Malaysia – Gas Policy Brief

Malaysia is one of the largest oil and gas producers in the Asia-Pacific region with an average daily production of more than 1.7 million barrels of oil equivalent (BOE) in 2018, two thirds of which was natural gas. Three quarters of its estimated commercial reserves of more than 5 billion BOE are also natural gas.

Despite its rich natural resources, Malaysia has increasingly relied on imported coal over the past 10 years. Coal now generates 47% of its electricity needs compared to natural gas at 43% and hydropower the third significant source at 10%.

Overall, coal forms 24% of the country’s primary energy mix compared to 41% for natural gas and 31% oil – adding up to a 96% dependence on fossil fuels.

The country exports 41% of its natural gas production, mostly as LNG, with the remainder used domestically for power generation, industry and by households. It exports 42% of its daily average oil production of 688,000 barrels and the rest is used domestically, primarily for transportation.

The increase in coal imports, primarily from Indonesia, has been driven by low costs but a change in approach is anticipated following the government’s commitment to transition to lower carbon energy sources tied to the country’s Paris Agreement target to reduce emissions by 45% by 2030 relative to its emissions intensity in 2005. The national oil and gas company, Petronas, has also announced it will achieve net-zero emissions by 2050.

Apart from this firm target, the only published target that Malaysia has revealed so far is for renewable sources to generate 20% of electricity by 2025.

A Renewable Energy Transition Road Map (RETP) towards 2035 is expected to be published in 2021 with affordability, security and sustainability expected to be key factors. A Natural Gas Roadmap (NGR) is also to be published in 2021 confirming natural gas in a strategic balancing role, backing out high-carbon, dirty coal and filling in for renewables while technologies, projects and economics develop to establish it as a long-term solution.

According to the Prime Minister the Natural Gas Roadmap will strive to optimize the value of indigenous gas resources, enhance the security of supply and access to cost-competitive energy.

So far, information is sparse about how Malaysia will achieve its aims. The roadmaps are both part of the National Energy Policy and the 12th Five Year Plan, still awaiting release.  With parliament suspended due to the emergency order, the plans will not be revealed until the second half of the year at the earliest.

According to Malaysia Energy Commission data, the proportion of electricity generated by coal is expected to rise to more than 50% in 2030, compared to 44% in 2020 while the contribution of natural gas will halve to 19%. Even allowing for an increase in renewable energy to 30% of the mix from 10% in 2020 it is hard to see how the country can achieve its 45% reduction in emissions compared with 2005.

Political turmoil and complex energy sector governance are both issues that need to be managed by the government which is also seeking to improve energy efficiency in the power sector by almost half in 2030 compared to 2005 levels.