comparative energy framework in malaysia indonesia and thailand
TRANSCRIPT
www.woodmac.com
Comparative Energy Framework in Malaysia, Indonesia and ThailandWood Mackenzie paper prepared for the 4th National Energy Forum
S t b 2012September 2012
Strategy with substance
www.woodmac.com
Disclaimer
This presentation has been prepared for presentation at the 4th National Energy Forum in Malaysia. The presentation is intended solely for the benefit of forum participants and its contents and conclusions maypresentation is intended solely for the benefit of forum participants, and its contents and conclusions may not be disclosed to any other persons or companies without Wood Mackenzie’s prior written permission.
The information upon which this presentation is based comes from our own experience, knowledge, and d t b Th i i d i thi t ti th f W d M k i Th h bdatabases. The opinions expressed in this presentation are those of Wood Mackenzie. They have been arrived at following careful consideration and enquiry but, as of this date, are subject to change. We do not accept any liability for your reliance on them.
September 2012
Strategy with substance© Wood Mackenzie 2
www.woodmac.com
Robust economic growth is driving energy demand in Malaysia, Indonesia and Thailandand Thailand.Economic Growth and Energy Demand
4 04 5GDP Growth Per Capita
Income GrowthTotal Energy
Demand GrowthGDP Growth
4.04.65.8
2011-15 2020-302015-20
2.22.83.8
2020-302015-202011-15
3.23.74.0
2020-302015-202011-15
3.34.14.5
2020-302015-202011-15
Per Capita
GDP Growth
3.64.64.7
2020-302015-202011-15
GDP Growth3.33.74.8
2015-20 2020-302011-15
pIncome Growth
Total Energy
2.33.13.1
2020-302015-202011-15
Per Capita Income Growth
2.83.84.3
2020-302015-202011-15
Total Energy Demand Growth
Total Energy Demand Growth
1.53.73.7
2015-202011-15 2020-30
Strategy with substance
Source: Wood Mackenzie
www.woodmac.com
Malaysia’s current energy policy is driven by the Tenth Malaysia Plan.
Malaysia Total Primary Energy Consumption by Fuel Malaysia Key Energy Policy Framework
Mtoe123CAGR
CAGR 2011-30 Tenth Malaysia Plan (2011-2015) highlights
the “New Energy Policy”:
25
38
89
106
123
+3%
CAGR
4%
the “New Energy Policy”:
Focuses on market pricing for gas and power, diversification of supplies with feed-in tariffs for renewables, and energy
17
20
31
77
3634
30
1%
gyefficiency improvements.
Aims to enhance energy security and reliability of supply through development of hydro LNG and coal for power
006
1
33
0
26
4
39 37
30
3%
14%
2%hydro, LNG and coal for power.
Development of nuclear energy as an option.
Gas of strategic importance given the power00 4 1
2011
3 0
2020
0 44
2015 2030
0 6 Gas of strategic importance given the power sector’s reliance on gas.
Other Sources1
Other Solid FuelsHydroGas
OilCoal
-
Strategy with substance© Wood Mackenzie 4
Source: Wood Mackenzie1. Other Sources include other solid fuels and other renewables
www.woodmac.com
Peninsular Malaysia is facing a looming gas shortfall which is exacerbated by domestic gas price subsidiesdomestic gas price subsidies. Pen. Malaysia Gas Supply-Demand Outlook Malaysia Domestic Gas Prices vs. Cost of Gas
4,50014 2
16
3,000
3,500
4,00014.2
10
12
14 Cumulative subsidies between 1997-2011
amount to more than RM135 billion
1 000
1,500
2,000
2,500
mm
cfd
4.5 4.76.1
7.8
6
8
10
US
$/m
mb
tu
0
500
1,000
2011 2016 2021 2026 2031 0
2
4
A
Contracted LNG MTJDA YTFPeninsular Malaysia YTF CAA UncontractedMTJDA Uncontracted Natuna Sea UncontractedPM Uncontracted CAA ContractedMTJDA Contracted Natuna Sea Contracted
TN
B O
n-G
ridP
ow
er
Larg
e Ind
ustr
Sm
allIn
du
stry/Gas
Malaysia
Averag
e Co
sto
f Gas fo
rP
ET
RO
NA
S
LN
G
Strategy with substance© Wood Mackenzie 5
Source: Wood Mackenzie / PETRONASPM Contracted Total Demand
ry t
www.woodmac.com
Malaysia’s policy response has yield mixed results.
Malaysia Upstream Fiscal Measures Malaysia Proposed Gas Price Reform
“Malaysia Ups Power, Natural Gas Prices” Reuters 30 May 2011– Reuters, 30 May 2011
“Natural gas prices will rise by 3.0 ringgit per mmbtu each six months until it reached market levels…the price
charged for power generation rises to 13.7 from 10.7 ringgit per mmbtu (from June 2011)”
“PETRONAS Awards Small Fields Risk Service Contract to ROC and Partners” – Energy-pedia, 17 Aug 2011
“A Risk Service Contract is a new petroleum arrangement PETRONAS is implementing in Malaysia. This model strikes a balance in sharing risks with fair
“Solving Oil and Gas Subsidy Problem”
– The Star, 5 May 2012 “Framework Needed on G S
returns for development and production of discovered marginal fields”
“The argument against subsidizing the country’s
oil and gas has been made time and again, yet the
decision to do away with it remains one that no
Gas Subsidy” – The Sun Daily, 5 Jun 2012
“The Government needs to work on a mechanism in
terms of who will be
“PETRONAS Awards Talisman PSC Offshore Malaysia” – EPMag, 29 May 2012
“This new PSC is the first of a new Progressive Volume-Based (PVB) PSC to be awarded by PETRONAS. The PVB PSC ifi ll d i d t i ti i t t remains one that no
government would be glad to make in a hurry”
charges based on market rates and who will be
subsidised”
Datuk Dr Abdul Rahim Hashim, MGA
PSC was specifically designed to incentivize contractors to improve oil recovery and increase production from
mature oil fields”
Strategy with substance© Wood Mackenzie 6
Source: Various Newswires / Wood Mackenzie
,
www.woodmac.com
Indonesia’s Energy Law embeds the national interest as the cornerstone of energy policyenergy policy.Indonesia Total Primary Energy Consumption by Fuel Indonesia Key Energy Policy Framework
Mtoe
372
Energy Law (2007) mandates energy resources be utilised for people’s welfare:
CAGR 2011-30
109+3%
372
283
CAGR
7%
resources be utilised for people’s welfare:
Focus on diversifying energy supply to renewable sources.
Guaranteeing availability of energy from
3352
69
82
235
74
199
50
97 2%
2%
Guaranteeing availability of energy from indigenous sources or imports.
Prices based on “fair economic value”; Governments obliged to subsidize
531
34
70
53
62
2
13
541
4148
50
26
56
1 1%
3%
gunderprivileged.
Domestic Market Obligation (DMO)
Oil & Gas Law (2001) requires at least 25% 10%
20302015
13
2011
8
2020
26 ( ) qof contractor entitlement production “to fulfill domestic needs”; DMO requirement extended to coal in 2009.
Mining Law (2012) limits foreign ownership
GasOilCoal
Other Sources1
Other Solid FuelsHydro
Strategy with substance© Wood Mackenzie 7
Source: Wood Mackenzie1. Other Sources include other solid fuels and other renewables
Mining Law (2012) limits foreign ownership of coal mines.
www.woodmac.com
Inadequate energy sector investment poses a major challenge for Indonesia in the gas sectorin the gas sector…West Java Gas Supply-Demand Outlook Bontang Liquefaction Plant: Capacity vs. Output
3,000 3,500
2,000
2,500
fd
2,500
3,000
1,000
1,500mm
cf
1,500
2,000
mm
cfd
0
500
2011 2016 2021 2026 2031 500
1,000
2011 2016 2021 2026 2031
Contracted LNG South Sumatra CBM YTFSouth Sumatra YTF West Java YTFSouth Sumatra Uncontracted West Java UncontractedSouth Sumatra Contracted West Java ContractedTotal Demand
02011 2016 2021 2026 2031
Contracted & Committed Liquefaction Capacity
Strategy with substance© Wood Mackenzie 8
Source: Wood Mackenzie
www.woodmac.com
…as well as power sector.
Java-Bali Power Reserve MarginIndonesia Crash Build Power Program I
8010,000
40
60
7,000
8,000
9,000
0
20
2011 2016 2021 2026 2031
%
4,000
5,000
6,000
Cum
ulat
ive
MW
-40
-20
1 000
2,000
3,000
,C
-80
-60
West Java Central Java East Java Bali
0
1,000
2009 2010 2011 2012 2013 2014 2015 2016
Original (Aug 2006) Revised (Feb 2010) Wood Mackenzie
Strategy with substance© Wood Mackenzie 9
Source: Wood Mackenzie
g ( g ) ( )
www.woodmac.com
Gas prices have been on the rise in Indonesia as public and private sector players face up to market realitiesplayers face up to market realities.Indonesia Upstream Gas Renegotiations
8
5
6
7
3
4
5
US$/m
mbtu
0
1
2
0
Madura
Offshore
Corridor Muriah Pangkah Kangean Pertamina
S.Sumatra
Pertamina
S.Sumatra
S.Natuna Sea
Block B
West
Madura
Offshore
S.Sumatra
Extension
Jambi
Merang JOA
North West
Java Sea
2011 2012
Strategy with substance© Wood Mackenzie 10
Source: Wood Mackenzie / PLN / PGN / Indonesian Utility Companies / Indonesian Petrochemical Companies
www.woodmac.com
Thailand’s energy policy aims to diversify the country’s fuel mix and promote market-reflective pricesmarket-reflective prices. Thailand Total Primary Energy Consumption by Fuel Thailand Key Energy Policy Framework
Mtoe
201
Fuel diversification and environmental concerns
CAGR 2011-30
24
36162
141
+3%
201CAGR
5%
concerns
Coal-fired steam plants as a means to diversify fuel and generation mix from gas.
Constitution requires public hearings for
15
18
36
73
6256
121
49
2%
0%
Constitution requires public hearings for projects having potential to impact health and environment (including mining and power projects).
4
36
28
2
44
251
41
211
3435
16
3%
7%
0%Promotion of Small Power Plants (SPP) and Very Small Power Plants (VSPP) based on renewable energy.
Depoliticising energy tariffs
2020
1
2015
025
2011
021 16
2030
Depoliticising energy tariffs
Gas Pool
Automatic Tariff Adjustment Mechanism Oil Other Sources1
Other Solid FuelsHydroGasCoal
-
Strategy with substance© Wood Mackenzie 11
Source: Wood Mackenzie1. Other Sources include other solid fuels and other renewables
www.woodmac.com
Thailand is heavily reliant on natural gas, but maturing domestic supply poses a challenge for the next decadeposes a challenge for the next decade.Thailand Energy Mix Thailand Gas Supply and Demand Outlook
7,000
5,000
6,00013%
CoalOther Solid Fuels
18%
2,000
3,000
4,000
mm
cfdHydro
1%
Total (2011) = 121 MToe
0
1,000
2011 2016 2021 2026 2031Gas41%
Oil28%
( )
Cambodia YTF Gulf of Martaban YTFOCA YTF MTJDA YTFGulf of Thailand YTF MTJDA UncontractedGulf of Martaban Uncontracted Gulf of Thailand UncontractedMTJDA Contracted Gulf of Martaban ContractedGulf of Thailand Contracted Total Demand
Strategy with substance© Wood Mackenzie 12
Source: Wood Mackenzie
Gulf of Thailand Contracted Total Demand
www.woodmac.com
Thailand’s energy sector has benefited from the depoliticisation of gas and power tariff-settingpower tariff-setting. Thailand Gas Pool Prices Thailand Public vs. Private Investment in Power Generation
16
12
14
4,930 MW (39%)
6
8
10
US$
/mm
btu
Public
IPP1Total (2013-2020)
= 12 556 MW
2
4
6 IPP1= 12,556 MW
02011 2016 2021 2026 2031
Pool 1 Gas Price Forecast Pool 2 Gas Price Forecast
7,636 MW (61%)
Strategy with substance© Wood Mackenzie 13
Source: Wood Mackenzie1. Includes IPP import projects based in Laos.
www.woodmac.com
Malaysia, Indonesia and Thailand face a common set of energy challenges.
The Energy Trilemma: Wood Mackenzie Point of View
Energy
Common Challenges for Malaysia, Indonesia and Thailand
Energy SecurityEnergy
Security Managing indigenous resources
Facilitating fuel imports
Promoting fuel diversityg y
Encouraging energy sector investment
Social Equality
Ensuring fuel price affordability
Social Equality
Environmental
P i
Ensuring fuel price affordability
Reducing state subsidy burden
Environmental ProtectionEqualityProtection
Malaysia Indonesia Thailand
Minimising carbon footprint
Improving energy efficiency
Strategy with substance© Wood Mackenzie 14
Source: Wood Mackenzie
www.woodmac.com
Policy-makers in Malaysia, Indonesia and Thailand have much to learn from each othereach other.Key Lessons
Creating Incentives Depoliticising Price Setting Promoting Integrated Planning
Promotion of new upstream The Malaysian and Governments have
Creating Incentives Depoliticising Price Setting Promoting Integrated Planning
pfiscal terms in Malaysia is incentivising development of marginal fields.
More market reflective gas
yIndonesian experiences demonstrate the risks created by non-market reflective prices and fuel
developed well-meaning energy policies, but record of implementation is varied.
Indonesia’s current energyMore market-reflective gas prices in Indonesia will help attract much needed foreign investment.
subsidies.
Thailand is a model of how to prevent energy price setting from capture by
Indonesia s current energy market reflects a lack of integrated planning and ad hoc decision-making.
Market-reflective energy prices in Thailand serve as a clear signal for greater private sector investment.
setting from capture by various interest groups. Malaysia’s energy planning
is comprehensive, but the challenge is in implementation.
Strategy with substance© Wood Mackenzie 15
Source: Wood Mackenzie
www.woodmac.com
Contacts
G CRajnish GoswamiHead of Gas & Power Consulting - Asia & Middle EastT: +65 6518 0829 E: rajnish goswami@woodmac com
Valery Chow Vice President - Gas & Power Consulting T: +65 6518 0854E: valery chow@woodmac com
Strategy with substance© Wood Mackenzie 16
www.woodmac.com
Global OfficesAustraliaBrazilCanadaChinaIndia
Global Contact DetailsEurope +44 (0)131 243 4400Americas +1 713 470 1600Asia Pacific +65 6518 0800Email [email protected] www woodmac com
IndonesiaJapanMalaysiaRussiaSingapore
South KoreaUnited Arab EmiratesUnited KingdomUnited States
IndiaWebsite www.woodmac.com Singapore
Wood Mackenzie is the most comprehensive source of knowledge about the world’s energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide
Strategy with substance© Wood Mackenzie 17
y y g g y y yclients with the commercial insight that makes them stronger. For more information visit: www.woodmac.com