Local LNG prices likely to be more competitive
Petronas LNG

by BERNAMA / pic by BLOOMBERG

Liquefied natural gas (LNG) 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, said 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 LNG 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 LNG is being supplied by Petronas Gas Bhd 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 is 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 LNG 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% 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 LNG 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 are using LNG for cooking purposes. — Bernama