Equal Attention Needed for Gas Industry Players in Budget 2025, Urges MGA

 

Kuala Lumpur, 11 October 2024—The Malaysian Gas Association (MGA) calls for the Government to prioritise the gas industry in Budget 2025 to ensure Malaysia’s sustainable transition to a low-carbon economy. MGA underscores the pivotal role of the gas industry as outlined in the National Energy Transition Roadmap (NETR). With the Responsible Transition Pathway 2050 (RT 2050) aiming to increase renewable energy (RE), phase out coal, pursue energy efficiency (EE) and expedite green mobility, the importance of natural gas as a crucial fuel becomes even more critical.

Prime Minister’s statement in the NETR 2023 Executive Summary highlights, “Gas is not only a transitional fuel but also the primary contributor of Total Primary Energy Supply (TPES).” Similarly, the Minister of Economy emphasised, “The reliance on Natural Gas is addressed under Energy Security. Proactive initiatives are being undertaken to secure natural gas, such as infrastructure and commercial arrangements for the importation, including long-term agreements to stabilise fuel imports. At the same time, it is crucial to ensure natural gas prices for domestic consumers reflect market parity. This will enhance the attractiveness of Malaysia as an investment destination for the upstream sector as well as incentivise third-party suppliers to enter the domestic gas supply market, spurring the operationalization of TPA for the gas market.

”Natural gas and Renewable are expected to play a pivotal role in Malaysia’s energy transition journey, while coal usage will diminish over time. In relation to the TPES, natural gas usage will be expanded both in terms of share and absolute terms from 41 Mtoe (43%) in 2023 to 57 Mtoe (56%) in 2050. Additionally, with the recent strong interest by data centres to set up their operations in Malaysia, the nation’s energy demand is expected to increase significantly, hence putting additional expectations on the energy sector, including the gas industry.

Gas will play a greater role in ensuring energy security by 2050 and beyond.

“MGA calls for a more inclusive and supportive Budget 2025 to ensure the gas industry can meet its expected role in Malaysia’s energy future. To fully realise its potential and drive the energy transition, the industry requires urgent government support. Given the heightened expectation on the role and contribution of gas, as stated in the NETR, it is reasonable for the gas industry to be accorded incentives that are similar to those given to the Renewable energy industry. This includes tax incentives, grants and funding that encourage continued and enhanced investments and development within the gas industry.” Abdul Aziz Othman, President of the Malaysian Gas Association (MGA), highlighted in a statement.

In particular, incentives such as investment tax allowances should be enhanced for the following:

  1. Supply Side – To develop and commercialise domestic gas supply.
  2. Infrastructure – To maintain, upgrade and build essential gas infrastructures such as processing facilities, pipelines, regasification terminals, etc.
  3. Technology Advancement – To support innovation and the adoption of cutting-edge technologies like CCUS, gas development and production to ensure a cleaner gas form.
  4. Capacity Building – To develop the skills and expertise required for the future of the gas industry.

Improved Funding from the Financing Institution

Abdul Aziz added that funding is a critical element that ensures NETR targets are achieved. Of late, there seem to be stricter requirements and limitations (fund allocation) for Oil and Gas (O&G) related projects. Based on the current trends in project funding/financing, the situation will get even tougher for the O&G industry. Immediate government intervention is required to reverse the concerning pattern by encouraging financial institutions to recognise the strategic importance of gas projects and provide sufficient support to the gas industry to achieve the NETR targets:

  1. Allocation of sufficient funds to support gas-related investments.
  2. Fair treatment of gas-related investments.
  3. Minimise/reduce restrictive funding requirements.
  4. Reasonable funding terms and conditions.

MGA Urges for Equal Attention and Fair Treatment for the Gas Industry

The gas industry is crucial for Malaysia’s aspiration towards Net Zero emissions. The right incentives and funding support are essential for gas industry players, predominantly local companies, to fulfil their expected role and meet the NETR targets. Strong support from the government is crucial to ensure the gas industry can contribute effectively to Malaysia’s energy security, energy transition goals and economic growth objectives.

“Natural gas is a core fuel for Malaysia’s energy security. We urge the government and financial institutions to recognise the strategic importance of gas projects and provide the necessary support to the industry. Representing over 150 members, we are committed to engaging with financial institutions to clarify requirements and ensure our members, along with other industry players, have access to allocated funding, such as the RM 2 billion seed fund for the NETR related facilities and projects. To achieve our ambitious NETR targets, it is imperative that the gas industry receives the same level of support and incentives as the renewable energy sector. This includes tax incentives, grants and funding to encourage continued investment and development. Ultimately, MGA echoes the statements of other industry players, calling for sufficient incentives across all segments of the energy ecosystem. Each segment plays a crucial role in the energy transition journey. Therefore, equal attention and fair treatment must be given to all players to ensure a secure, robust and sustainable energy for the nation.”