The world is facing an energy crisis where the demand for energy commodities exceeds supply and this is causing volatility in short-term pricing with global spot prices for natural gas reaching the highest level this year.
However, the impact of the energy crisis on Malaysia has not been alarming.
On October 5, 2021, in the Dewan Rakyat, minister in the prime minister’s Department (Economy) Datuk Seri Mustapa Mohamed assured that Malaysia has managed its energy security despite the price increase in energy commodities, namely coal and liquefied natural gas (LNG).
He stressed that the government, through the Economic Planning Unit (EPU) and agencies such as Petronas, have undertaken measures including liberalising our gas market to further strengthen the nation’s energy security.
This has enabled Malaysia to supplement gas supply with available global LNG cargoes to ensure energy security when deemed fit, although Malaysia has its own indigenous natural gas resources.
Malaysia’s gas industry
The Malaysian economy grew in tandem with the increase in gas consumption in Malaysia. Natural gas played a pivotal role as an energy provider to power generation, spurring the growth of gas-fired power plants in the 1990s, thereby expanding energy access that further developed the economy.
Today, the Malaysian gas industry brings more than RM135 billion annually and employs over 80,000 in the wider economy.
To future-proof the Malaysian gas industry, the gas market was reformed to introduce competition that will benefit the consumer and ensure the long-term security of supply.
The gas market liberalisation that commenced in 2014 saw enablers implemented, including the removal of subsidies at gradual steps and the price of gas was brought to market parity, as well as the amendment of the Gas Supply Act in 2016 to enable third parties to access the gas supply infrastructure and ship gas to consumers.
Regasification terminals were constructed especially by Petronas to enable imports of LNG to complement the supply of indigenous gas.
Natural gas in Malaysia
Natural gas once dominated the share of power generation at 52 per cent in 2008.
The availability of natural gas supply to demand centres on the west coast of the Peninsular enabled fast track deployment of gas-fired power plants to cater for the growing need for electricity to power rapid industrialisation.
However, a slew of coal-fired power plants constructed at the turn of the century on the pretext of improving energy security tipped the balance.
In 2020, the share of coal in the electricity energy mix for Peninsular Malaysia was nearly 70 per cent, leaving gas a paltry 28 per cent.
In October 2020, the Institute for Democracy and Economic Affairs (IDEAS) published a policy paper pointing out the unsustainable practice of relying too heavily on coal.
Besides being a fully imported source of fuel, a coal-fired power plant emits more than twice the amount of carbon dioxide released by a gas-fired power plant.
IDEAS further called to use gas to turbocharge the growth of renewable energy.
The Power Development Plan for Peninsular Malaysia 2021-2039, released by the Energy Commission of Malaysia, recognised the role of natural gas in carbon emission reduction for the power sector.
According to the plan, the combined growth of renewables and natural gas could reduce carbon emissions in the power sector by 60 per cent by 2035.
In the same plan, consumption of natural gas in the power sector is expected to grow from 643 million standard cubic feet per day (mmscfd) in 2021 to 1,656 mmscfd in 2039.
During the same period, the installed capacity of coal-fired power plants will be reduced by 22 per cent.
The year 2021 also witnessed a slew of commitments from both the finance community and power generation players to halt involvement in new coal-fired power plant projects.
Maybank joined CIMB Bank to stop financing new coal projects while Tenaga Nasional Bhd plans to eliminate coal-fired power plants from their portfolio by 2050.
The Malaysian government also committed to no longer building new coal plants as the nation transitions towards carbon neutrality as early as 2050.
Gas usage in the power sector
With a gradual reduction in coal capacity, the role of natural gas in power generation is becoming increasingly vital.
This is because power plants fuelled by natural gas are the perfect partner to support and complement the intermittency of variable renewable energy (VRE).
A webinar organised by the Malaysian Gas Association (MGA) recently discussed the complementary roles of gas and renewables.
There have been calls recommending the drastic reduction of fossil fuel including natural gas if the world were to meet the target to limit global temperature rise to 1.5 degrees Celsius by 2050.
The most prominent being the net-zero scenario by the International Energy Agency (IEA) which stated that the current gas fields are already sufficient to supply demand until 2050.
Nevertheless, the energy crisis also exposed flaws in rushing the transition towards rapid deployment of VRE without being properly prepared.
Emerging countries with their indigenous natural gas need this fuel to expand their energy access and drive economic development. With calls for rapid acceleration towards net zero, there are still 759 million people who lack access to electricity and 2.6 billion of the population lack access to clean cooking.
The MGA webinar also stressed the important role that natural gas will be playing in a pragmatic and just energy transition towards net-zero emission by 2050.
Policymakers, industry players urged to collaborate
In the context of Malaysia, policymakers and industry players need to collaboratively deliberate and discuss how, as one nation, we can move towards clean and sustainable energy, whilst at the same time, address the challenges of energy trilemma, namely energy security, energy equity, and environment.
MGA is providing a discourse platform for both policymakers and energy players to congregate and explore mutually beneficial solutions through the upcoming Malaysian Gas Symposium (MyGAS 2021), which will be held from November 22-25, 2021.
Themed “Role of Gas in the Pathway Towards Carbon Neutral Malaysia by 2050″, the online symposium will be discussing the challenges faced by the gas industry globally and the opportunities that will be presented in fulfilling its role as core fuel and enabler in the energy transition for Malaysia.