The express route to a new energy mix

In the second week of September, Kuala Lumpur Convention Centre will host the International Greentech and Eco Products Exhibition and Conference. The four-day event (IGEM), the largest of its kind in the region, is expected to attract tens of thousands of visitors and more than 50 companies and organisations from around the world.

Towards the end of the same month, Renewable Energy World Asia, the region’s premier conference and exhibition for the renewable energy industry, will draw exhibitors and visitors from more than 60 countries to the same venue.

The nation is emerging as a major player in renewable energy and eco-technology.

At the same time, Malaysia is a producer of oil and gas. Next year the 25th World Gas Conference comes to Kuala Lumpur, marking the conclusion of Malaysia’s current three-year presidency of the International Gas Union, for which it has adopted the theme ‘Gas: Sustaining Future Global Growth’. Malaysia is only the second Asian country (after Japan) to hold the presidency.

The oil and gas industry in Malaysia has a history going back just over 100 years. Petronas, the national oil company, plays a big role in the Malaysian economy, involved in exploration and production but also in downstream activities like refining and petrochemical production. The Government depends on Petronas for around 40 per cent of state revenues.

Recently Malaysia’s status as a net oil exporter has been challenged as rising demand and falling oil production from its maturing fields have required it to import more crude.

Exploration continues and new discoveries are still being made. Petronas, which in February announced the discovery of major oil and gas reserves off the coast of Sarawak, is planning to drill 50 new exploration wells over the next three years.

In November last year, the Government announced tax breaks to attract more investment into the sector, with a waiver of up to 100 per cent tax on capital intensive petroleum projects such as deepwater drilling. Tax on the development of marginal fields has been reduced from 38 per cent to 25 per cent with a waiver of export duties on the oil produced.

“By lowering risks and increasing the rewards for investment, this initiative will potentially lead to additional petroleum-generated revenue of more than 50 billion ringgit (£10.4 billion) for Malaysia over the next 20 years,” the Prime Minister says.
 

However, with Malaysia’s gas reserves predicted to last for another three decades and oil reserves for less than two decades, the Government is taking steps to diversify the energy mix towards renewable energy. With its abundance of natural resources, Malaysia has the opportunity to develop several types of renewable energy, including biomass generated from palm oil waste, biogas, municipal waste, solar, mini-hydro and wind.
 

The 10th Malaysia Plan gives new emphasis on the use of renewable energy, particularly the use of hydropower for electricity generation and the mandatory blending of biofuels for the transport sector. The Government’s target is to achieve 5.5 per cent renewable energy in Malaysia’s total energy mix by 2015.

Incentives worth RM1.5 billion (£313 million) are being provided through the Gov-ernment’s Green Technology Financing Scheme to enhance the application of green technology. The Small Renewable Energy Programme promotes small power plants, utilising renewable energy, to sell electricity to the state-owned electricity utility.

The latest moves to kick-start the renewable energy industry include the establishment of a Sustainable Energy Authority and a feed-in-tariff (FIT) mechanism that will enable individuals and companies to sell electricity generated from renewable energy to utilities companies at a premium rate.

Here, Peter Chin Fah Kui, Malaysia’s Minister of Energy, Green Technology and Water discusses investment opportunities and moves to develop renewable energy sources.
 

How significant is Malaysia’s hosting of the World Gas Conference next year?

The energy sector creates multiple opportunities for financing and investment. Thanks to the environment we have put in place there are excellent opportunities for the international community to do business. I can give an example. We had a green technology conference and exhibition last year. This event generated $1.4 billion (£870 million) worth of business. Sixty countries were represented – we are doing it again this September. There is huge potential in terms of exploration and technology. In the past there has not been enough investment in this part of the world but we are certainly catching up with Europe and America. A conference like the World Gas Conference is therefore very relevant.

What are the challenges facing your Ministry?

Energy needs keep on growing; the challenge is how to find energy resources and balance demand with available supply. We would like to see gas and coal make up a smaller percentage of the energy mix in comparison to hydropower, biomass and renewable energy. We have a commitment to reduce carbon emissions to 40 per cent of our 2005 levels by the year 2020. We are looking at other sources of renewable energy, like solar power and geothermal energy, and exploring the area of wind technology. We hope to be able to increase hydropower generation to as much as 20 per cent. This would not necessarily involve big damns like Bakun in Sarawak; but rather smaller ones which will provide enough clean energy. We are also planning some nuclear energy but of course this is a long-term project.

Are you promoting investment in renewable energy projects?

Essentially, we are putting in place the necessary conditions to allow the renewable energy sector to expand. There will certainly be good opportunities for the private sector and we are encouraging foreign companies with expertise in clean technologies to come and invest. The Green Technology Financing Scheme is specifically designed to transfer technology from Western countries to Malaysia. There are already numerous foreign companies who are interested.

How are you encouraging greater energy efficiency?

There are two challenges in this area. The first is making sure that our people know how to manage their production in such a way that they use energy efficiently. The other aspect is using more efficient technologies. Many of our electricity generating plants are more than 30 years old so the technology is almost obsolete and not energy efficient. We want to increase production and ensure efficiency by investing strongly in new technology. There are many opportunities for British companies to export their expertise and turbines to Malaysia.