Malaysia's Energy Commission to release new LNG third-party access framework in 2023

Malaysia's energy policy regulator Suruhanjaya Tenaga, or Energy Commission, is expected to publish its updated Third-Party Access (TPA) framework for LNG terminals later in 2023, which will contain more guidelines on how licensed natural gas and LNG importers can access the country's gas import infrastructure, according to an official.

LNG importers in Malaysia are looking forward to the updated mechanism to pave the way for a more liberalized gas market.

The Energy Commissions is in the process of updating the "access arrangement" document of the TPA framework and the regulator is currently working with Petronas Gas Berhad, which owns the Sungai Udang Regasification Terminal (RGTSU) to come up with a more effective and flexible gas facility access arrangement policy, the official said.

Further details will be disclosed when the updated document is released later this year once the Energy Commission receives the green light from the government.

The new TPA mechanism will be tested at RGTSU first before they proceed to apply the same mechanism at the Pengerang Regasification Terminal in the southern state of Johore, and the estimated timeline for the Pengerang Regasification Terminal to implement the mechanism will be next year.

"The coming year will also see more policy enhancements that will benefit the Malaysian gas and LNG industries," the officer said, adding that the plans include an update on the transmission pipeline policy.

Gas market liberalization

Malaysia is one of the world's largest LNG exporters. In 2022, Malaysia exported 28.2 million mt of LNG, up 9.18% from 2021 despite heightened market volatility, S&P Global Commodity Insights data showed.

In 2017, the TPA mechanism was first introduced in Malaysia as part the government's effort to achieve a fully liberalized gas market. It allowed licensed importers and shippers to access the gas facilities, distribute and supply natural gas and LNG within the country.

By launching TPA, the government was looking to create a competitive environment as more companies enter the market, lower gas prices and provide security of gas supply to the country.

In 2019, the Energy Commission began issuing LNG import and shipping licenses with 10-year validity to a list of Malaysian and joint-venture companies. In the same year, RGTSU welcomed the first trial cargo under TPA mechanism.

The Malaysian LNG market, however, has not seen active LNG imports by these licensed importers. Compared to four years ago, LNG imports in Malaysia grew by 8.2%, and were dominated by long-term cargoes from Gladstone LNG, SPGCI data showed.

"We have imported one or two trial cargoes since we obtained the license. We are looking to import more but the situation is not favorable," a licensed LNG importer said. "We are still trying to import LNG," a second importer said.

Currently, state-owned Petronas remains the dominant natural gas and LNG supplier in the nation and the Malaysia Reference Price (MRP) continues to be the only price marker that is used in the domestic market.

As importers are given more access to gas facilities and import LNG into Malaysia, the market will observe increasing competition, as well as the introduction of regional price markers, according to market participants.

Natural gas remains important in Malaysia's energy mix, Malaysian Prime Minster Dato' Seri Anwar bin Ibrahim said at the Energy Asia 2023 conference in June 2023.

The National Energy Plan (NEP) (2022-2040) that was launched in September 2022 also highlighted natural gas as the key component to ensure energy security and drive the sustainable socio-economic growth in Malaysia.