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Interview

with Abdul Rahim Bin Haji Hashim, President, Malaysian Gas Association

03.03.2010 / Energyboardroom

The Malaysian Gas Association (MGA) is one of the oldest associations in the Oil & Gas industry in Malaysia. Could you highlight its
history to our readers?

MGA was formed in 1986 and its founding members were the leading oil & gas players in the country. The objectives of our association are to provide a forum in which members can discuss matters relating to the gas industry; to serve as the focal point and channel of communication with the government, especially on issues of common interest such as gas availability, gas prices, health, safety and environment; to advance knowledge and learning, and stimulate research in the area of gas technology; to stimulate the development of the gas industry in Malaysia; to enhance understanding of the general public on the role of gas as a clean and efficient energy to the nation; etc. MGA is thus a conduit to raise concerns and in promoting the overall gas industry but developing the gas industry as a whole is very much dependent on the members, in this case the key and biggest player being PETRONAS. We represent the entire value chain, and each company plays a specific role within the value chain. We have service providers, PSC contractors, players in the mid-stream and the downstream sector. The most important is that MGA has somehow managed to develop linkages to the whole spectrum of oil & gas and has connected every sector, from the biggest LNG plants to petrochemicals plants, gas district cooling, transportation, downstream and consumers’ side. There have also been huge developments in the fabrication industry, especially supporting the upstream players (e.g. platforms etc. are fabricated locally). We are fortunate in the sense that we can use the association as a forum to discuss issues that are of common interest to the industry, and offer our views or provide feedback to the government to address common areas of concern.

Given the diversity of your members, how do you manage to balance between their interests?

There are lots of inter-dependencies in the value chain, and we look at common area to contribute to the development of each of them (e.g. Health & Safety, Human Capacity Building etc). In terms of Human Capacity Development, we have launched the “Prestige Programme” to try to create interest amongst young graduates in Health, Safety and Environment (HSE) area. Every key stakeholder are involved in the programme i.e. representatives from the government as well as our members. It is not only an industry-centered effort, making sure that we are not only looking at ourselves but also going to the general public at large. For safety issues we have, together with the Ministry of International Trade and Industry (MITI), come up with a video to educate the general public on HSE. MGA tries to make sure that each of its members gets connected, through networking during MGA tea talks on topics of special interests or that concern everyone such as talk about health issues, energy issues in general and different business models. We do not interfere in the business of our members; we can offer advice on areas of common interests.

Is MGA a political, business or technical association?

MGA is an association of gas companies getting together discussing areas of common concerns and promoting the development of the gas industry. It is definitely not political. We go to the government to voice and raise issues and concerns. MGA is an independent entity and views expressed by MGA will be as objective as possible. Obviously PETRONAS is an important member, but if a majority of our members is concerned, say with the availability of gas or gas prices for example, we will discuss the issue collectively.

MGA is involved internationally, what does this bring to your members?

We are an active organization within the region for gas development, and at the same time we would like to demonstrate leadership in regional and international meetings and organizations that MGA participates. Our association has been involved in organizing conferences and exhibition vis-a-vis GASEX, LNG 10, and in 2012 we will be hosting for the first time the World Gas Conference. MGA does it with active involvement and participation of its members. We believe involvement in these events will not just benefit members from international networking and help them to explore for new business opportunities, but also to share some of our experiences on how we have developed our gas resources successfully. Malaysia, is ranked 15th in the world in terms of gas reserves, but in terms of gas development, we are proud of our achievements so far and some have wondered, as an example, how we have managed the gas industry successfully to become second largest exporter of LNG. That is where the international platforms such as GASEX or IGU are helpful, and we encourage our members to be active members of the working and programme committees or study groups. Once they become members, their network will tremendously expand and they are able to seek views and advice via networking with the international counterparts or gas experts to address issues extremely quickly. GASEX for example is very active as a regional gas association; it involves seventeen members and meets twice a year to provide a good forum for networking and discussion between members in Asia Pacific region.

Do you believe that the international recognition of Malaysia has anything to do with the recently announced presidency of IGU for MGA?

We view the Presidency of MGA as recognition not only of the Malaysian capabilities, but also of the ASEAN region. We managed to secure the IGU presidency – thanks to the support of our MGA members, and also to the strong support from the ASEAN and GASEX members. The internationalisation of the IGU is demonstrated by IGU that brought the WGC for the second time to Asia. This is the region of the world where the future action is, and people need to come here to Kuala Lumpur in 2012 to see the actions for themselves.

To support the industry it is important to be active in R&D. How is MGA involved in pushing for innovation?

MGA collaborates with the ASCOPE Gas Centre, or the gas centre for the ASEAN Council on Petroleum, which is responsible for looking at the technical and commercial aspects of gas developments of ASCOPE members’ countries. However, major researches are being carried out by the companies themselves, especially PETRONAS. MGA can provide its members with strategic direction as to which area to develop. Green technologies, for example, have been a strong topic of discussion at the moment, and this is where our MGA forum is important. We enable stakeholders to share information and knowledge as to who are able to develop what technology, and help to draw roadmap and channel it to the relevant government agencies or ministries. We plan to discuss the role that green technologies can play, and how to integrate gas as part of a greener energy mix, while trying to understand who will pay for this shift at the end of the day: whether the consumers, the government or stakeholders of the industry?

Where do you see the push for energy efficiency come?

Everybody has a role to promote and contribute towards energy efficiency, as ‘energy saved is equivalent to energy produced’. For energy companies, not going towards renewable energy would not be strategically wise as it is the new direction that their business should be pursuing. Even the suppliers, or the companies involved in transportation have to develop business models to find new energy substitutes. Politically, the solution is to find an optimum balance in the energy mix: what should be the appropriate share of gas, oil, coal, hydro or renewable energy. Once the roadmap is clear and gives good directions, each company will then be in a position to harness its resources towards benefiting from the policy measures introduced by the Government. MGA provides as a useful platform for such discussion. Later this year, we will be having a forum with the Energy Council of Malaysia to address relevant issues of green or clean energy for Malaysia. It is important for MGA to do that, as we have the support of all our stakeholders which can attract the attention of the public, and bring together captains of the gas industry and businesses, policy makers and representative of consumers. We would like to make sure that national energy planners and decision makers to take certain issues into account when deciding the future energy policies and direction of the country that would have lasting impact on industry players.

When meeting with Sofiyan Yahya in MOGSC, he said that Malaysia shouldn’t rest on its laurels but go forward. What is Malaysia’s
direction in terms of Gas?

There are two main issues that the Malaysian Oil & Gas industry will face in the coming years: depleting gas resources and renewable energy. To address these issues, MGA will take a multi-prong approach. We believe that gas will play an increasing role in the future energy mix, taking into account sustainable development. The discovery of unconventional gas and the development of new technologies will increase the availability of gas and gas will remain as part of the energy landscape for a long time to come. In terms of reserves and future availability of gas, it has much longer production life and better prospects than oil. We believe that gas will be a part of the global solution to the issue of global warming due to present ‘high-carbon’ economy and the need to mitigate emissions of carbon dioxide and greenhouse gases to enhance sustainable development. Unfortunately gas is not yet widely recognized as it should be, and some people say gas being a fossil fuel is one of the worst polluter. But in the near future, with the advancement of carbon capture and sequestration (CCS) technology and other new technological breakthrough, gas will be regarded as almost totally green, thanks to new technologies. With CCS, having clean gas is not a dream as having clean coal. At MGA, we believe that gas is going to play an important role, and our task is to create awareness and understanding what gas can effectively do to contribute to make a cleaner and greener world, especially to replace coal for power generation. Gas should be seen as a greener substitute that is readily available and competitively priced.

Malaysia is well positioned geographically to deliver gas throughout south‐east Asia, and is now developing strong links with the
Middle East. How is the positioning of the Malaysian gas industry evolving?

When gas was discovered in large quantities, we were then recognized as a potential major gas player due to our stable political climate and strategic location. Today our customers are more concerned about energy security and reliability of gas supply. In term of LNG, our customers are from Japan, Korea, Taiwan and People’s Republic of China, who want to secure energy/LNG supply while diversifying their energy supply portfolios. Malaysia has delivered LNG cargoes without failure in the past, and the country has always been able to deliver its commitments and promises. Malaysia wants to share its experiences as a reliable energy partner. The development of the Oil & Gas industry is now undertaken almost 100% by Malaysians, and we have not only developed indigenous reserves successfully, but also made sure that the entire spectrum of the value chain is done locally. We are proud of this development.

Where is the balance between energy efficiency and price for energy?

Prices of gas in Malaysia have been subsidized since 1997, aftermath of the Asian Financial crisis. The subsidies have not only distorted the market but also created an economic system where people do not look at opportunities to enhance energy efficiency. That is why today the government is looking at ways and means to reduce the economic burden, vis-à-vis to reduce subsidies. By removing subsidies – although not altogether – people will chose the most cost effective source of energy and become more innovative and creative on how to consume energy efficiently. Today with a non-market oriented gas pricing, the end consumers at large do not really profit from the subsidies, except maybe when consuming electricity as gas represents about 60% share of the fuel mix in the power sector. We have to gradually remove subsidies, while making sure that smaller industry players can gain some competitive advantages. Some people would argue that without subsidies our economy would not be competitive. They should just look at Singapore and Thailand where although no subsidy scheme is in place and yet its products and services are still very competitive in the international market.

Many pipeline projects have been discussed over the past to go across several countries, for example the Trans‐ASEAN pipeline. How
feasible are these projects?

Historically, these projects have been developed bilaterally, vis-à-vis cross-border gas pipeline inter-connections between Singapore-Malaysia; Myanmar-Thailand; Indonesia-Malaysia and IndonesiaSingapore, etc. based on strictly commercially- oriented deals. But developing a project to get gas from Myanmar to Malaysia through Thailand for example would involve a whole host of issues to be resolved e.g. cross-border issues on gas transit, 3rd party access, taxation and tariff, throughput charges, passing through various transit countries. Hence, we do not see in the near future an integrated Trans-ASEAN Gas Pipeline in place in view of not only the issues to be resolved but also the limited availability of gas reserves to make it happen.

How is MGA’s presidency of IGU going to influence the Malaysian Oil & Gas industry?

MGA wants to make a difference during our presidency of the IGU, and introduce some changes. As a start, we will implement the concept of the four regional co-ordinators to have more regional contribution from the different regions of the world. We also want to further enhance the publications of IGU. IGU produces lots of reports but we now have to publish them for the benefit of the members and other stakeholders and further enhance IGU position as the spokesman for the gas industry. We also want to brand gas to gain wider recognition and acceptance internationally. We need to establish our position strategically with energy planners and policy makers.

What difference will you make with MGA’s Presidency of IGU?

We want to address emerging issues that have not been addressed extensively in the past within IGU and that we believe will make a difference. The first one is “Building Strategic Human Resources”. When looking at the demographics profile of the industry, with the average age of around 50 years old, and lesser new graduates entering the industry, the industry has to undertake big changes in order to address issues relating to sustainable supply of human capital. We are also embarking a study called “Nurturing the Future Generation” where we have to engage children from pre-primary schools to get them to be interested in science and mathematics, hopefully create interests for the children to be interested in science and engineering areas. We will also engage children so as to create awareness and interest in the oil and gas industry in general. We are trying to the change negative perception into making people to appreciate and understand the importance of the energy industry as the economic lifeblood of the world, and that nothing could happen without energy. The last issue we want to address is the “Geo-Politics of Gas” where accessibility to natural gas resources are getting more challenging due to resource nationalism and barriers posed to cross-border gas pipeline inter-connections such as from Iran-Pakistan-India which is much influenced by geo-politics.
As far as the exhibition is concerned, we would like it to be very different. We want to make sure it is the most memorable world gas conference ever held. People will remember the time they attended the world gas conference of 2012 with a more lasting impression that it has been a spectacular event. We also want to provide a unique and good leadership and stewardship for the Union.

If you had one last message to represent MGA to the international Gas community, and highlight Malaysia’s ambitions, what would it be?

We need to play our role strategically even more than before, reaching out to educate the people and make sure that we do not only reach the policy makers but also the younger generations, in order to provide continuously supply of human capital and resources to fuel the future development of the industry. Because of the long-term nature of the industry, the development and supply of human capital has to be continuous. In the past we might have not done enough to create a great impression on the people’s mindset that gas is part of the equation for energy efficiency and to complement renewable energy. At the end of the day this industry is all about being innovative and creative, and making sure that not only engineers are creative and develop new technologies, but also that we develop new ways to reach out to the wider population, creating greater awareness and providing greater transparency on the role of gas and the benefits derived from the gas industry.

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