April 17, 2017 8:06 pm JST

Petronas Gas readying to offer under-utilized capacities to new gas players

KUALA LUMPUR (Nikkei Markets) - Malaysia's national oil company Petroliam Nasional is in talks with government agencies to finalize financial details of a plan that allows new suppliers to use its unit Petronas Gas' underutilized capacities at pipelines and gas processing facilities in the country.

Petronas Gas could potentially sell as much as half of current regasification capacity and up to 25% of pipeline load to third parties, Chairman Mohd Anuar Taib said at a news conference. Talks with the Energy Commission, an agency regulating the power sector, could be concluded as soon as this year.

"We do see (opportunity) as we have underutilized capacity, and with shippers (coming in), we could benefit from higher utilization," Chief Executive Yusa Hassan said. "We are actually in full support."

Malaysia decided last year to give new suppliers access to existing infrastructure such as regasification terminal, and tap into transmission and distribution pipelines in the country. That will allow other companies to sell gas to consumers, easing a decades-old restriction in an industry dominated by Petronas Gas and Gas Malaysia.

Petronas owns about 61% of Petronas Gas while Gas Malaysia is 31% held by port-and-utility company MMC Corporation. Other major shareholders of Gas Malaysia include Tokyo Gas Mitsui, which owns a 19% stake and Petronas Gas that has a 15% stake.

Analysts said the profitability of the new venture to sell regasification and transmission services to third parties hinges mostly on tariff rates that will be decided by Malaysia's Energy Commission. That compares with the current regime where both transmission and regasification tariffs have been agreed between Petronas and Petronas Gas.

"The move is ambitious as potential third-party clients may find it difficult to secure LNG at rates lower than what Petronas units pay their parent company for supply," said MIDF Amanah Investment Bank Analyst Aaron Tan. "Unless they can do so, it is unlikely the economics will make sense."

Petronas Gas is in "full support" of the move to liberalize the gas industry and allowing third parties to use its infrastructure, Yusa said.

"That will also ensure supporting the gas ventures downstream with more competitive and more reliable supply of gas," he said. "Hopefully that will promote the development of gas [and] gas-related industries."

Gas Malaysia meanwhile plans to diversify into other businesses as the new regulation threatens to erode the company's market share, the company said in its annual report released Friday.

To protect its earnings in face of potential new competition, Gas Malaysia plans to diversify into new ventures like the supply of combined heat and power, bio-compressed natural gas, and compressed natural gas transportation system, the company said.

Shares of Petronas Gas fell 1% to 19.28 ringgit while that of Gas Malaysia rose 0.3% to 3.01 ringgit on Monday. The benchmark FTSE Bursa Malaysia KLCI ended 0.2% higher.

--Jason Ng and Alexander Winifred

--Nikkei Markets is a real-time financial news service for South East Asia's markets published by Nikkei NewsRise Asia Pte Ltd, a Nikkei and NewsRise joint venture company. Nikkei Markets provides wide companies coverage in the region, including the Nikkei's Asia300 companies.

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