Gas, LNG Demand in Peninsular Malaysia to Remain Soft: WoodMac
Gas and LNG demand in Peninsular Malaysia is expected to be soft over the next five years thanks to declining share of gas in power generation from 39% today to 27% in 2020, losing to generation from coal, said Wood Mackenzie July 3.
Peninsular Malaysia also known as Malaya or West Malaysia, is the part of Malaysia which lies on the Malay Peninsula and surrounding islands. Its area is 132,156 km2 which is nearly 40% of the total area of the country.
However, downstream projects in Pengerang - comprising a new gas-fired CCGT, oil refinery and downstream petrochemical complex - will help offset this decline and maintain the overall gas demand at between 2,500mn ft3/d and 2,800mn ft3/d within the forecast time frame, WoodMac said.
Demand for LNG is expected to remain below 3mn mt/yr until 2020 thanks to increase in local gas supply and increase in coal-fired generation. “The market will remain in an oversupply situation with uneasy competition between piped gas supply and LNG imports. Demand will still be lower than the import contract level from GLNG and Brunei LNG through to 2022. From 2023 onwards, as piped gas supply declines, LNG demand will start to surpass the existing import contracts, creating space for more LNG to supply the market,” said WoodMac's senior analyst Edi Saputra.
According to WoodMac, gas demand growth in Sabah and Sarawak looks stronger compared with that of Peninsular Malaysia. In Sabah, new industrial projects in Kimanis and Sipitang have been developed, with several others in the pipeline. In Sarawak, gas demand growth will be driven more by the power generation sector. Currently, the bulk of opportunities still centre on the LNG export venture, but more gas will be needed to supply the growing local markets going forward.
Pengerang regasification terminal
Petronas Gas, in a joint venture with Dialog group and the Johor State, has started the operations of Malaysia's second regasification terminal in Pengerang, Johor. The 3.5mn mt/yr onshore terminal, which cost $680mn to build, started operating in November 2017.
The new terminal however, has not caused any visible increase in Peninsular Malaysia's LNG demand, as the downstream power, refinery and petrochemical projects are not yet in place to take the gas, said WoodMac. “While six LNG cargoes have been delivered to the terminal within six months of its operations, we understand this was driven more by the technical requirement as it requires minimum turn down to operate. Deliveries into the Sungai Udang terminal in Malacca have declined during the same period as a result,” Saputra said.