Malaysian Gas Association, the prominent voice of the natural gas industry in Malaysia. MGA is a non-profit organization representing members and companies involved in the entire value chain of the Malaysian gas industry.
1. Malaysian Gas Association, also known as MGA, has been around since 1986 with its vision to promote the gas industry and its utilization as a clean an efficient energy source. What are the biggest achievements in the recent years, for the natural gas industry?
Malaysian Gas Association (MGA) represents 150 members, with one common mission to promote the advancement of sustainable gas industry in Malaysia. Our membership comprises companies serving the entire value chain of the natural gas industry; from upstream, midstream and to downstream, including major gas consumers.
MGA is excited to play its part in the transformational changes undergone by the natural gas industry in recent years.
Natural gas supply to Peninsular Malaysia is no longer an issue with the introduction of Re-Gasification Terminal (RGT1) in Sungai Udang, Melaka, back in 2013. RGT1 enables import of Liquefied Natural Gas (LNG) to supplement the gas supply from indigenous resources. The second RGT for the country, RGT2 in Pengerang, Johor, is expected to start commercial operation in 2018.
The completion of LNG import facility in RGT1 paved way for the implementation of Third Party Access (TPA) in January 2017. TPA opens the gas supply market to third parties. Now, anyone can sell gas to any consumer in Malaysia.
To enable TPA and open competition, the natural gas industry is transiting from regulated to market-based pricing. To achieve this, the regulated gas price has been increased by RM1.50 per mmBtu every six months. Once the gas price has achieved market parity, gas transactions will be based on willing buyer-willing seller concept. Gas at market price will attract more players to supply gas to consumers.
At MGA, we are encouraged that the Malaysian government has been fully committed to ensure this market liberalisation and market reforms. This will pave way towards realising MGA’s vision of a vibrant and sustainable gas industry that benefits the nation and its citizens.
2. With the Malaysian government moving to reduce carbon emission by 45% by 2030, how does this impact gas production?
International Energy Agency (IEA) has on 14 November 2017 launched their World Energy Outlook 2017. The report singled out natural gas as the best fossil fuel to complement renewable energy going towards 2040. This is because natural gas can operate in continuous base load, emitting the least CO2 and most flexible to support renewable energy. During the press conference to launch the WEO 2017, IEA regarded natural gas as “a good husband” to renewables. In fact, IEA expected natural gas to be the only fuel to increase by 2040.
Similarly, as Malaysia aspires to increase share of renewable energy in the energy mix, natural gas plays an even more important role in power generation. With majority of renewable energy expected to be generated by solar photovoltaic (PV), the electricity grid will need flexible power plants that can react quickly to the intermittent nature of power from PV. Gas turbine power plants are perfect for this role. Gas turbines can react quickly and emits much less CO2 in comparison to power plants using other fossil fuel.
In the transport sector, greater utilisation of natural gas for heavy transport, such as city buses and long haul commercial vehicles, can further reduce CO2 emissions.
In the industrial sector, combined heat and power using gas turbines in cogeneration application increases efficiency of the system. This means less fuel is needed and less CO2 emitted.
In conclusion, in order to achieve target GHG emission reduction, the nation needs natural gas even more
3. Global demand for natural gas has been increasing steadily over the years. When do you foresee a peak in demand for gas?
DNV GL this year released a report on “Energy Transition Outlook 2017” foresee that natural gas is set to be the largest single source of energy towards 2050 with peak demand occurring in 2035.
In Malaysia, MGA is constantly promoting greater utilisation of gas in all sectors, including power generation, transport, industrial and commercial. The third party access is expected to further spur the growth of demand for natural gas.
4. How has technology helped in shaping the industry? Can you share an example of advancement in technology that has spurred the growth for gas production?
We are proud that MGA members are leaders in innovation and technological advancement.
PETRONAS for example continues to be a pioneer in global gas industry, being innovative in the fast track construction of the re-gasification terminal using floating storage units (FSU) in Melaka and the world’s first floating LNG (FLNG) plant that will unlock small and stranded gas fields that were once uneconomical to explore.
5. What are the biggest challenges in the foreseeable future for the industry?
Malaysia’s gas industry entered an exciting phase this year with The Implementation of the third party access, enabling any supplier to bring natural gas into Malaysia. TPA ensures sufficient supply and energy security for the nation. For TPA to be successful, there should be higher demand for natural gas in Malaysia, creating a market large enough to attract third parties.
In 2015, the power generation sector consumed more than 50% of the total natural gas supplied in Malaysia, making that sector the most attractive market for gas suppliers. However, natural gas share in the power generation mix is set to drop from 46% in 2015 to a mere 32% in 2026. In contrast, coal share increases from 48% to 56%. Coal is preferred over gas due to lower cost of generating power, even though the CO2 and pollutant emissions are higher.
6. In today’s world, what do you think are the necessary skills and traits that are important for a young professional to have when entering the job market?
MGA recently organised a three-day programme for final year university students called PRESTIGE that includes exposing them to careers in the oil & gas industry. We arranged for oil & gas professionals from varied backgrounds to share their career experiences and provide career tips. One of the tips given that resonates with the students was to keep gaining knowledge. Learning does not stop once a student graduates.
7. With the advancement of technology and the internet, how do you think young professionals should capitalize on this to further their career and self-improvement?
Learning does not stop once a student graduates. The advice from a seasoned oil & gas professional during MGA’s PRESTIGE programme was to keep gaining knowledge. The digitalised and borderless world enables easy access to beneficial knowledge.
8. How important has collaboration and professional networking been in reaching where you are today in life?
MGA is a charter member of the International Gas Union (IGU), the global voice for gas, with members from 90 countries. IGU provides global networking platform for its members to share knowledge and best practices in the industry.
In Malaysia, MGA continuously collaborate with several other organisations. This year, we collaborated with PEMANDU Associates to organise the inaugural Forum on Women in Energy (FoWiE). Other organisations that supported FoWiE were 30% Club, PETRONAS Leading Women Network, Shell Women Action Network and General Electric Women Network. Such collaborations increase networking opportunities for MGA and its members. FoWiE provided a rare and unique platform for women in the energy sector to congregate, network and discuss common issues.
9. What is next in the development and progress plans of gas industry in Malaysia?
To achieve a sustainable gas industry, it is imperative that the gas industry reform and market liberalization remain on track and demand growth for gas increase exponentially.
One of the priorities for MGA is to enhance gas advocacy. Gas has all the attributes to support the national aspirations to ensure energy security whilst achieving reduction in carbon emission as committed in the Paris Agreement.
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Headline crude prices for the week beginning 19 March 2018 – Brent: US$66/b; WTI: US$62/b
Headlines of the week
Last week, OPEC sounded an alarm. Previously hopeful that the global crude markets would be balanced by June, which would allow it to walk back on the supply freeze that propped prices up at the cost of OPEC market share, the OPEC monthly report raised its expectations for non-OPEC supply for a fourth consecutive month. OPEC now expects global oil demand to grow by 1.6 mmb/d this year, which is more than previously expected. However, non-OPEC oil supplies will grow by 1.66 mmb/d, more than covering demand. The culprit, as always, is the US, where output is expected to grow by 12%. And this is not even the most optimistic forecast; the IEA expects non-OPEC supplies to grow by 1.8 mmb/d this year.
While this has near term implications – Saudi Arabia has already signalled that the OPEC supply curbs may have to extend into 2019 – the more important question is, how far can shale go? American oil production can consistently surpassed expectations over the past year, as the recovery in oil prices triggered a return rush to shale drilling. This will help US oil production reach 11 mmb/d by Q418; it could be even earlier, based on current production trends. By 2030, BP expects US shale oil to grow to 10 mmb/d, almost double its current level.
Despite the base case for shale production being constantly revised upwards – requiring lower long-term oil prices to clear – it is worth asking how realistic it is. There are suggestions that American shale production could hitting the wall; not because the of finite reserves in the Permian, but because of technology limitations. The application of new technology does not in itself create new energy, it only improves the recovery of hydrocarbons and at a faster rate. As reported in CNBC, "Mark Papa, a pioneer in the U.S. shale oil revolution, is warning that forecasts for booming U.S. production growth will leave industry watchers disappointed in the coming years as drillers burn through their best wells and tighten their purse strings. The impression of U.S. shale as the big bad wolf is perhaps a bit overstated, Papa told an audience at this year's CERAWeek by IHS Markit in Houston this year. Papa's comments were a stark contrast to the tone of cautious optimism at the conference, where many executives claimed that data analytics and technology, like machine learning, will improve efficiency in the oil patch and fuel further gains." Though most people are focused on additions to the US rig count, productivity rates in shale wells are actually declining, while costs per well are rising. Major players seem to be mitigating this by creating larger fields by connecting wells, but there is also a looming logistical and manpower crunch. This suggests that while shale production is still on the steep part of its growth curve, that could soon plateau out and that long-term forecasts are overstated. That would be good news for oil prices in the long run.
However, there are signs that the opposite could be true. Investment into shale players is increasing, giving them more funds to play around with. With money come more interest – solving, or at least, mitigating most of the upcoming bottlenecks. It seems that either more debt through borrowings or the capital markets is driving this production surge, particularly in the USA. However it is worth noting that the USA is not the only place the shale revolution is taking place. By the end of this month, Saudi Arabia will have produced its first shale gas from the North Arabia basin. The giant South Ghawar and Jafurah basins – which reportedly rival Eagle Ford in size – are also underway. Promising finds are improving moods in China and Argentina shale as well, while the UK drilled its first shale well last year. Even if the American shale revolution hits the brakes, the movement could continue elsewhere, which would mean that current non-US share oil production forecasts maybe understated? There is little data out there at the moment about the profitability or economics of non-US shale fields.
Both the low and high scenarios make compelling cases. Both, however are closely tied to current developments in US oil production. Ultimately the base case for shale will depend on economics but more importantly the demand for hydrocarbons in the medium to long term. If oil demand keeps growing, so will the need for more oil, but any large surge would only dampen prices all over again, affecting the low margins of shale production. Too much of something is always bad, and there is no exceptions for shale either.
Various production forecasts for American shale tight oil production
Current level: 4.5 mmb/d (2017)