Petronas and TNB need to find a better solution


  • Business
  • Saturday, 03 Sep 2011

EVERY argument has a flip side. No two ways about it.

When it comes to the issue of gas supply (or lack thereof) in the country's power sector, we've seen both sides of the coin publicly played out by two state-owned giants which, as it appears, have widely divergent interests.

In recent weeks, national utility Tenaga Nasional Bhd (TNB), which buys gas from national oil company Petroliam Nasional Bhd (Petronas), has been drumming the point that there's a gas crunch in the power sector a shortfall of a worrying 30% in gas supply to the system. This has compelled the power company to look for alternative and more expensive fuel sources which has cranked up its cost severely, crimping its financials. (Gas is supplied to the power sector at a subsidised price, hence it's cheaper than most other fuel sources. The cut in gas supply is largely due to maintenance activities).

On the other side of the fence sits Petronas which since the Asian Financial Crisis has been supplying gas at a subsidised price, foregoing some RM20bil annually in potential revenue. Petronas chief Datuk Shamsul Azhar Abbas recently rapped the gas subsidy as “distortionary” and “inefficient”. Its biggest beef, understandably, is that the subsidy hits it right at the pocketbook; it involves a jaw-dropping sum of RM133bil between 1997 (when the subsidy first kicked in) and March 2011. For this reason, rightly or wrongly, many perceive that Petronas has far less commercial incentives to pump more gas into the power system.

Should this protracted tug-of-war between both stalwarts concern us?

Truth is both Petronas and TNB are not necessarily on the opposing ends of the battle ring. TNB is amenable to gas prices being raised to better reflect market rates so long as it's able to pass the additional cost to consumers.

And if Petronas gets to sell its gas at market rates to the power sector, chances are it could even supply a lot more than previoulsy agreed. In short, if status quo is to be averted, gas prices need to be gradually raised and consumers will have to brace for higher electricity bills.

But who would dare raise electricity tariffs at a time when consumers are already pinched by rising cost of living?

That being the case, it is indeed curious why the two government-controlled enterprises would engage in such fruitless rhetoric.

Here's the conundrum everyone recognises the root of the problem (subsidies) but lacks courage to resolve it.

Meanwhile, there's no buy-in from the two key industry players Petronas and TNB. And that in itself should be of grave concern. Worst case scenario, the country could once again find itself in a perfect storm massive blackouts.

Was TNB being effective in its communications when it recently issued a profit warning due to the gas curtailment or was it simply being alarmist? Was Petronas' retaliation that gas subsidies which ensure cheap power need to be dismantled as “nothing comes for free” a calculated remark to fuel the possibility of higher electricity rates or purely impulsive?

Perhaps, they were simply and effectively communicating their respective predicaments (and craftily throwing the ball in the Government's court to make the tough decision).

Meanwhile, the plan to introduce nuclear civil power to meet the country's electricity needs appears to be re-surfacing after ducking from criticism post-Japan's nuclear disaster. It is reported that the Government is mulling over the idea of hiring a public relations agency to gather support for nuclear power. This has not been officially confirmed nor denied as yet.

There's a fine line between public relations and propoganda machines. For this reason, such actions stand the risk of backfiring, even on the most genuine of intents. Over-ridingly, what's essential is to put forth a plan that's clearly argued and well substantiated to the folks. People need to have faith in the plan and in the makers of the plan. But they loath these nasty surprises, a plan being hijacked by political one-upmanship and more spins.

Opinions are highly divergent and split on the topic of nuclear power. So, it's important for the Government to show that it's willing to listen to public concerns, fears and reservations. It's a good strategy to have it “all out in the open” with intense dialogue and discussions between the public and the government machinery from the onset.

Seriously, do we really need PRs to tell us that?

■ Senior business editor Anita Gabriel wonders if the Government sold the much-vaunted spectrum to the highest bidders or “deep pockets” in the telecommunications sector, would it lessen the urgency to cut certain subsidies? That way, we can continue to enjoy cheap power.

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