Taken from THE STAR

September 18, 2007

Petronas not able to sustain subsidies and wants to raise prices

GEMAS: Having paid out subsidies close to RM50bil in the last 10 years for gas and with global oil prices hitting US$80 (RM280) per barrel last week, Petronas is now pushing for an increase in gas charges.

If the Government gives Petronas the green light to raise rates, consumers would have to brace themselves for higher costs since gas is required for generating electricity, industrial/household use and for NGV-powered automobiles.

The minister said Petronas had provided gas subsidies close to RM50bil since 1997, and last year alone, it paid out RM14bil in subsidy.

“Petronas is screaming for an increase.”

He said that for example, Petronas sold subsidised gas at RM6.40 per mmBtu (Million British Thermal Units) to local industries, whereas unsubsidised gas cost about RM40 per mmBtu.
He explained that if the gas was sourced locally, Petronas would be able to absorb the costs.

However, its gas fields in Terengganu could not meet the demand in the peninsula. As such, Petronas was forced to pay three times more to import the gas from Indonesia and Thailand.
Lim said when the Cabinet committee would decide on Monday the next gas policy as well as gas prices for TNB and IPPs.

“This is necessary as 60% of the country’s electricity is generated by gas,” he told pressmen after opening Heaveaboard Bhd’s second particleboard line here yesterday. The minister was asked to comment on the escalating global oil prices.

Lim said the people should understand Petronas’ position and not criticise it for asking an increase.


September 19, 2007

Najib: Petrol prices to stay

PUTRAJAYA: The Government will honour its promise not to increase petrol prices this year, assures Datuk Seri Najib Tun Razak.

“Whatever we have promised (about not rising the petrol price), we will honour our commitment.

“But that is for the price of petrol. (Prices of) gas, it is another issue,” he told reporters after chairing the 21st National Forestry Council meeting yesterday. He was asked to comment whether consumers would be affected by the recent hike in oil prices.

On Petronas' request for an increase in gas charges, Najib said the Government’s willingness to look into the matter did not mean the national oil company would be given the green light to charge more.

Najib said the Government had taken steps to protect consumers from escalating prices of commodities and daily necessities by providing subsidies and fixing prices of certain goods.

He said the bulk of the subsidy went to petroleum and gas, amounting to a whopping RM27bil this year, of which RM14bil was borne by the Government and RM13bil by Petronas as gas subsidy.

“This is how much the Government and Petronas are spending on subsidy. If there are parties accusing the Government of not protecting consumers’ interests, they are sorely wrong.”

He said the increase in prices of goods, food and daily necessities, did not only affect the country but was also of global concern.

In Kuala Lumpur, Energy, Water and Communications Minister Datuk Seri Dr Lim Keng Yaik urged people not to speculate on a price increase for gas.

He said that at a Cabinet committee meeting on Monday on the next gas policy, his ministry, Petronas and the Economic Planning Unit would present a proposal on the issue.