
0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Domestic Kerteh WNB JDA LNG Available RGT Capacity Contractual Demand
Indigenous supply can only meet 57% of total demand
Gas Demand (2014) Gas Supply (2014)

Periodic gas price increase not fully implemented
Government imposed regulated pricing in 1997 during the Asian Financial Crisis
In May 2011, Cabinet approved gas price increase effective from June 2011
No subsequent gas price increase was implemented
Unit : RM/MMBtu
w.e.f w.e.f w.e.f w.e.f w.e.f w.e.f

Sector 1 May Oct 1 July 1 August 1 March 1 June
1997 2002 2008 2008 2009 2011
Power 6.40 6.40 14.31 14.31 10.70 13.70
Non-Power Contractual 11.32 32.56 22.58 15.35 18.35
Gas Malaysia Contractual 9.40 24.54 17.99 11.05 14.05

Revenue foregone due to regulated gas pricing is now at RM

199.9 billion
Cumulative since 1997 2013 (YTD Q3)
2.16 0.40
62.51
8.08
11.81
135.23
Total = 199.90 billion Total = 20.29 billion
Power Non Power NGV Power Non-Power NGV

Prolonged regulated pricing causes market imbalance &

inefficiencies
• Gas shortage
• Cost of new
supplies
• Inefficient usage
Domestic gas market reform to ensure sustainable energy

security
Regulated Market Open Market

DOMESTIC
GAS
MARKET
REFORM
Pricing
Infrastructure Mechanism
Market
Rules, Regul Stable Policy
Conduit to diversify ation & Prices that
sources of gas Framework incentivize timely
Enforcement
supplies via LNG availability of
imports supplies
• Regasification Terminals Clear & transparent Predictability and • Gas market set by
rules to facilitate credibility for competitive gas market
Sg. Udang, Melaka supply competition effective long-term
and safe utilisation of planning • Gradual phasing out
Pengerang, Johor gas regulated gas pricing
• A robust National Energy
• Third-party Access Policy that
Competition will help comprehensively
ensure gas is efficiently internalises Malaysia’s
priced energy challenges
Frequent policy changes will
create unacceptably high
risk for investors and lead to
underinvestment
THANK YOU
The new gas price mechanism and its application
New gas price mechanism Application
LNG WAP
Power Supply of up to 1,000 mmscfd
Discount Sector threshold will be at regulated
(FOB) X factor
ex Bintulu price. Threshold will be reviewed
15% for Power by PETRONAS every 3 years
10% for non-Power starting 2016
+ Supply above threshold will be at
Shipping the new gas pricing mechanism
Price of gas
delivered to
customers Non-Power Current contractual volume at
Regas Sector regulated price
All new contracts will be at the
new gas price
Pipeline
Transmission
Price mechanism shall be reviewed in 2020

Peninsular Malaysia Gas Supply and Its Challenges: 19 December 2013 Pusat Konvensyen Antarabangsa Putrajaya (PICC)

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Peninsular Malaysia Gas Supply

and its Challenges

© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

All rights reserved. No part of this document may be reproduced, stored in a

PETRONAS was formed as the custodian and manager of

Creation of PETRONAS Capability & Capacity Building A Global Player

1970s 1980s-2000s After 35 Years - Today

• The Malaysian Petroleum • Downstream gas projects • Worldwide expansion in more

Since 1980s, PETRONAS began developing its own capabilities and

Upstream Downstream Products

Extensive infrastructure in place to support Peninsular Malaysia

Unprecedented growth since late 1990 in Peninsular Malaysia can

Historical Evolution of Peninsular Malaysia Gas Production (Gross)

2000 2005: 1st gas fr

Gas demand breakdown by customer type

Historical Gas Demand of Peninsular Malaysia

With RGT in Melaka, Peninsular Malaysia gas demand can be

Indigenous supply can only meet 57% of total demand

Gas Demand (2014) Gas Supply (2014)

Periodic gas price increase not fully implemented

No subsequent gas price increase was implemented

w.e.f w.e.f w.e.f w.e.f w.e.f w.e.f

Non-Power Contractual 11.32 32.56 22.58 15.35 18.35

Gas Malaysia Contractual 9.40 24.54 17.99 11.05 14.05

Revenue foregone due to regulated gas pricing is now at RM

Cumulative since 1997 2013 (YTD Q3)

Total = 199.90 billion Total = 20.29 billion

Power Non Power NGV Power Non-Power NGV

Prolonged regulated pricing causes market imbalance &

Domestic gas market reform to ensure sustainable energy

Regulated Market Open Market

The new gas price mechanism and its application

New gas price mechanism Application

Price mechanism shall be reviewed in 2020

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