By Lawrence Yong
Malaysia’s first use of imported natural gas brought in by Petronas through its RM1 billion regasification terminal (RGT) in Sg Udang, Melaka will be positive for Tenaga Nasional Bhd (TNB) as it would allow the company to capitalise on its gas-fired power plants.
Analysts said the overdue move will iron out structural inefficiencies which caused the national utility TNB to temporarily switch to more expensive gas oil last year after a shortfall in gas feedstock.
“The RGT is expected to commence operations by the end of May, which we believe is just in time to meet the higher electricity demand in the coming months,” an analyst report from Public Investment Bank (PIVB) noted.
Samsudin Miskon
PIVB quoted Petronas Gas Bhd managing director and CEO Samsudin Miskon as saying that the RGT has been commissioned with its first shipment of 152,888 cubic metres of liquefied natural gas (LNG) received last week. Earlier, Bloomberg News said that a tanker of similar capacity may have sailed on March 27 from Nigeria LNG Ltd’s Bonny Island terminal for Melaka.
Petronas Gas (PGas) is primarily involved in the processing and distribution of natural gas in Peninsular Malaysia. Its share price has more than doubled from the time it first announced the RGT in December 2010. It was trading flat at RM22.02 on Friday on Bursa Malaysia.
The PIVB report said that TNB currently receives an average gas supply of 1,100 million standard cubic feet a day (mmscfd), still short of the daily gas requirement of 1,250 mmscfd. As at 2Q13, gas-powered generation only accounted for 46.8 percent of total power generated, despite gas-powered plants making up 58 percent of total installed capacity, it said.
Petronas holds the monopoly on supplying gas in Malaysia. It mooted plans to construct Malaysia’s first floating LNG import facility offshore Melaka in December 2010 as the regular piped offshore supply from the Terengganu and Thailand joint development area fell short of demand.
Even though construction was completed in record time, Melaka RGT has delayed imports twice since September last year. Industry sources said pricing was an issue as Malaysia’s industrial and power users enjoyed some of the lowest gas prices in Asia. Petronas previously said that from 2007 to 2011 it has stumped out RM136.5 billion to subsidise both the power and non-power sectors.
Under the Najib government’s plan, gas prices should be hiked by RM3/mmbtu every six months until prices converge to market rates. This was estimated to be reached by end-2015. However, the past three gas price review dates since November 2011 have come and gone without any changes.
PIVB however said gas price hikes may not severely affect TNB’s earnings as it could be passed on to consumers or absorbed by a government-backed stabilisation fund. TNB shares have been one of the best performers on Bursa Malaysia this year. Since March, its shares have soared by some 20 percent to trade this week in the RM8.20 to RM8.40 range.
Petronas has also drawn up plans to build another three regasification terminals in the near future, in Pengerang (Johor), Lahad Datu (Sabah) and Lumut (Perak). This would eventually allow users to independently import gas from anywhere in the world.
Through Sarawak’s LNG export plants, now reaching a ninth train, Malaysia is the world’s second biggest LNG exporter. Most of it is committed to long term contracts to Northeast Asian buyers.
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