Minister of International Trade and Industry Tan Sri Muhyiddin Yassin can prove his reformist credentials by urgently restructuring the national gas subsidy and supply policy that has cost Malaysians to pay RM 62.6 billion gas subsidies to the power sector since 1997 and losses of up to RM 14 billion in foreign investments. Tan Sri Muhyiddin had admitted that 8 companies from Japan, US and Europe in energy intensive industries such as steel and manufacture of glass are holding back up to RM 8 billion investments because of lack of secure supply of gas from Petronas.
However Tan Sri Muhyiddin did not include the RM 6 billion in foreign investment lost by Penang from solar-related investors from America and Germany due to the gas shortage. Despite Tan Sri Muhyiddin correctly tracing the lack of gas supply to Petronas committing all its gas production till 2014, nothing has been done to resolve this gas shortage.
There is an urgent need to redirect supply, especially from the independent power producers (IPPs), to manufacturing and domestic use. Despite Petronas having spent RM 11.5 billion to build the Peninsular Gas Utility System (PGU System) pipeline to supply gas throughout the country, it is a terrible waste of money to install the gas pipeline if there is no gas flowing through the PGU pipeline.
Presently Petronas Gas supplies 65% to the power sector, 15% to its own subsidiaries and joint ventures, 12% to domestic and manufacturing with the remainder 8% to Singapore. By oversupplying to the power sector, especially IPPs, creates not only a severe shortage but results in huge subsidy payments of RM 62.6 billon especially the RM 35.7 billion paid to IPPs. The table below shows how much gas subsidies have been paid by Petronas to IPPs with higher gas subsidies of RM 35.7 billion as compared to TNB’s RM 26.9 billion.
Giving gas subsidies to TNB may be justifiable to allow consumers to enjoy lower tariffs. But what benefit is it to 27 million Malaysian consumers to have 23 IPPs in the country enjoy these gas subsidies. Gas subsidies to IPPs account for 46% of the total gas subsidies of RM 77.9 billion or 57% of the total gas subsidies given to the power sector of RM 62.6 billion. And IPPs cumulative profits of tens of billions of ringgit are never shared with ordinary Malaysians.
There is no point in acknowledging adverse consequences caused by gas shortage if we continue to deny that there is a wrong national energy policy favouring Independent Power Producers (IPPs). Malaysia and Penang can neither afford to pay huge gas subsidies to IPPs nor continue to lose such foreign investments. It is imperative that the government reforms its national gas policy with an immediate redistribution of gas away from IPPs by increasing the supply for manufacturers and domestic consumption from 12% to 30%.