The gas industry in Malaysia is a complete value chain – from upstream production right to the end-consumers. Gas is produced in offshore blocks by upstream players under a production sharing arrangement with the national oil and gas company, PETRONAS. Malaysia’s upstream sector has been built upon the oil and gas fields in the shallow waters off Peninsular Malaysia and Sarawak, which have been the focus for development activity since the 1960s. In Peninsular Malaysia, much of the gas found has been associated with oil discoveries, in the form of associated gas. This had facilitated cost effective development of gas reserves.

The downstream sector of Malaysia’s natural gas industry consists primarily of domestic consumption and exports. Malaysia’s domestic gas market had its beginnings Sarawak with the introduction of domestic and commercial piped gas in the early 1960s. This was followed by Peninsular Malaysia in 1984. The power sector is an important driver of gas demand in Malaysia, followed closely by the industrial and non-energy sectors. Peninsular Malaysia takes up the largest portion of the country’s gas demand. Meanwhile, a significant portion of the natural gas produced offshore Sarawak is exported in the form of liquefied natural gas (LNG).


The building of gas infrastructure is aligned with the Malaysian government’s energy and economic policies. Malaysia views the gas industry as an enabler for the nation to reach its vision of a developed nation by 2020. Pragmatic policies and regulatory framework were put in place to ensure growth and sustainability.


The downstream sector of the gas industry in Peninsular Malaysia has its beginnings in the Gas Master Plan Study that was commissioned by PETRONAS in 1981. This set the stage and roadmap for the development of natural gas industry in Peninsular Malaysia. One of the most important recommendations from the study was the implementation of a project to build the Peninsular Gas Utilization (PGU) transmission grid for Peninsular Malaysia. Under the PGU system, gas from the offshore fields off the east coast of Peninsular Malaysia is treated and processed at PETRONAS Gas Berhad’s gas processing plants. Here, the gas is separated into its main components, namely sales gas, ethane, propane, butane, and condensate. The sales gas; which comprises mostly methane, is supplied to the power, industrial and commercial sectors while ethane, butane and propane are supplied to petrochemical plants as feedstock.

Accessibility to natural gas has via the PGU been an enabler other industries, particularly those that are energy intensive. The PGU gas transmission grid fuels many power plants along its route and spawned petrochemical hubs in the East Coast. In 2015, there was 10,739.5 MW of installed gas-fired generation capacity in Peninsular Malaysia. By providing access to feedstock, the PGU also enabled PETRONAS Chemicals – a subsidiary of PETRONAS, to become one of South East Asia’s largest integrated gas-based chemicals producers. Further downstream, the PGU feeds into reticulation lines, termed the Natural Gas Distribution System (NGDS) which is operated by Gas Malaysia Berhad, where gas is piped to retail customers. Industrial users are the largest buyers Gas Malaysia Berhad’s sales gas, with the main customers coming from the rubber products, food, beverage and tobacco, and chemical products sectors. The PGU also flows gas into Singapore and has the historical significance of being the first Asian gas export pipeline.

Today, he value chain that makes up the industry is mature and well-established, with many Malaysian companies participating in the sector. As an indication, MGA counts over 150 companies as its corporate members. These companies hail from the gas and gas-related fraternities encompassing exploration, production, processing and transmission, industrial consumers, power generation, distribution and reticulation, logistics services, EPCC, consultancy, research, materials, equipment and  trading. Collectively, they directly hire thousands of Malaysian employees, support the growth of the domestic economy and contribute substantially to the national coffers.

The End-to-End Value Chain of the Malaysian Gas Industry

Source: MGA


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