KUALA LUMPUR (Dec 13): Malaysia’s plan to lean on natural gas as a transitionary fuel in its energy transition plans may face difficulties in light of the depleting local supply of the cleanest burning fossil fuel, coupled with pressure to curtail the use of all fossil fuels from external forces.
Ministry of Energy Transition and Public Utilities Electricity Supply Division senior undersecretary Mareena Mahpudz said the depletion of fields offshore Kerteh in Terengganu beyond 2030 poses a challenge to natural gas’ role as a transitory fuel in the plan.
“The local supply for natural gas will reduce, and we are going to have to depend more on liquefied natural gas (LNG) coming from outside,” Mareena said during a panel discussion at the release of IDEAS report, Competitive Neutrality in the Malaysian Power Sector: Removing Barriers for a Greener and More Innovative Energy Industry, on Thursday (Dec 14).
“To rely so much on external sources poses quite a high risk for the country in terms of energy security,” she added.
As the offshore fields deplete, the ones that remain post-2030 will be much more difficult and costlier to develop, said former Malaysian Gas Association secretary general Rosman Hamzah.
“So going forward, with the depleting fields, you will definitely see the need to import LNG. When you talk about bringing in LNG, then you talk about the two regasification terminals (RGTs) that you (Malaysia) have, which are in Pengerang and Sungai Udang, are they sufficient?
“Or do you need to build new RGTs? If you want to build new RGTs, where do you build it, who should own it?” he quizzed.
The Natural Gas Roadmap, said Rosman, should be a comprehensive plan spanning until 2050 addressing various issues including future infrastructure needs.
On that note, the cap on gas prices below market rates for the power sector needs to be addressed, he added, as “no third party is going to sell below market rate”.
“So this is where the electricity later should be reflecting the true cost of [generating] electricity and not be that another party [sold gas] below the cost of opportunity,” he said.
Gas price to the power sector is currently capped at a floor price of RM24 and a ceiling of RM30 per million British thermal units (MMBtu) for the first 800 million standard cubic feet per day of natural gas consumed, as opposed to Malaysia's export prices benchmark of over RM48 per MMBtu in the second quarter of this year.
COP28 fossil fuel phase-out commitment weighs
Another issue weighing on Malaysia’s plan to use natural gas as a transitionary fuel is external pressure to transition away from fossil fuels altogether, exemplified by the recent United Nations Climate Change Conference (COP28) fossil fuel phase-out commitment, according to Rosman.
“If you noticed the countries that support the phase-out of fossil fuels, they are the US, EU, and the island states. The EU is pushing for this phase-out, but European suppliers have already signed a few LNG contracts with Qatar that go beyond 2050,” he said.
Rosman said the concern for Malaysia is not whether we need gas or not, but whether there is supply.
“In 2050, we have to be aware of that issue; we need gas but there’s no gas [available] because people have stopped investing because of the COP28 decision, that’s a concern,” he said.
To address energy security concerns, Mareena said a recent Planning and Implementation of Electricity Supply and Tariff Committee meeting held a couple of week’s back was exploring a multitude of renewable energy sources, notably including nuclear power, to ramp up capacity.
“I am not saying that we are going to build up nuclear power, no, not that. But we are exploring the potential of small modular reactors because in the long run it is cheaper, it is stable, and there are new approaches and technology to be looked at,” she said.