Primary Energy

Gas and LNG ecosystem

Energy Value Chain | M Afiq Abu Zarim | August 2020
Tell us about you…
 1. Gas in the global context

2. Natural gas in Malaysia

We will talk
3. Gas Pricing
about…
4. Gas market Liberalisation in Malaysia

5. Impact of C-19 to the market

Gas in the
global context
 The energy landscape is changing as the world is
undergoing an energy transition

Global energy transition is driven by growing energy demand, technology advancement

and rising attention for sustainable energy

Global energy Technology & Climate Change

demand growth Innovation

Energy Intensity unit: Energy Since 1880, the average

Energy demand is expected
consumption (toe) per global temperature has risen
to grow at least 1% every
US$1,000 of GDP (in PPP) by 1 degree Celsius
year

Source: IEA

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 We are faced with an energy trilemma
Sustainability
The world wants
green energy

Security Equity
Need reliable energy supply to (Affordability)
support country’s energy
Need for low cost
requirements
fuel

 Energy trilemma is the challenge of balancing environment sustainability, energy affordability

and security.
 Technology and innovations could help to solve energy trilemma by:
1) bringing down cost of renewable energy
2) providing energy supply solutions i.e. energy storage, hydrogen fuel cells
3) improving efficiency of energy production, delivery and use

Source: IEA,SR analysis

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There is no one size fits all
strategy in managing energy
transition

• Germany – Focusing on sustainability and Energy

Security,

• Australia – Starting to build RE, grid infrastructure

and energy storage

• China – Focusing on economic growth,

government led Energy Transition

• Thailand – Focusing on RE, and strong policies.

• Vietnam – Focusing on Energy Equity

 Sustainability

Conversation: Security Equity

(Affordability)
Where do you think Malaysia should be in the energy trilemma triangle;
Why natural gas?
The cleanest fossil fuel
 Natural Gas is a reliable, versatile and the
most competitive source of energy… now

ABUNDANTLY AVAILABLE to meet RELIABLE ACCESSIBILITY through

GLOBAL GAS demand for the next 250 pipelines, regasification terminals, liquefaction
years plants and floating LNGs.

Global gas demand growth Gobal source of supply make it accessible –

1.6% CAGR for Natural Gas ensuring energy security
3% CAGR for LNG by 2040

COMPETITIVE
Natural gas is more affordable than most fossil fuels, when impact of
climate change and pollution are considered

Natural gas produces more energy than any other fossil fuels resulting in
cost savings and higher production efficacy

(55 MJ/kg vs Coal 24 MJ/kg)

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 Natural Gas complements Renewable
Energy supporting low carbon economy

Air pollution: nearly zero GHG emissions: 40%-50% Heat intensity: the most
Sulphur dioxide, low less than coal and 20% less heat intensive and highest
nitrogen oxide and no than oil efficiency hydrocarbon fuel
particulate matter emissions source

Flexibility: helps address Energy solution: Small scale

the challenge of seasonal
and daily output variability
of solar energy
infrastructure can be integrated
with renewables to support
remote micro grids and offer
dependable and efficient hybrid
systems

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Natural gas
has been
powering the
economy in
many
countries
globally
It is all about
the price
Gas pricing
Gas pricing mechanisms which are based on different assumptions varies
in different regions

Europe

Asia Pacific
North America

• Lack of gas resources and pipeline infrastructure

• Large gas resources • Oil linkage and gas-on-gas pricing • Dependent on LNG
• Gas-on-gas competition in • Oil linkage pricing dominates LNG contracts
domestic pricing • Lack of gas-on-gas competition
• Rising LNG exports

30% of demand 34% of demand

36% of demand

6% of LNG imports 19% of LNG imports

75% of LNG imports
There are several gas price index globally based on
different assumptions and factors
Long-term supply provides price stability and supply security, while
spot volumes are volatile

USD/MMBtu

Term Prices - JKT

 Mostly oil-linked, either a % of Brent/JCC
MRP
Spot Prices LT  Linked to JCC

 Predominantly based on JKM, either JKM

minus or a premium
Spot
 Reflecting short-term dynamics of
uncontracted volumes, thus, tend to be
more volatile
Mar-17

May-17

Jul-17

Sep-17

Nov-17

Mar-18

May-18

Sep-18

Nov-18

Jan-19

Mar-19

May-19
Jan-17

Jan-18

Jul-18

Jul-19

* Published by Argus. The price movements are highly correlated with the more well-known Platts JKM spot price
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** Based on Malaysia Reference Price (MRP), derived as the FOB value of LNG exported from Malaysia divided with its corresponding volume
Natural gas –
Powering Malaysia’s
economy since
1980s
Natural Average Malaysia’s primary energy supply
gas is an Natural gas Oil, Petroleum Coal Others

important
primary en 9%

ergy suppl
y and 21% 40%
contributes
to 4% of
Malaysian
GDP
30%
 Malaysia has a vibrant oil & gas industry providing reliable
energy security
Malaysia has a well established integrated gas
infrastructure

>2,500 KM >2,000 MMSCFD

GAS TRANSMISSION
PIPELINE ACROSS MALAYSIA PROCESSING CAPACITY THROUGH

6 GAS PROCESSING PLANTS

530 MMSCFD
LNG REGASIFICATION TERMINAL
490 MMSCFD
SUNGAI UDANG, MELAKA LNG REGASIFICATION TERMINAL
PENGERANG, JOHOR

Source: PETRONAS Gas Berhad annual rep

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 PETRONAS’ integrated value chain
enables economic growth in Malaysia

Natural Gas Liquefied Natural Gas

• LNG export

Liquefaction
Plant

• Power sector
Liquefied
Natural Gas • Industrial sector

LNG import Regasification

Terminal
Processed Gas • Residential sector
• Commercial sector

Processed Gas
• Petrochemical business
Natural Gas
• Agricultural business
Gas Processing Peninsular Gas
Plant Utilisation (PGU)
pipelines

• Transportation
*commercial fleet

UPSTREAM MIDSTREAM DOWNSTREAM

Natural gas industry in Malaysia contributes >RM180 billion to GDP and has
created over 80,000 jobs in the wider economy, providing more than RM8.8 billion in
income for workers

Disclaimer: Numbers are based on certain assumptions and unofficial report

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 Natural gas has been fueling Malaysia’s economy since
1980 and will continue to be the main source of energy,
supporting clean energy agenda
ktoe RM Billion Energy Demand by Fuel
Trends in GDP & Gas Consumption
1200 14000
3% 8%
GDP (at 2010 Prices) 11%
Natural Gas Consumption 18%
12000 23%
1000 21% 20% 4%

10000
800
33% 31%
50%
40%
8000

600

6000
38% 39%
400 28% 27%
4000

Base case (2018) Base case (2050) Green (2050) Carbon Neutral
200 (2050)
2000 Other Solid Fuels
Renewables
Nuclear
0 0 Coal
80 982 984 986 988 990 992 994 996 998 000 002 004 006 008 010 012 014 016 Gas
19 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 Oil Source: Malaysia Future Energy Landscape 2050
Source: National Energy Balance

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Third Party Access
Gas market liberalisation supports open and competitive
gas market, promoting sustainable energy security
 Under TPA, third party players can import and supply
natural gas to Peninsular Malaysia market
Infrastructure Legislation

1 Regasification • Date Operational: 23 May 2013

Terminal (RGT) • Capacity: 530 MMscfd (3.8 Mtpa)
Sungai Udang,
Melaka
Third Party Access Code for
Malaysian regasification terminals
2 Regasification • Date Operational: October 2017 has been introduced by Energy
Commission in 2017 to ensure non-
Terminal (RGT) • Capacity: 490 MMscfd (3.5 Mtpa) discriminatory open access for third
Pengerang, Johor parties

3 Peninsular Gas • Date Operational: started in 1984

Utilisation (PGU) • Capacity: 3,500 MMscfd
pipelines

• Source: Energy Commission, PETRONAS Gas Berhad

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 Since 2018, PETRONAS Gas Berhad’s
regasification terminals & main gas
pipeline (PGU) has been regulated
(TPA), resulting to a more competitive
tariff to end users

TPA tariff for Regasification terminal and

pipeline
2018 2019
Main Pipeline
RM1.248/GJ RM1.072/GJ
PGU
Regasification
RM3.23/mmbt RM3.518/mmb
(Sungai Udang,
u tu
Melaka)
Gas Malaysia Distribution Center Distribution Pipeline Regasification USD0.804/mm USD0.637/mm
Gas Processing Plant Transmission Pipeline (Pengerang, Johor) btu btu

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Impact of
COVID -
19
The unprecedented COVID-19 pandemic has stirred the
supply-demand, resulting to the plunged in the gas
market globally.

LNG exports Gas price

Demand

• Power

• Commercial

• Industrial
However, analyst projecting a recovery on supply-demand
as early as Q4 2020. Furthermore, there is no indication on
divestments on LNG terminals.
Case 2: Effective and
strong containment

Pre C-19
Demand

Oversupply, and
demand plunges Recovery
Green marketing consists
of marketing.

Re-opening of
economic
activities
Demand starts to pick-up

Jan April Oct

2020 2020 2020
The overall gas demand has dropped by approximately 32% mainly
contributed from power demand drop resultant from the Movement Control
Order (MCO).

MCO
commenced

4-5GW

Source: https://www.gso.org.my/SystemData/SystemDemand.aspx
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 Thank you
Energy Value Chain | M Afiq Abu Zarim | August 2020
afiqzarim@petronas.com | :
afiqzarim