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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)
© 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
© 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
© 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
© 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
© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)
Gas demand breakdown by customer type
Historical Gas Demand of Peninsular Malaysia
Unit: mmscf/d
Non-Power ExportPower
© 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
© 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
© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)
Indigenous supply can only meet 57% of total demand
Gas Supply (2014) Gas Demand (2014)
© 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
© 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
© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)
Prolonged regulated pricing causes market imbalance &
inefficiencies
•Gas shortage
•Cost of new supplies
• Inefficient usage
© 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
© 2013 PETROLIAM NASIONAL BERHAD (PETRONAS)
THANK YOUTHANK YOU
© 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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