Oil Report

Malaysia says has no gas for new manufacturers

KUALA LUMPUR, Feb 4 (Reuters) - Malaysia, looking to attract foreign investment, vowed to allocate more of its natural gas output to manufacturers but said it could not provide gas to companies starting new businesses in the Southeast Asian country.

International Trade and Industries Minister Mustapa Mohamad said on Thursday that 100 million standard cubic feet of gas per day, or 5 percent of daily output, would be redistributed to non-power industries until 2011.

“Gas is in short supply. We have gas for existing manufacturers but for new manufacturers we don’t have enough gas,” he told journalists. He said new firms would have to find other energy sources.

The supply is taken out of allocations given to private power producers such as MMC Corp MMCB.KL, Genting GENT.KL and YTL Power YTLP.KL due to an excess supply of electricity. Gas is sold at subsidised rates to manufacturers and power producers.

Power producers pay $3.21 per million metric British thermal units compared to manufacturers who pay $4.49-4.60 per mmbtu. The tariffs represent a subsidy of up to 40 percent when compared to the March gas contract NGH0 on the New York Mercantile Exchange which closed on Wednesday at $5.419 per mmbtu.

Malaysia produced 2,146 million standard cubic feet of processed gas per day in 2009, according to state oil firm Petronas [PETR.UL].


Economic reforms to lure investors to Malaysia, including the gradual removal of gas subsidies, have been slow. Subsidies of fuel and food are expected to cost the government 21 billion ringgit ($6.15 billion) this year.

The step may benefit rubber glove makers however as they recently said expansion would be slow unless the natural gas shortage is addressed. Malaysia is the world’s top maker of rubber gloves. [ID:nSGE60E0FC]

"It is a good move. Glovemakers have been struggling to expand because of the shortage of natural gas which accounts for more than 70 percent of their energy needs," Ikmal Hafizi, an analyst covering rubber glove companies like Top Glove TPGC.KLTPGC.KL and Supermax SUPM.KL with TA Securities, said.

“But the impact of this reallocation will be limited because alot of these companies have made contingency plans with their existing plants. Perhaps the next batch of factories due in two or three years will benefit,” Ikmal added. (Additional reporting by Niluksi Koswanage; Editing by Jan Dahinten)