LNG may be insufficient to power Sabah

KUALA LUMPUR: The proposed use of liquefied natural gas (LNG) to generate power in Sabah following the scrapping of plans for a coal plant in Lahad Datu may be insufficient to power the state, said a local research house yesterday.


In the note to clients, OSK Research reiterated its earlier stance that merely building up renewable energy capacity in Sabah would not solve the state’s electricity supply problems.

“A reasonably sized power plant still needs to be located in east Sabah given that it is currently dependent on smaller diesel-fired power plants and the East-West grid connection, which has resulted in numerous disruptions,” it said.


“In our view, we still consider it a more economically viable option to build a coal plant on the east coast of Sabah rather than delve into solutions such as an LNG terminal, which may be an overkill.”


It also highlighted that a move towards LNG was not without additional costs and considerations despite the view that gas-fired power plants were cleaner than coal given lower emissions.

Firstly, it raised the question of whether Sabahans would be willing to pay more for electricity given the fact that LNG would likely be imported at market prices.

“There will still be a need to build the regasification plant although the storage and receiving terminals will likely be converted to LNG ships. There would still be some environmental impact,” it added.

OSK Research also raised the question of which industries would be promoted in the state to make the building of an LNG plant economical, given the limited demand for natural gas in Sabah’s east coast presently.

To recap, Sabah Chief Minister Datuk Seri Musa Aman said on Wednesday that the state and federal governments had decided against building the proposed plant in Felda Sahabat, Lahad Datu.

The decision was said to be made during a recent National Economic Advisory Council meeting chaired by Prime Minister Datuk Seri Najib Razak.

The government is said to be studying plans to use biomass and biodiesel-based power plants to supplement the energy needs of Sabah.

According to Bernama, the east coast of Sabah is presently served by a 200MW diesel-based power plant.

There was strong objection from local and international environmental activists who expressed concern about the proposed plant’s environmental impact on Sabah’s natural environment.

On how the news would impact listed players, OSK Research said the move to scrap the coal plant, while unsurprising given the sensitivity of the issue, would retain its earnings forecast on Tenaga Nasional Bhd on which it has a “neutral” call.

“We believe TNB will continue to receive its diesel subsidies for Sabah given this development and eventually may have to build a gas- fired power plant,” it said.

“On the other hand, just as it has been awarded the ownership of the LNG terminal in Melaka, we expect Petronas Gas Bhd (PetGas) will stand a good chance of owning any other LNG plants across the country, which will be a boost to its bottomline.

“As an indication, the company is spending RM1.1 billion on its 3.8 million tonnes per annum plant in Melaka,” said OSK, adding that it was positive on PetGas.

TNB closed unchanged yesterday at RM6.15 with 2.62 million shares done, while PetGas gained two sen to RM11.14 with 326,300 shares traded.

http://www.theedgemalaysia.com/in-the-financial-daily/181843-lng-may-be-insufficient-to-power-sabah.html