Malaysia has approved a 20% increase in natural gas prices for industrial and commercial sectors in the west of the country, effective May 1, in order to reflect the cost of procuring more expensive imported LNG.
Domestic natural gas distribution company Gas Malaysia last Friday said in a filing to the Kuala Lumpur stock exchange, Bursa Malaysia, that the average natural gas price for the non-power sector in Peninsular Malaysia, or West Malaysia, will rise from MR16.07/MMBtu ($4.95/MMBtu) to MR19.32/MMBtu from May. This translates to a 20.2% increase.
The bulk of the company's existing industrial customers will be affected by the increase although residential gas prices will remain at MR19.52/MMBtu. The adjustment is also not applicable to natural gas consumed by the transport sector.
Gas Malaysia said the purchase price of gas that it procures from state-owned Petronas "will be adjusted upwards accordingly," taking into account prices of domestic natural gas as well as LNG.
Gas Malaysia, which had total gas sales of 138.5 million MMBtu across West Malaysia last year, started to include LNG from the new Petronas-operated Melaka LNG regasification terminal in its gas sources when the terminal was commissioned in May 2013.
Despite being a significant exporter of LNG from its Malaysia LNG liquefaction plant in Bintulu, Sarawak, in the east of the country, Petronas has been looking at LNG imports to feed burgeoning gas demand in West Malaysia.
Gas reserves offshore Peninsular Malaysia are dedicated to that region while those offshore Sarawak are committed for domestic projects in Borneo as well as LNG exports.
Petronas has three LNG import agreements. The first, signed in May 2011, is with France's GDF Suez for the supply of 2.5 million mt of LNG over three and a half years, starting from August 2012. The second is with Qatargas for the supply of 1.5 million mt/year of LNG over 20 years starting 2013 while the third is with Norway's Statoil, signed in June 2012. Besides imports, the Melaka terminal has also received diversion cargoes from Bintulu.
Petronas said early last month when it announced its annual results that it lost a total MR1.4 billion in subsidizing LNG imports into Peninsular Malaysia last year.
In a research note on Monday, Maybank Kim Eng Research said the 20% increase in the gas price appears to "merely reflect a pass-through of higher gas cost [due to an increase in the proportion of costlier LNG-sourced gas] based on 2013 gas volumes."
The proportion of LNG in Gas Malaysia's total gas supply is expected to rise significantly in 2014-2015, according to Maybank. Gas Malaysia's quota for domestic gas supply would decline from 382 MMcf/d in 2013 to 300 MMcf/d in 2015, while that of LNG-sourced gas would rise from 40 MMcf/d to 192 MMcf/d over the same period, the bank said.
A gas price hike for industrial customers in West Malaysia had been expected this year after the country raised the price for subsidized gas used by the power sector by about 11% late last year to MR15.20/MMBtu.
