Press Statement On Reaction To Calls To Reduce Gas Tariff

With respect to the Malaysian Rubber Glove Manufacturers Association’s (MARGMA’s) call for reducing natural gas price, the Malaysian Gas Association (MGA) would like to clarify on two matters, namely the current Asian spot LNG prices and the need for Malaysia to remain on track with regards to market liberalisation.

1) Current Asian spot LNG prices

The current global LNG prices are low as a result of a temporary imbalance in the supply-demand equilibrium. For now, Asian spot LNG prices have fallen because of oversupply given the new supply capacity in the United States and Australia, coupled by weakening demand owing to a milder-than-expected winter. Historically, such temporary imbalances are generally restored within a short time which will then increase the spot LNG prices.

In Malaysia, long term contracts with large industrial customers offer them certainty in terms of managing their operations, as the local natural gas price adjustments have been predicted beforehand and are not subject to dynamically fluctuating spot LNG prices.

2) Market liberalisation

Any reversal in the Government’s efforts towards natural gas market liberalisation will be detrimental to the entire industry and overall economy. There are two aspects to this market liberalisation agenda:

a) Market pricing

It has been repeatedly seen across the globe that artificial pricing distorts markets, escalating regulatory and commercial risks to all players. This will only further discourage interest and investments in the industry by both existing and new players.

Therefore, reducing gas price is not sustainable for Malaysia’s natural gas industry and energy security.

b) Third Party Access (TPA)

The TPA system, which came into effect on 16 January 2017, allows third parties to access gas infrastructure such as the regasification terminals (RGT) as well as the transmission and distribution pipelines. With this, large gas users stand to benefit the most as they will now be better empowered to purchase their own LNG from any source.

Under the TPA, gas suppliers can now bring in LNG into the country via the RGT and ship gas to their buyers using the existing transmission and distribution pipelines.

Both these aspects have been well thought out and mandated by the Government with foresight to strengthen the nation’s energy security, maintain Malaysia’s leading position as an LNG exporter and ensure the natural gas industry’s competitiveness.

As such, MGA urges all parties concerned to help stay the course on the market liberalisation agenda to ensure the local natural gas market continues to remain robust enough to serve the industries and contribute to Malaysia’s socio-economic progress.