Balancing renewables with gas for a sustainable Malaysia

KUALA LUMPUR - Malaysia is blessed with substantial natural gas resources that have ensured a continuous and affordable energy supply to the country for the past four decades.

Natural gas is abundant in Malaysia, with deposits having been discovered in all three regions comprising Peninsular Malaysia, Sabah and Sarawak.

Malaysia’s domestic gas market had its beginnings in Sarawak with the introduction of domestic and commercial piped gas in the early 1960s. This was followed by Peninsular Malaysia in 1984.

For Peninsular Malaysia, natural gas is supplied throughout the Peninsular via an integrated 2,500-kilometre (km) pipeline system developed by Petronas Gas Bhd (PGB) called the Peninsular Gas Utilisation (PGU), which was constructed in three phases from 1984 to 1998.

This sets the stage and spurs the development of the natural gas industry in Peninsular Malaysia.

Under the PGU system, gas from the offshore fields off the east coast of Peninsular Malaysia is treated and processed at PGB’s gas processing plants.

Accessibility to natural gas via the PGU has been the driver for gas-powered electricity generation and an enabler to industry users, particularly those that are energy-intensive.

To enhance the distribution of gas, a 2,000-km Natural Gas Distribution System built by Gas Malaysia Bhd distributes gas from the PGU to cater for demand from small and medium industries, commercial establishments and residential customers.

Today, the value chain that makes up the gas industry is mature and well-established, with many Malaysian companies participating in the sector.

Uses of natural gas in everyone’s lives - A reliable source with lower carbon emissions

Natural gas is the cleanest-burning hydrocarbon that is colourless, odourless and non-toxic.

Apart from that, natural gas is extremely reliable with a lower carbon emission which makes it a sustainable energy source.

Additionally, it is an economical fuel option for many businesses, as it provides relatively higher efficiency and is competitively priced.

In the local context, natural gas is mainly used for power generation that provides electricity to homes and businesses as well as cooking our meals.

In some other countries, natural gas is widely used for space heating to provide warmth.

Additionally, natural gas is used as a feedstock and many industrial processes that produce materials as simple as clothing, paints and solvents and as complex as specialty chemicals and high-grade materials.

Globally, natural gas fuels about a quarter of global electricity generation, as it is easily stored and can be delivered through pipelines or liquefied and sent by ship.

In Malaysia, natural gas is one of the most widely used fuels especially to generate electricity because gas-fired power plants can turn on and off quickly, thus it is a convenient way to respond to any demand and grid fluctuations.

To ensure an uninterrupted, reliable, and cost-efficient electricity supply for the country, the government decided to diversify and balance out the generation fuel mix by bringing more gas and renewable into the matrix.

Gas used to be the dominant fuel for electricity generation in Peninsular Malaysia, accounting for two-thirds of the electricity generated.

Today, about 40 per cent of Malaysia’s electricity needs are being met by natural gas, which simply means powering the lights in our homes.

How is gas being used by the industrial sectors?

In the industry sector, gas is being used for industrial processes and as a feedstock for the petrochemical industry. The main industry processes that use gas are, amongst others, heating, drying and sterilising.

Relating to feedstock, natural gas components such as methane, propane and butane are further processed to manufacture basic products and feedstock such as methanol, ammonia, urea, ethylene, propylene and derivatives such as olefin, glycol and others.

Natural gas - Vital role for a better and cleaner future

In line with the government’s aspiration towards Net Zero by 2050, there is a drive to use cleaner energy sources.

This means a shift towards renewables and cleaner fossil fuels. In this context, the usage of coal will be gradually phased out.

From 2033 onwards, no more new coal power plants will be constructed, and by 2050, coal will no longer be used to generate electricity to keep the lights on in our homes.

At the same time, renewables will gradually increase their market share in Malaysia’s energy mix.

During this transition, gas is expected to play a vital role, namely:

· To balance the intermittency of renewables (until technology, infrastructure, grid modernisation, energy storage solutions, flexible demand management and supportive policies and regulations) allows renewables to realise their full potential.

· In coal phase-out as early as 2029 -- coal plan retirement will help to lower the country’s carbon emissions, hence leading to a higher dependency on gas.

Thus, more gas will be used, and of course, it needs to be in a cleaner form to continue to play a long-term role in providing energy security to the country while helping achieve Malaysia’s greenhouse gas (GHG) target and net zero emissions by 2050.

This is due to natural gas being more efficient and emits less carbon by 50 per cent than coal.

In response to the enhanced role and higher expectations, the gas industry is taking proactive steps and measures to reduce its carbon footprints through emission reduction technologies such as carbon capture utilisation and storage, and methane flaring.

Future energy demand and its implications

Economic and population growth, and rapid urbanisation will also contribute to an increase in energy demand by approximately two per cent annually.

As of 2023, Malaysia consumed the most energy from natural gas resources at approximately 41 million tonnes of oil equivalent.

As reported in the National Energy Transition Roadmap (NETR) under the responsible transition scenario, natural gas will continue to play a prominent role in the primary energy supply, thus underscoring the importance of natural gas in the nation’s energy transition journey (56 per cent natural gas followed by 22 per cent renewable energy (RE) share by 2050).

This is due to the government's commitment to phase out coal power plants by 2040 and achieve an ambitious RE capacity target of 70 per cent by 2050.

The primary energy demand in Malaysia is projected to increase significantly. By 2050, it is expected to rise by 60 per cent over the 2018 levels.

In terms of electricity generation, it is projected to reach 194.70 billion kilowatt-hours in 2024, with an annual growth rate of 5.53 per cent from 2024 to 2028.

Peninsular Malaysia’s indigenous gas supply production is declining.

This is due to a lack of discoveries, challenging new field development and declining production from matured fields.

A vibrant gas market with workable third-party access (TPA) is important for a sustainable gas market that gives positive signals to the investor for continuous investment in upstream and infrastructure.

However, with depleting domestic resources, the increasing demand will need to be met via liquefied natural gas imports, which need to be sourced at market price.

For TPA and gas market liberalisation efforts to be effective, power sector reforms, which include market-based pricing, are critical.

According to the International Renewable Energy Agency, almost one-fifth of Malaysia’s demand for fuels by 2050 in the 1.5°C scenario will be renewable-based -- coming from bioenergy, renewable direct-use and hydrogen -- a large shift from just one per cent today.

Electricity will comprise up to 40 per cent of final energy consumption, reflecting the additional electricity demand required to power the transport sector and green hydrogen production.

According to the United States Environmental Protection Agency, besides the transportation sector, electric generation is the next largest greenhouse gas emitter (this includes emissions from electricity production used by other end-use sectors).

In 2021 alone, 60 per cent of the country's electricity comes from burning fossil fuels, mostly coal and natural gas.

The effects of pollution are glaringly seen today globally with high temperatures and unexpected weather, to name a few.

The transition towards cleaner energy sources and renewables significantly helps to reduce carbon dioxide (CO2) emissions and pollution.

In the first six months of 2023, CO2 emissions from the global power sector grew just 0.2 per cent in the first six months of 2023, mainly due to rapidly rising RE installations (wind and solar) outpacing sluggish demand growth.

Use your energy efficiently - Let’s do our part to help lower the emissions

As stated in the NETR, the government pledged to scale down its GHG emissions by 45 per cent across the economy by 2030 and also to reach net-zero emissions by 2050.

Consistent with the above, in October 2023, policymakers passed a law that mandated Malaysia’s large energy consumers to implement energy-saving measures as the country looks to slash its energy consumption and carbon emissions.

The law aimed to bring Malaysia's energy efficiency regulations in line with international standards.

The Energy Efficiency and Conservation Act is projected to save 2,017 million gigajoules of energy use, equivalent to RM97.1 billion by 2050.

The government encouraged the use of energy-efficient appliances in a bid to drive a reduction in electricity bills.

From Dec 10, 2023, the public will obtain a rebate of up to RM400 when purchasing energy-efficient appliances such as air conditioners and refrigerators.

For the industrial sector, the development of energy-efficient technologies becomes a vital driver to help the country achieve its energy-saving targets.

These include an average of 21 per cent energy savings by 2040 and 22 per cent energy savings by 2050 under the NETR.

Fueling the country’s economic growth for decades

Unbeknownst to many, the natural gas industry has been driving Malaysia’s socio-economic growth for decades.

As a highly advanced industrial sector, the natural gas industry is characterised by relatively high productivity and technology-driven jobs.

On a standalone basis, the Malaysian gas industry was valued at over RM10 billion in 2017.

More importantly, the Malaysian gas industry brings in over 135 billion per annum of economic benefits and creates over 80,000 jobs for the wider economy, according to a study by the Institute for Democracy and Economic Affairs.

The study estimates that every RM10 ringgit of output generated in the natural gas industry generates over RM25 ringgit in the wider economy.

Additionally, for every 10 jobs created in the natural gas industry, over 25 jobs are created in the wider economy.

The gas industry has provided many benefits to Malaysia and contributes to the nation's socio-economic well-being through the creation of jobs, the establishment of local support industries and foreign earnings that support and grow the domestic economy.

Mainly, it is due to the fact that the industry generates business activity across a spectrum of support industries and supplier networks.

Thus, for every ringgit that is spent domestically on gas, several more are generated in the economy, with the net effect being the industry’s contribution to the country’s gross domestic product amounts to several times more than its value.

To conclude, gas is vital in energy transition (security of supply), generates significant spillover economic benefits, and allows end-users to be more efficient in energy consumption as it will help to reduce carbon emissions and with more manageable electricity bills.

Natural gas is a critical fuel in our energy transition, ensuring a secure and reliable energy supply while fostering economic growth.

Its efficient use by end-users empowers them to reduce their carbon footprint and manage electricity costs effectively without compromising the ability of future generations to meet their own energy needs. - BERNAMA