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Petronas wants gas hike September 18, 2007

Posted by elizabethwong in Economy, Malaysia, Note2Self, Politics.

There’s been increasing pressures to hike the price of diesel and now, Petronas wants to reduce subsidies to natural gas to the local industry.

Crude oil has gone up as high as USD 80/barrel.

While the government has promised there will not be any fuel price hike in 2007, there’s only 3 months left to the year. Most likely after General Elections.

Tuesday September 18, 10:07 AM
Malaysia to rule Monday on Petronas gas hike-paper

KUALA LUMPUR, Sept 18 (Reuters) – Malaysia’s energy minister will argue in cabinet next week for state oil company Petronas to be allowed to raise the price of natural gas it supplies to local industry, the Star newspaper said on Tuesday.

The daily quoted Energy Minister Lim Keng Yaik as saying a cabinet committee would meet on Monday to consider the request, and that Petronas was subsidising gas at an unsustainable rate, importing it and selling it domestically at well below cost.

“How can they continue to subsidise the prices for the imported gas?” Lim was quoted as saying. “It is beyond them. We cannot control global prices, it is not our doing.”

His aides could not immediately confirm the remarks.

Lim said Petronas had been selling gas to local industry, including power producers, at low rates for 10 years, amounting to a cumulative subsidy of close to 50 billion ringgit ($14 billion).

Currently, Petronas sells gas to domestic industry at 6.40 ringgit per million British thermal units, compared to a market price of about 40 ringgit, the Star said.

The report gave no details on the proposed hike but it quoted Lim as saying Petronas could no longer afford this level of subsidy, especially with the crude oil price at record highs of more than $80 a barrel. Gas prices are related to oil prices.

Lim said Petronas could not meet all the domestic gas demand from Malaysian fields and had to import some gas at market rates from Indonesia and Thailand.

“We are doing a disservice to our grandchildren. We are spending so much on the subsidies at the expense of our future generation,” he was quoted as saying.

Even if cabinet sanctions a gas-price rise, Lim ruled out another increase in electricity tariffs. The government last raised the price of electricity in June last year.

Gas is used by both the main state-linked power firm, Tenaga Nasional Bhd , and the independent power producers (IPPs), such as YTL Power International and MMC Corp , to make electricity.

Brokerage OSK Securities said on Tuesday any increase in gas prices would not affect the independent power producers (IPPs) because they had contracts to buy the Petronas gas at the subsidised rate through Tenaga, not direct from Petronas.

“Tenaga sourced all the fuel for the IPPs,” said OSK analyst Tursina Yaacob. “The IPPs also pay 6.40 ringgit for the gas.”

“Under the power-purchase agreement, any changes in the fuel price would be borne by Tenaga and there is no pass-through clause for the IPPs,” she said.

OSK maintained a buy recommendation on YTL Power with a target price of 2.80 ringgit, citing its steady and predictable cash flows and attractive valuation.

At 0200 GMT, YTL Power was down 0.8 percent at 2.36 ringgit while Tenaga was down 1.04 percent at 9.55 ringgit.



1. Black - September 18, 2007

BN government will try to wait the fuel hike after the 12th General Election.

So it’s true that GE will be in November. They will not take longer time befor calling for the election.

2. monsterball - September 18, 2007

Lim must be directed by PM to say that…to let chinese voters know in advance what to expect from the government and not to oppose voting for then in coming election…as his small party is also at stake of loosing chinese voters
He has a big mouth and sure can talk..if he chooses to do so…but what he completely forgot….is that…if Petronas is well managed and impartial towards race and religion and not helping to bail out all malays only….the huge huge earnings can generate alot of bank interests or profits from good investments made by Petronas to offset what increases.Are they investing well?
We always hear the logics on increases…but never the sickening welknown mismanagements and playing politics with the country’s wealth as well.
I bet UMNO will not dare to increase…at least after the general elections….as reserves RM is huge….why offend the chinese voters now?
Will be nice to read what Brunei is doing.

3. penangkia - September 19, 2007

All i can say is the current administration should take a hike..

4. sofiairdina - September 19, 2007

Everything went up what… except the economy and everything else that pays for the increase.

5. wits0 - September 19, 2007

“We are spending so much on the subsidies at the expense of our future generation,”
Woefully trying the altruistic spin as expected.

6. aitok - September 19, 2007

Petronas wants more money to give to PM. PM wants more money to pay the amnoputra contractors.

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