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 with the government aiming to be carbon neutral by 2050 and meeting its updated 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 Natural Gas Roadmap (NGR) was expected to be published in 2021 setting out the pivotal role of natural gas but it has been delayed. The NGR forms a part of the National Energy Policy which has also been delayed and was still in draft at the end of 2021. In addition, a Renewable Energy Transition Road Map (RETP) towards 2035 was expected in 2021 but remains outstanding. Affordability, security and sustainability are expected to be key factors behind the new roadmap with gas taking a strategic balancing role, backing out high-carbon coal and filling in for renewables while technologies, projects and economics develop to establish it as a long-term solution.
According to the Malaysia Energy Commission, replacing coal-fired electricity generation capacity by renewables through to 2025 and 2030 will reduce coal-fired capacity from 42% in 2020 to 35% by 2025 and 29% by 2030. However, coal might still account for higher actual electricity produced in 2025 if cheaper prices result in prioritising coal-fired production.
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.