The Association of Water and Energy Research Malaysia (Awer) would like to highlight the press statement by the Energy, Green Technology and Water Ministry on Jan 21, 2015, stating “another factor to take into account is that the market price of LNG supplied to peninsula Malaysia is linked to the ex-Bintulu LNG price and the Japan Customs-Cleared Crude (JCCC) price with a time lag of two to four months and five to seven months, respectively.

“Hence, any decrease or increase in the world crude oil price can only be reflected in the price of LNG for the peninsula five to seven months later."

In addition to that, in the special address by YAB the prime minister on Jan 20, 2015 on the Current Economic Development and National Financial Status (Perutusan Khas Perdana Menteri Tentang Perkembangan Ekonomi Semasa Dan Kedudukan Kewangan Negara), in Point 62 of the speech, it was mentioned that the government will postpone the natural gas price increase in 2015 to reduce the cost of doing business.

In view of the world oil price drop since the last quarter of 2014, Malaysia is supposed to enjoy a cost reduction beginning April 2015 due to the time lag effect in LNG price as mentioned in the ministry’s statement. But it was reported today that the government has increased the natural gas price for commercial and industrial sectors in peninsula Malaysia except for the power sector effective July 1, 2015.

It is important for Malaysia to remain competitive in manufacturing and services sector to become a developed nation. Competitive and transparent pricing of energy resources is vital for Malaysia's growth. However, the transparency issue related to natural gas pricing is nothing new.

Why did the government increase the natural gas price while Malaysia is supposed to enjoy cost reduction now due to the time lag effect in LNG price? Awer urges the government to reveal the calculation mechanism that reflects both piped gas and Liquefied Natural Gas (LNG) price.

Does the price difference between piped gas and LNG equate to cost of liquefaction, shipping and regasification of LNG? Has there been a transparent calculation reflecting international pricing mechanism that is widely accepted?

PIARAPAKARAN S is president, Association of Water and Energy Research Malaysia (Awer).