No price increase for gas... for now
UPDATED VERSION. Can you take this, my friends?
There is no increase in the price of gas and yet the government went ahead with the increase of TNB electricity tariff?
The inrease in the price of gas was originally scheduled for implementation effective from July 1. It was to impact negatively on the IPPs which run on gas, and some 65% of gas supply from Petronas benefitted largely these IPPs and TNB.
Read on with the original posting.
ORIGINAL POSTING
I had prepared my text to speak on the imminnet increase in the price of gas in the country in response to a Cabinet decision on June 4 pertaining to the restructuring of petrol, diesel and gas subsidies.
I was made to understand that 74% of our gas supply, courtesy Petronas, is sold to the power producers including the IPPs -- which include BN cronies of three races -- and 9% exported to Senoko Power Station in Singapore; and only 14% to large undustrial users, 12% for reticulation by Gas Malaysia (and onward to users in commercial, residential and industrial sectors).
Of the total gas supply in Peninsular Malaysia, the power sector (65%) is being supplied at RM6.40/mmbtu*, in contrast to 9% to Singapore at a contract price of about RM30/mmbtu.
Whereas, about 14% is supplied to large petrochemical users at RM11.32/mmbtu, and 12% to Gas Malaysia at RM9.40/mmbtu for onward sale to the manufacturing industry at RM12.87/mmbtu.
It has been reported that the international market for gas is about US$11/mmbtu, which translates to RM35/mmbtu.
Based on the current tariff structrure levied by Petronas, the IPPs stand to gain the most as they are insulated from any price turbulence because the PPAs -- drafted by the EPU in the PM's Department during Mahathir's era and perpetually endorsed by Abdullah -- ensure that these cronies can pass through the increase in gas price to TNB and onward to the end users, while the IPPs' Internal Rate of Return (IRR) remains intact, rain or shine. They take the gain we take the pain.
I have big problem with this because these IPPs had been supplied subsidised gas for nearly a decade, amounting to no less than RM27.6 billion of tax payers' money since 1997.
These IPPs -- the big BN cronies who got the concessions through closed-door, direct negotiations -- don't suffer like we consumers do whenever fuel price goes up, which is a subset of a kneejerk policy creatively packaged as a restructuring of subsidy programmes.
Gas price remains as is
After the June 4 Cabinet announcement of an imminent increase in the price of gas, the industry anticipates a hile that ranges between 129% and 187%. Most manufacturing players will be wiped out should this happen.
However, yesterday, I was informed that he implementation of the new gas price, scheduled to take effect from July 1, has been deferred to a later date. The announcement was made by the Economic Planning Unit of the Prime Minister's Department.
Given the choice, I will still speak in the Parliament on this.
* MMBTU refers to a thousand thousan British Thermal Units, of which each unit is a standard measurement used to denote both the amount of heat energy in fuels and the ability of appliances and air conditioning systems to produce heating or cooling.
Comments
Please keep on harping about this issue!
they lifted the petrol subsidy without consultation and hesitation... and what took them such a long time to remove the IPP's (and among others) gas subsidy?
Posted by: bentoh![[TypeKey Profile Page]](http://www.jeffooi.com/nav-commenters.gif)
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July 2, 2008 01:20 PM
Dear YB Jeff Ooi,
That is a good article you highlighted & I hope you will be able to present this to Parliament.
I had sent you an article to verify, comment & maybe also highlight at your level as MP.
The issues :
"The first problem with Petronas is the fact that it was designed to be a secretive organisation. The Petronas agreements have been classified secret. Why? What clauses are in the agreement that the people should not know? This secrecy also include the secrecy of Petronas' detailed annual report which is shielded from public scrutiny, making it an organization without public accountability.
The other shocking revelation that had came to my knowledge is that 80% of the oil produced by Petronas is not sold directly to the world market but is channelled through six 'option holders' who obtain the supply from Petronas below market prices. These option holder agents are the ones reaping the benefits in the oil price hikes.
Who are these people? Why are they there in the first place? Why had such a system been created for Petronas? Are these people in fact representing certain private interests?
It is also understood that this supply through the option holders is sold by contracts with a binding agreement for 20 or 30 years, causing huge losses for Petronas when oil price increases, as Petronas would then have to continue selling at the old agreed price. Only 20% of Petronas's supply is sold through direct open bidding.
Because of these arrangements, Petronas is sadly not maximising its revenue by dealing direct with the open world market. Instead it has been incurring inculculable losses for the nation and for the people. How much this monstrous loss is, we will never know.
The Members of Parliament and the state government should boldly raise up this very important issue in Parliament or directly with the federal government for the benefit of the oil-producing states.
As soon as possible, leaders of the oil producing states should seek for a review of the oil royalty rate and push for a differentiation of prices and benefits for the oil-producing states and the non-oil-producing states." unquote.
Posted by: flyer168![[TypeKey Profile Page]](http://www.jeffooi.com/nav-commenters.gif)
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July 2, 2008 02:02 PM
Jeff,
To reverse the subsidy and amend the agreements the govt had with these IPPs would bring repercussions to the investment world.
The best way is to tax these buggers so those benefits are returned back to the public - what izzit called again WINDFALL TAX
Posted by: Tan Sir Lord Toddie![[TypeKey Profile Page]](http://www.jeffooi.com/nav-commenters.gif)
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July 2, 2008 11:29 PM
Dear YB Jeff,
Kindly get your facts right.
JEFF OOI says: You too.
The public has consistently been misinformed on the fuel pass thru mechanism on the IPPs. The IPPs PPAs have a pass thru fuel cost mechanism i.e. TNB, as the sole buyer of the power, will take the fuel pricing risk, be it coal, gas, diesel, crude etc. The subsidsied gas at RM6.40/mmbtu is enjoyed by TNB and not the IPPs. Hence the end user electricity tariffs are highly dependent upon the subsidised gas price. If Petronas increases it's gas price, then the price increase will be passed on to the end consumers as what we are seeing now. IPPs will not gain anything. TNB may put a slight profit margin on the end tariff electricity price after costing in the increase in gas price and opex into the tariff rates.
JEFF OOI says: You and I don;t read from the same chapter. I fight for the interests of the consumers, residential and industrial. You pitch for the IPPs. So to each your own and mine. And I will get like-minded MPs to keep hmmering in the Parliament and opinion space. Enough is enough! We know how to skin the fat cats!
Posted by: tukun![[TypeKey Profile Page]](http://www.jeffooi.com/nav-commenters.gif)
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July 3, 2008 09:38 AM
YB Jeff,
I am not against you or the like minded MPs and I am not pitching for the IPPs. I am just stating the facts. I am also an end consumer facing an increase in tariff rates.
Kalau nak jadi champion rakyat jangan cepat melatah. Kena korek dlam-dalam lagi info on the PPAs and FSAs (Fuel Supply Agreement) between the IPPs and TNB.
JEFF OOI says: Precisely. Get hold of the PPAs -- FSAs here are red herrings on your part -- and speak the truth. I will be happy if you joined me to fry the IPPs, without fear or favour.
Posted by: tukun![[TypeKey Profile Page]](http://www.jeffooi.com/nav-commenters.gif)
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July 4, 2008 09:03 PM