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The Gas Industry in Malaysia

Natural gas is amongst one of the fastest growing component of the world primary energy consumption. Consumption of natural gas worldwide of 2660 billion cubic metres in 2005, is forecasted to increase by more than 90 per cent by year 2030. Globally, the industrial and electric power sectors are the largest consumers of natural gas. The total world gas reserves currently stand at 171136 billion cubic metres with Russia, holding 27%, having the largest reserves.

Over the last two decades, the Malaysian gas industry has grown significantly with the support of government policies that are aimed at reducing dependence on oil while ensuring a cleaner environment. A large part of this success is attributed to careful planning that has facilitated the timely development of the country’s abundant gas resources to meet national economic and energy objectives.

Malaysia is endowed with natural gas reserves that are three times larger than its oil reserves. With a total proven natural gas reserves of 2400 billion cubic metres, Malaysia is ranked the 13th largest in the world. Most of these gas reserves are located offshore Peninsular Malaysia, Sarawak and Sabah. These natural gas resources are carefully harnessed to serve as the main source of fuel for Malaysia’s industrialisation through the Industrial Master Plan, charting out the long-term energy utilisation strategy for Malaysia. This saw Malaysia ushering in the gas era in the 1980s with the introduction of natural gas as a source of fuel for power generation and industrial development as well as the harnessing of the gas resources for foreign exchange earnings in the form of liquefied natural gas exports. The natural gas resources in Malaysia are distributed almost equally between Peninsular Malaysia in the west and Sarawak and Sabah in the east. Due to the low population density in the states of Sarawak and Sabah on the island of Borneo, the natural gas resources found offshore Sarawak are harnessed to produce liquefied natural gas (LNG) for exports.

The State of Sarawak’s association with the oil and gas business goes back to 1910 when the first oil well was bored. When natural gas began to take a claim as the fuel of choice for mature and growing economies in the 1960s, it rekindled intense exploration activity for this clean energy source which was first supplied to households and as feedstock for the local industries in Miri in 1965. With the subsequent discovery of vast reserves of natural gas in the Central Luconia area offshore Sarawak in 1969, an earnest effort was embarked by the Government to commercialise the commodity. Since its first export of LNG in 1983, there are now three LNG Plants in Malaysia’s PETRONAS LNG Complex in Bintulu. With a total nameplate capacity of 23 million tones of LNG per annum, the PETRONAS LNG Complex is the world’s largest LNG production facility at a single location. The LNG produced which is currently exported to Japan, South Korea and Taiwan, has made Malaysia a major global LNG producer.

Adjacent to the LNG Complex is the Shell Middle Distillate Synthesis (MDS) plant, which converts natural gas into high quality and environment-friendly petroleum products such as diesel that is sulphur and aromatics free and low emission top tier engine oil. The 12,000 barrels per day MDS plant is the world’s first commercial gas-to-liquid conversion facility. The gas that is landed for LNG production is also harnessed to manufacture fertilisers at the ASEAN Bintulu Fertilizer plant. The fertilisers are sold mainly to domestic and ASEAN markets to support the agricultural sector of Malaysian and ASEAN economies. In Sabah, associated gas from the offshore oil fields is piped to a gas terminal in Labuan for utilisation at the methanol plant, to a power plant for power generation and as a source of fuel at a steel mill. The methanol that is produced is shipped to petrochemical plants in Kuantan on the east coast of Peninsular Malaysia, where it is used as feedstock to produce MTBE (Methyl Tertiary Butyl Ether). This is in line with the country’s objective of adding value to its gas reserves. ^ Top ^

The main consumer of the PGU gas is the power sector where the processed gas is used as fuel for electricity generation. Today, natural gas accounts for over 60% of the fuel mix in Malaysia’s power sector. Other non-power end-users of the processed natural gas in Malaysia are the Perwaja Steel Mill, Titanium Oxide plant, PETRONAS refineries, gas district cooling, NGV (natural gas for vehicles) plant, petrochemical plants and the Centralised Utility Facilities plants. The gas district cooling system uses natural gas to produce chilled water for air conditioning of buildings in the Kuala Lumpur City Centre as well as the Kuala Lumpur International Airport and Putrajaya - a modern, eco-friendly intelligent garden city in an integrated commercial and residential development, which also houses the Malaysian Government’s Federal Administrative Centre. NGV has been introduced as a cleaner alternative fuel especially to commercial vehicles in the bigger cities. For the residential sector, piped gas is supplied to newer housing estates as an alternative form of convenient fuel to households. Stringent regulations are imposed to ensure safe and reliable supply of gas to end-users. High engineering and construction standards are adhered to in meeting the stringent safety criteria. In addition, high safety standards are also strictly observed in the operations and maintenance of the natural gas systems. To further add value to the country’s gas resources, various components of the natural gas, such as ethane, propane and butane, are extracted and sent to petrochemical plants to produce ethylene and propylene-based petrochemical products. Malaysia’s petrochemical industry is supported by a strong natural gas supply system.

The gas industry in Malaysia has since the early 1980s indeed assumed an important role in fuelling the nation’s industrialisation and demand for energy, spawning other ancillary and related industries, including the development of the petrochemical industry. As greater emphasis is being placed on sustainable development and corporate social responsibility in balancing business objectives with the need to ensure a safe and healthy environment for the benefit of the people and community, especially in the petroleum industry, gas will continue to have an increasingly vital role as the fuel of choice to drive future sustainable economic growth. In rising to the challenges to meet this aspiration for the sustainable development of the country’s gas industry, the Malaysian Gas Association serves as an effective platform to bring together the key industry players to work towards a common vision for the promotion and further development of natural gas to fuel Malaysia’s journey of transformation into a fully developed nation by 2020.

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