Cheap gas to TNB a ‘one-off’ deal, says Petronas

By Yow Hong Chieh

March 05, 2012

Tenaga needs to find another source to help pay for the price difference, said Petronas. — File pic

KUALA LUMPUR, Mar 5 — Petronas today reiterated its unwillingness to continue selling subsidised gas to national power company Tenaga Nasional Bhd (TNB) for the generation of electricity.

The state oil firm’s president and chief executive, Datuk Shamsul Azhar Abbas, said Petronas’s offer to supply TNB with gas below market rates was a “one-off” affair and that the government should help pay for any future subsidies on gas.

“Never have we mentioned in the past that that’s going to be a continuous kind of handout to TNB,” he told reporters at Petronas headquarters here today.

“It’s supposed to be one-off because we pity them, begging all over... that they don’t have enough cash now to operate efficiently.”

He said Petronas was still waiting to hear back from Putrajaya on its offer to foot a third of the cost to supply gas to TNB for the public’s sake, pointing out that every RM3.00 subsidised would cost the group some RM1.7 billion.

“We sat down with three ministers three weeks ago and we’ve basically proposed a review of the formula which takes into account domestic sensitivities.

“So now it’s up to them to bring it up to the Economic Council. We’re waiting for that,” he said.

Shamsul Azhar said in December that Petronas was no longer willing to provide gas subsidies to cover TNB inefficiencies.

His remarks came after the state power company posted a net loss of RM453.9 million in the last quarter of 2011 after it switched to expensive alternative fuels following a shortage in locally-supplied subsidised natural gas.

He had said Petronas would not continue encouraging reliance on cheap gas that discouraged efficiency, promoted market distortions and was unsustainable in the long term.

Petronas currently provides subsidies of up to RM20 billion per year to the power industry in the form of natural gas rates at below market prices.

The company disclosed today that it has paid RM108.5 billion in subsidies for TNB since 1997, including RM3.9 billion for the three quarters ended December 31, 2011.

Shamsul Azhar said that the shortage of natural gas will come to an end when the regassification terminal in Malacca comes online in July or August this year, which would allow imported liquefied natural gas (LNG) to be introduced to peninsular Malaysia.

He stressed, however, that output from the plant will be at market prices.

Apart from Malacca, Petronas is building two other LNG regassification terminals in Pengerang and Lahad Datu, and is said to be mulling a fourth in Lumut.