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Last Updated: December 11, 2017
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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.

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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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January, 24 2020
EIA expects U.S. net natural gas exports to almost double by 2021

In its Short-Term Energy Outlook (STEO), released on January 14, the U.S. Energy Information Administration (EIA) forecasts that U.S. natural gas exports will exceed natural gas imports by an average 7.3 billion cubic feet per day (Bcf/d) in 2020 (2.0 Bcf/d higher than in 2019) and 8.9 Bcf/d in 2021. Growth in U.S. net exports is led primarily by increases in liquefied natural gas (LNG) exports and pipeline exports to Mexico. Net natural gas exports more than doubled in 2019, compared with 2018, and EIA expects that they will almost double again by 2021 from 2019 levels.

The United States trades natural gas by pipeline with Canada and Mexico and as LNG with dozens of countries. Historically, the United States has imported more natural gas than it exports by pipeline from Canada. In contrast, the United States has been a net exporter of natural gas by pipeline to Mexico. The United States has been a net exporter of LNG since 2016 and delivers LNG to more than 30 countries.

In 2019, growth in demand for U.S. natural gas exports exceeded growth in natural gas consumption in the U.S. electric power sector. Natural gas deliveries to U.S. LNG export facilities and by pipeline to Mexico accounted for 12% of dry natural gas production in 2019. EIA forecasts these deliveries to account for an increasingly larger share through 2021 as new LNG facilities are placed in service and new pipelines in Mexico that connect to U.S. export pipelines begin operations.

Net U.S. natural gas imports from Canada have steadily declined in the past four years as new supplies from Appalachia into the Midwestern states have displaced some pipeline imports from Canada. U.S. pipeline exports to Canada have increased since 2018 when the NEXUS pipeline and Phase 2 of the Rover pipeline entered service. Overall, EIA projects the United States will remain a net natural gas importer from Canada through 2050.

U.S. pipeline exports to Mexico increased following expansions of cross-border pipeline capacity, averaging 5.1 Bcf/d from January through October 2019, 0.5 Bcf/d more than the 2018 annual average, according to EIA’s Natural Gas Monthly. The increase in exports was primarily the result of increased flows on the newly commissioned Sur de Texas–Tuxpan pipeline in Mexico, which transports natural gas from Texas to the southern Mexican state of Veracruz. Several new pipelines in Mexico that were scheduled to come online in 2019 were delayed are expected to enter service in 2020:

  • Pipelines in Central and Southwest Mexico (1.2 Bcf/d La Laguna–Aguascalientes and 0.9 Bcf/d Villa de Reyes–Aguascalientes–Guadalajara)
  • Pipelines in Western Mexico (0.5 Bcf/d Samalayuca–Sásabe)

U.S. LNG exports averaged 5 Bcf/d in 2019, 2 Bcf/d more than in 2018, as a result of several new facilities that placed their first trains in service. This year, several new liquefaction units (referred to as trains) are scheduled to be placed in service:

  • Trains 2 and 3 at Cameron LNG in Louisiana
  • Train 3 at Freeport LNG in Texas
  • Trains 5–10, six Moveable Modular Liquefaction System (MMLS) units, at Elba Island in Georgia

In 2021, the third train at the Corpus Christi facility in Texas is scheduled to come online, bringing the total U.S. liquefaction capacity to 10.2 Bcf/d (baseload) and 10.8 Bcf/d (peak). EIA expects LNG exports to continue to grow and average 6.5 Bcf/d in 2020 and 7.7 Bcf/d in 2021, as facilities gradually ramp up to full production.

monthly natural gas trade

Source: U.S. Energy Information Administration, Natural Gas Monthly

January, 24 2020
EIA forecasts U.S. crude oil production growth to slow in 2021

In the January 2020 update of its Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) forecasts that U.S. crude oil production will average 13.3 million barrels per day (b/d) in 2020, a 9% increase from 2019 production levels, and 13.7 million b/d in 2021, a 3% increase from 2020. Slowing crude oil production growth results from a decline in drilling rigs during the past year that EIA expects will continue through most of 2020. Despite the decline in rigs, EIA forecasts production will continue to grow as rig efficiency and well-level productivity rise, offsetting the decline in the number of rigs until drilling activity accelerates in 2021.

Figure 1. U.S. crude oil production

EIA’s U.S. crude oil production forecast is based on the West Texas Intermediate (WTI) price forecast in the January 2020 STEO, which rises from an average of $57 per barrel (b) in 2019 to an average of $59/b in 2020 and $62/b in 2021. The price forecast is highly uncertain, and any significant divergence of actual prices from the projected price path could change the pace of drilling and new well completion, which would in turn affect production.

Crude oil production in the Lower 48 states has a relatively short investment and production cycle. Changes in Lower 48 crude oil production typically follow changes in crude oil prices and rig counts with about a four- to six-month lag. Because EIA forecasts WTI prices will decline during the first half of 2020 but begin increasing in the second half of the year and into 2021, forecast U.S. crude oil production grows slowly month over month until the end of 2020. In contrast, crude oil production in Alaska and the Federal Offshore Gulf of Mexico (GOM) is driven by long-term investment that is typically less sensitive to short-term price movements.

In 2019, Lower 48 production reached its largest annual average volume of 9.9 million b/d, and EIA expects it to increase further by an average of 1.0 million b/d in 2020 and 0.4 million b/d in 2021. EIA forecasts the GOM region will grow by 0.1 million b/d in 2020 to 2.0 million b/d and to remain relatively flat in 2021 because several projects expected to come online in 2021 will not start producing until late in the year and will be offset by declines from other producing fields. Alaska’s crude oil production will remain relatively unchanged at about 0.5 million b/d in 2020 and in 2021.

The Permian region remains the most prolific growth region in the United States. Favorable geology combined with technological improvements have contributed to the Permian region’s high returns on investment and years of remaining oil production growth potential. EIA forecasts that Permian production will average 5.2 million b/d in 2020, an increase of 0.8 million b/d from 2019 production levels. For 2021, the Permian will produce an average of 5.6 million b/d. EIA forecasts that the Bakken region in North Dakota will be the second-largest growth area in 2020 and 2021, growing by about 0.1 million b/d in each year (Figure 2).

Figure 2. Monthly U.S. crude oil production by region

EIA expects crude oil prices higher than $60/b in 2021 will contribute to rising crude oil production because producers will be able to fund drilling programs through cash flow and other funding sources, despite a somewhat more restrictive capital market. Financial statements of 46 publically-traded U.S. oil producers reveal that these companies generated sufficient cash from operating activities to fund investment and grow production with WTI prices in the $55/b–$60/b range. The 46 selected companies produced more than 30% of total U.S. liquids production in the third quarter of 2019. The four-quarter moving average free cash flow for these companies ranged between $1.7 billion and $3.5 billion from the fourth quarter of 2017 through the second quarter of 2019. The third quarter of 2019—the latest quarter for which data are available—had less cash from operations than investing activities, but this figure was skewed by the large, one-time acquisition cost of Anadarko Petroleum by Occidental, valued at $55 billion (Figure 3).

Figure 3. Cash flow statement items for 46 U.S. oil producers

Results for these 46 publicly traded companies do not represent all U.S. oil producers because private companies that do not publish financial statements are not included in EIA’s analysis. The Federal Reserve Bank of Dallas Energy Survey sheds some light on the financial position of a broader set of companies. Released quarterly, the bank’s survey asks oil companies about business activity and employment and asks a few special questions that change each quarter. The number of companies that participate varies each quarter, but generally the survey includes about 100 exploration and production companies. In the most recent survey (from the fourth quarter of 2019), 75% of survey respondents said they can cover their capital expenditures through cash flow from operations at a WTI price of less than $60/b. In addition, 40% of survey respondents plan to increase capital expenditures in 2020 compared with 2019, while 24% of respondents expect to spend about the same (Figure 4).

Figure 4. Selected questions from the Federal Reserve Bank of Dallas' Energy Survey

Since about 2017, large, globally integrated oil companies have acquired more acreage in Lower 48 regions, particularly in the Permian. These companies have announced investment plans to make Lower 48 production an increasing portion of their portfolios. These companies can typically fund their investment programs through cash flow from operations and are generally less susceptible to tighter capital markets than smaller oil companies. The financial results of the public companies shown in Figure 3 and the Federal Reserve survey support EIA’s production forecast and suggest that U.S. crude oil production can continue to grow under EIA’s price forecast for 2020 and 2021 because many companies are less dependent on debt or equity to fund investment.

U.S. average regular gasoline and diesel prices decline

The U.S. average regular gasoline retail price fell more than 3 cents from the previous week to $2.54 per gallon on January 20, 29 cents higher than the same time last year. The Midwest price fell over 5 cents to $2.39 per gallon, the Gulf Coast price fell nearly 5 cents to $2.23 per gallon, the Rocky Mountain price fell more than 3 cents to $2.57 per gallon, the East Coast price fell more than 2 cents to $2.50 per gallon, and the West Coast price fell nearly 2 cents to $3.18 per gallon.

The U.S. average diesel fuel price fell nearly 3 cents from the previous week to $3.04 per gallon on January 20, 7 cents higher than a year ago. The Rocky Mountain price fell nearly 6 cents to $3.01 per gallon, the East Coast price fell nearly 4 cents to $3.08 per gallon, the Midwest price declined almost 3 cents to $2.94 per gallon, the West Coast price fell nearly 2 cents to $3.57 per gallon, and the Gulf Coast price dropped more than 1 cent to $2.80 per gallon.

Propane/propylene inventories decline

U.S. propane/propylene stocks decreased by 1.4 million barrels last week to 86.5 million barrels as of January 17, 2020, 17.1 million barrels (24.6%) greater than the five-year (2015-19) average inventory levels for this same time of year. Midwest, East Coast, Gulf Coast, and Rocky Mountain/West Coast inventories decreased by 0.7 million barrels, 0.4 million barrels, 0.2 million barrels, and 0.1 million barrels, respectively. Propylene non-fuel-use inventories represented 6.9% of total propane/propylene inventories.

Residential heating fuel prices decrease

As of January 20, 2020, residential heating oil prices averaged nearly $3.07 per gallon, 3 cents per gallon below last week’s price and 10 cents per gallon lower than last year’s price at this time. Wholesale heating oil prices averaged almost $1.96 per gallon, more than 7 cents per gallon below last week’s price and more than 7 cents per gallon lower than a year ago.

Residential propane prices averaged almost $2.01 per gallon, less than 1 cent per gallon below last week’s price and more than 42 cents per gallon less than a year ago. Wholesale propane prices averaged more than $0.60 per gallon, nearly 4 cents per gallon lower than last week’s price and 20 cents per gallon below last year’s price.

January, 24 2020