Gas Malaysia’s new LNG plant to fire up energy sector

THAT Gas Malaysia Bhd has secured approval for a new liquefied natural gas (LNG) regasification terminal in Kedah is yet another indication of the rapid build-up of energy sources in the country.

And that, in turn, is largely driven by the heavy demand of the numerous data centres being built in the country.

The gas from this new facility will be used to fuel the new power plants (which include new builds and extensions of existing ones) in the country.

Malaysia has been increasingly importing LNG to meet local demand. It is left to be seen how much impact on this that the war in the Middle East will have.

There are currently two regasification plants in Malaysia, one in Sungai Udang, Melaka, and another in Pengerang, Johor. Petroliam Nasional Bhd (PETRONAS) has interests in both via Petronas Gas Bhd, working with partners.

However, both are unable to cope with the massive demand for gas from the new power plants.

PETRONAS has confirmed that it is working on a new regasification plant, said to be in Lumut, Perak. This will bring the total of regasification plants in the country to four.

Gas Malaysia’s bid to build its plant in Kedah marks the first time a non-PETRONAS entity has been greenlighted to undertake such a project. It marks a significant milestone for the group.

Historically, Gas Malaysia has been mainly a downstream gas distributor, selling gas to industries.

This project nudges Gas Malaysia into LNG infrastructure ownership. It shares – which are up almost 30% year to date – hit a fresh high after being given the award of this regasification plant by the Energy Commission.

Kenanga Investment Bank said the development is positive, as it provides a new source of long-term recurring income.

The research house estimates the regasification terminal could generate a net present value of RM1.71 billion, based on a RM3bil investment for a six million tonnes per annum facility, 70% utilisation over a 20-year concession, a weighted average cost of capital of 6.3%, and a project internal rate of return of 10%.