Setting gas reserve margin – better late than never

THE concept of reserve margin is well-known in the power sector, which is constantly on guard against power outages and plant breakdowns.

To be on the safe side, a reserve margin of 40% is set for the power sector although that is gradually being brought down to an optimum level of 20%.

Caught in a severe gas shortage situation, Petroliam Nasional Bhd (Petronas) is also setting aside a gas reserve margin of 15%, which is said to commence by 2015.

That is three years from now. In view of the severity of the gas shortage problem, steps should be taken to expedite the setting of this gas reserve margin.

Already, three major stakeholders Tenaga Nasional Bhd (TNB), Petronas and the Government have to foot an additional fuel costs of RM3bil incurred through the burning of expensive distillates.

No doubt several regasification plants for the import of liquefied natural gas are coming up, first of which will be the one in Malacca this August.

That will help ease the shortage situation; however, a good back-up will always come in handy especially in times of emergency.

In shouldering the additional fuel bills, it may appear that we have passed the ball to major organisations such as TNB and Petronas.

Ultimately, it is the Government and taxpayers who are bearing the burden as the major shareholder in TNB and Petronas is the Government.

It is, therefore, of utmost urgency that the problem is solved as quickly as possible so as not to further burden the Government and, ultimately, the taxpayers.

The compensation amount of RM3bil covers the additional fuel bill from January 2010 to October 2011.

Between November and December 2011, a further fuel bill of RM400mil to RM500mil has surfaced.

With the import of gas, its price is likely to be higher at market prices. Will the Government and taxpayers again have to bear the extra costs?

The setting of a reserve margin for gas does not solve the problem of security of supply, a major concern that has cropped up as a result of the current gas shortage.

While a reserve margin may help ease a situation where there is a sudden breakdown, security of supply would help cover instances of major disruptions.

To ensure security of supply, various sources of supply have to be tapped.

Petronas is already making every effort to import more gas; there needs to be a concerted effort by not just Petronas to help secure more sources of supply.

TNB is also looking out for more supply sources; more organisations can chip in since this is a national problem that requires a concerted effort and central planning.

TNB not only requires gas for itself but also distributes to the independent power producers.

However gas is supplied to the steel and cement industries as a priority before TNB.

With demand constantly growing, there is the pressing need for future planning in a dynamic growth environment.