KUALA LUMPUR, Dec 1 — Petronas said today that it is no longer willing to provide gas subsidies to cover for Tenaga Nasional Berhad’s inefficiencies.
This comes as TNB posted massive losses in the last quarter due to the need to use more expensive alternative fuels due to the shortage of locally supplied subsidised natural gas.
“We are not prepared to subsidise and fund their (TNB’s) inefficiencies,” said Petronas CEO Datuk Shamsul Azhar Abbas in a media briefing today. “The growing reliance on cheap gas discourages efficiency and it is not sustainable.”
He added however that as a national service, Petronas is in talks for the additional cost of alternative fuels to be equally borne by Petronas, TNB and the government.
“The decision will come as soon as we come to an agreement,” he said. “We are agreeable to sharing one third, as a national company, we have a role to play.”
Petronas currently provides subsidies worth RM18-20 billion a year to the power industry in the form of natural gas rates at below market prices.
The state oil company chief decried the distortionary effects of subsidies on the economy and said that all the distortions will be gone “overnight” if the government gets rid of subsidies.
“The days of abundant subsidised gas are effectively over,” he said.
He said that the shortage of natural gas will end when the regassification terminal in Melaka comes online in either July or August next year which means that imported liquefied natural gas (LNG) can be introduced to west malaysia.
Shamsul stressed however that output from the regassification plant will be at market prices.
“Our understanding with TNB is that any molecule from the regassification terminal will be at full market prices,” he said. “They can choose to bring in their own (LNG) so once and for all, Petronas will no longer have a monopoly oof gas supply to domestic end users.”
Apart from Melaka, Petronas is building two other LNG regassification terminals at Pengerang and Lahad Datu and is mulling a fourth terminal in Lumut.
TNB posted a net loss of RM453.9 million in the last quarter and said that it expects to report similar results in the coming quarter.
The national utility is unable to pass on the higher cost of electricity generation however as tariffs are regulated by the government.
Shamsul said that Petronas is looking to develop natural gas buffers of 15 per cent for crisis situations from about zero currently.
“We are not going to supply 100 per cent of our gas to domestic users but have basically a safety buffer,” he said.