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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 retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without the permission of the copyright owner. 19 December 2013 Pusat Konvensyen Antarabangsa Putrajaya (PICC)

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Page 1: Peninsular Malaysia Gas Supply and its Challenges · retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without

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

retrieval system or transmitted in any form or by any means (electronic,

mechanical, photocopying, recording or otherwise) without the permission of the

copyright owner.

19 December 2013

Pusat Konvensyen Antarabangsa Putrajaya (PICC)

Page 2: Peninsular Malaysia Gas Supply and its Challenges · retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without

© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

Capability & Capacity Building A Global PlayerCreation of PETRONAS

PETRONAS was formed as the custodian and manager of

Malaysia’s petroleum resources

• Fully integrated multinational oil

and gas company

• Worldwide expansion in more

than 30 countries

• Revenues from overseas

operations

• Production of oil and gas from

international ventures

• Gas exploration & development

activities

• Downstream gas projects

• Expansion of other domestic

downstream projects such as

Refining, Petrochemicals &

Logistics & Maritime

• International Ventures

• Incorporation of PETRONAS on

17th August 1974

• The Malaysian Petroleum

Development Act 1974 vested

upon PETRONAS the exclusive

rights to explore, develop and

produce petroleum resources

within Malaysia

• First PSCs signed in 1976

Capability & Capacity Building A Global Player

1970s After 35 Years - Today1980s-2000s

Creation of PETRONAS

Page 3: Peninsular Malaysia Gas Supply and its Challenges · retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without

© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

Since 1980s, PETRONAS began developing its own capabilities and

has evolved into a fully integrated multinational oil and gas company

OIL

Refining

Transportation Sector :

� Gasoline

� Jet Fuel

� Diesel

� Fuel Oil

Industrial Sector:

� Ethylene

� MTBE

� Methanol

Petroleum

Products

Petrochemical

Downstream ProductsUpstream

GASProcessing

Liquefaction

� Methanol

� Polyethylene

� Propylene

� VCM / PVC

Export

Power Sector :

� Methane

� Diesel

� Fuel Oil

Commercial &

Residential Sectors

LPG

Sales Gas

LNG

Exploration,

Development &

Production

Condensates

Page 4: Peninsular Malaysia Gas Supply and its Challenges · retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without

© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

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)

RGT 2

RGT 1

PGU Projects

Phase 1 - 1984

Phase 2 - 1992

Phase 3 - 1997

JDA - 2005

RGT-1 - 2013

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

• ~RM 2 billion to develop

Trans Thai-Malaysia facilities

• ~RM 3 billion to develop

RGT-1

Page 5: Peninsular Malaysia Gas Supply and its Challenges · retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without

© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

Unprecedented growth since late 1990 in Peninsular Malaysia can

no longer be sustained from indigenous gas production

3000

3500

Historical Evolution of Peninsular Malaysia Gas Production (Gross)

Unit: mmscf/d

Developing

natural gas: the

late 1970s to the

mid-1980s

Unsustainable

gas

supply, late

2009

Unprecedented

growth in gas: the

late 1980s to the late

1990s

Sustaining @

2Bscf gas

sales, throughou

t 2000

2002: 1st gas fr

PM3 CAA 2002: Import fr

West Natuna

1998: PGU 3

0

500

1000

1500

2000

2500

3000

1970 1975 1980 1985 1990 1995 2000 2005 2010

1984: PGU

1 (GPP 1)

, TCOT

1991: PGU 2

(GPP 2-4)

1998: PGU 3

(GPP 5-6)

2005: 1st gas fr

JDA

Page 6: Peninsular Malaysia Gas Supply and its Challenges · retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without

© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

Gas demand breakdown by customer type

Historical Gas Demand of Peninsular Malaysia

Unit: mmscf/d

Non-Power ExportPower

Page 7: Peninsular Malaysia Gas Supply and its Challenges · retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without

© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

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

Page 8: Peninsular Malaysia Gas Supply and its Challenges · retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without

© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

With RGT in Melaka, Peninsular Malaysia gas demand can be

met

Unit: mmscfd

2500

3000

3500

4000

0

500

1000

1500

2000

2500

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

Page 9: Peninsular Malaysia Gas Supply and its Challenges · retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without

© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

Indigenous supply can only meet 57% of total demand

Gas Supply (2014) Gas Demand (2014)

Page 10: Peninsular Malaysia Gas Supply and its Challenges · retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without

© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

Unit : RM/MMBtu

� 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

Periodic gas price increase not fully implemented

Sector

w.e.f

1 May

1997

w.e.f

Oct

2002

w.e.f

1 July

2008

w.e.f

1 August

2008

w.e.f

1 March

2009

w.e.f

1 June

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

Page 11: Peninsular Malaysia Gas Supply and its Challenges · retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without

© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

Revenue foregone due to regulated gas pricing is now at RM

199.9 billion

2013 (YTD Q3)Cumulative since 1997

0.40

62.51

2.16

11.81

8.08

Power Non-Power NGV

135.23

62.51

Power Non Power NGV

Total = 199.90 billion Total = 20.29 billion

Page 12: Peninsular Malaysia Gas Supply and its Challenges · retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without

© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

Prolonged regulated pricing causes market imbalance &

inefficiencies

•Gas shortage

•Cost of new supplies

• Inefficient usage

Page 13: Peninsular Malaysia Gas Supply and its Challenges · retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without

© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

DOMESTIC GAS

MARKET REFORM

Stable Policy

Infrastructure

Market Rules, Regul

Pricing Mechanism

Open MarketRegulated Market

Domestic gas market reform to ensure sustainable energy

security

Conduit to diversify Prices that Stable Policy Framework

Rules, Regulation &

Enforcement

Clear & transparent rules to facilitate

supply competition and safe utilisation of

gas

Conduit to diversify sources of gas supplies via LNG

imports

Predictability and credibility for

effective long-term planning

Prices that incentivize timely availability of

supplies

• Regasification Terminals

�Sg. Udang, Melaka

�Pengerang, Johor

• A robust National Energy Policy that comprehensively internalises Malaysia’s energy challenges

�Frequent policy changes will create unacceptably high risk for investors and lead to underinvestment

• Third-party Access

�Competition will help ensure gas is efficiently priced

• Gas market set by competitive gas market

• Gradual phasing out regulated gas pricing

Page 14: Peninsular Malaysia Gas Supply and its Challenges · retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without

© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

THANK YOUTHANK YOU

Page 15: Peninsular Malaysia Gas Supply and its Challenges · retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without

© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

The new gas price mechanism and its application

New gas price mechanism Application

15% for Power

10% for non-Power

+

XDiscount

factor

LNG WAP

(FOB)

ex Bintulu

Power

Sector

� Supply of up to 1,000 mmscfd

threshold will be at regulated

price. Threshold will be reviewed

by PETRONAS every 3 years

starting 2016

Price of gas

delivered to

customers

+Shipping

Regas

Pipeline

Transmission

Non-Power

Sector

� Current contractual volume at

regulated price

� All new contracts will be at the

new gas price

starting 2016

� Supply above threshold will be at

the new gas pricing mechanism

Price mechanism shall be reviewed in 2020


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