RMK 11 - Strategy Paper 17

Sustainable
Usage of Energy
to Support
Growth
INTRODUCTION
TENTH MALAYSIA PLAN, 2011-2015:
PROGRESS
Energy Demand
Energy Supply
Oil and Gas Subsector
Electricity Subsector
Demand Side Management
ISSUES AND CHALLENGES
Energy Sector
ELEVENTH MALAYSIA PLAN, 20162020:
WAY FORWARD
Energy Sector
CONCLUSION
Strategy Paper
For further information refer to:

Director General
Economic Planning Unit
Prime Ministers Department
Block B5 & B6
Federal Government Administrative Centre
62502 Putrajaya
MALAYSIA
http://www.epu.gov.my
Tel.: 603-8000 8000
Fax.: 603-8888 3755
_____________________________________________
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prior permission of the Economic Planning Unit, Prime Ministers Department.
Eleventh Malaysia Plan

Strategy Paper 17: Sustainable Usage of Energy to Support Growth
I.
17-1
INTRODUCTION
17.1 Energy security is the vital cog to sustain economic growth. Numerous key measures
have been undertaken to ensure security of energy supply during the Tenth Malaysia Plan,
2011-2015. Concurrently, the growth of renewable energy (RE) as an alternative energy
source was further enhanced to support the continuous increase of energy demand
complemented with nominal efforts on energy efficiency (EE) measures. During the
Eleventh Malaysia Plan, 2016-2020, energy security and RE would continue to be given focus
while demand side management (DSM), a major paradigm shift incorporating EE and
conservation measures would be implemented to ensure sustainable management of
energy resources.
II.
TENTH MALAYSIA PLAN, 2011-2015: PROGRESS
17.2 The security of energy supply was improved to meet the increased energy demand.
Efforts were undertaken to ensure the long-term sustainability of the energy sector through
resources diversification, continuous investment in new infrastructure and technology
enhancement. Domestic reserves were added to ongoing investments, which enhanced
energy security. In addition, the improvement in productivity and efficiency as well as the
implementation of efficient resource utilisation measures were also undertaken.
Energy Demand
17.3 During the Tenth Plan, final energy demand increased from 41,476 kilo tonne of oil
equivalent (ktoe) in 2010 to 53,222 ktoe in 2013 and is expected to increase to 57,123 ktoe
in 2015, as shown in Exhibit 17-1. The demand for all energy sources is expected to have an
average annual growth rate of 6.6% from 2011 to 2015. Final energy demand per capita
increased from 1.5 toe/person in 2010 to 1.8 toe/person in 2013 and is expected to increase
to 1.9 toe/person in 2015.

Source
Exhibit 17-1
Final Energy Demand1 by Sources, 2010-2015
Kilo Tonne of
% of Total
Oil Equivalent2 (ktoe)
2010
2013
2015e
Petroleum Products
24,403 29,132 32,389
Natural Gas
6,254 12,015 10,225
Electricity
8,993 10,536 11,996
Coal and Coke
1,826 1,539 2,513
Total
41,476 53,222 57,123
Final Energy Demand per
1.5
1.8
1.9
capita (toe/person)
2010 2013 2015e

58.8
15.1
21.7
4.4
100
54.7
22.6
19.8
2.9
100
56.7
17.9
21
4.4
100
17-2
Average Annual
Growth Rate (%)
20112015e
5.8
10.3
5.9
6.6
6.6
5.0
Notes: Final energy demand refers to the quantity of energy delivered to final users including transformed
energy
2
One tonne oil equivalent to 7.6 barrels
e
Estimates
Source: Energy Commission and Economic Planning Unit
17.4 The transport sector consumed 42.3% of the final energy demand in 2013. This
substantial amount of energy consumption was spurred by increase in private vehicle
ownership which is the preferred mode of transportation. The second largest sector was
industrial1 with 25.1% share followed by the non-energy use with 17.1%, as shown in Exhibit
17-2.
Sector
Transportation
Industrial
Residential and
Commercial
Non-Energy
Agriculture and
Forestry
Total
Exhibit 17-2:
Final Energy Demand1 by Sectors, 2010-2015
Kilo Tonne of
% of Total
2010
2013
2015e
2010 2013 2015e
16,828 22,522
23,535
40.6
42.3
41.2
12,928 13,384
13,367
31.2
25.1
23.4
Average Annual
Growth Rate (%)
2011-2015e
6.9
0.7
6,951
7,378
10,339
16.8
13.9
18.1
16.4
3,696
9,111
8,968
8.9
17.1
15.7
19.4
1,074
827
914
2.6
1.6
1.6
-3.2
41,476
53,222
57,123
100
100
100
6.6
Notes: Final energy demand refers to the quantity of energy delivered to final users including transformed
energy
2
e
Estimates
Industrial include manufacturing, construction and mining.

17-3
Energy Supply
17.5 The total supply of energy increased from 76,809 ktoe in 2010 to 89,605 ktoe in 2013
and is expected to increase to 95,802 ktoe in 2015, as shown in Exhibit 17-3. Natural gas and
crude oil will remain as the main sources of supply. In 2013, the total share of fossil fuels
namely crude oil and natural gas as well as coal and coke declined, while the share of hydro
had steadily increased. The changing share reflects the decreasing dependency on fossil fuel
sources.
Natural Gas
Crude Oil
Coal and Coke
Hydro
Exhibit 17-3
Primary Energy Supply1 by Sources, 2010-2015
Kilo Tonne of
% of Total
2010
2013
2015e
2010 2013 2015e
35,447
39,973
42,441
46.1
44.6
44.3
25,008
31,877
29,507
32.6
35.6
30.8
14,777
15,067
20,118
19.2
16.8
21.0
1,577
2,688
3,736
2.1
3.0
3.9
Total
76,809
Sector
Notes:
89,605
95,802
100
100
100
Average Annual
Growth Rate (%)
2011-2015e
3.7
3.4
6.4
18.8
4.5
Primary energy supply refers to the supply of commercial energy that has not undergone a
transformation process to produce energy
2
3
Natural gas excludes flared gas, re-injected gas and exports of liquefied natural gas
e
Estimates

17.6 Oil and gas remain as important sources in the energy mix. Production during the
Tenth Plan was sufficient to meet the demand growth. Domestic reserves have increased
due to continuous investments in the upstream sector. In addition, Regasification Terminal 1
(RGT-1) in Sungai Udang, Melaka was completed in 2013 to enhance the security of gas
supply. Subsidy rationalisation measures were undertaken for piped natural gas, petrol and
diesel to achieve market parity. Cleaner transport fuel was introduced to improve air
quality.
Crude Oil
17.7 Oil reserves stood at 5.8 billion barrels of oil equivalent (boe) in 2014. Average
production of domestic crude oil and condensates decreased from 667,000 barrels per day
(bpd) in 2006 to 586,000 bpd in 2012. Production level recorded the lowest in 2013 at
576,000 bpd as shown in Exhibit 17-4. At 2013 production level, domestic crude oil including
condensate, has a reserve life of 28 years. An average Overall Resource Replenishment Ratio

17-4
(ORRR)2 of 1.94 was achieved from 2011 to 2013. The healthy ORRR is attributed to the
continuous investments by Petroliam Nasional Berhad (PETRONAS) in the upstream
exploration and production (E&P) activities to replenish the depleting reserves.
Exhibit 17-4
Crude Oil and Condensate Production, 2000-2014
Notes: Estimates
Source: PETRONAS
17.8 Crude oil and condensate export generated an average income of RM32.1 billion
annually between 2010 to 2014, as shown in Exhibit 17-5. There was a marginal decline of
export volume from 2010 to 2014. However, the export value had risen due to increase in
oil price.
ORRR is an indicator to measure discovered reserves versus production where a ratio of 1.0 and above is healthy.

17-5
Exhibit 17-5
Crude Oil and Condensate Production, Export Volume and Value, 2006-2014
1
Notes: Condensate is crude oil component derived from natural gas streams, comprising pentane and heavier
hydrocarbons
Source: Department of Statistics Malaysia and Economic Planning Unit
Natural Gas
17.9 Natural gas reserves stood at 16.8 billion boe in 2014. The discovery of new gas
fields contributed to the increase in reserves from 90 trillion cubic feet (tcf) in 2011 to 98.3
tcf in 2012. The production of gas increased at a compound annual growth rate of 6%, as
shown in Exhibit 17-6, with Sarawak as the leading producer. Average natural gas
production decreased from 7,476 million standard cubic feet per day (mmscfd) in 2010 to
6,730 mmscfd in 2013. At 2013 gas production level, gas has a reserve life of 42 years.

17-6
Exhibit 17-6
Gas Production, 2000-2014
8,000
Sabah
Sarawak
7,000
Peninsular Malaysia
Production (mmscfd)
6,000
5,000
4,000
3,000
2,000
1,000
0
2000
2002
2004
2006
2008
2010
2012
2014e
Note: Estimates
Source: PETRONAS
17.10 The average demand for natural gas in Peninsular Malaysia between 2010 and 2012
stood at 2,000 mmscfd taking into account the offshore supply constraint. However in 2013,
the gas demand of 2,419 mmscfd was met with the completion of RGT-1, which has a
capacity of 3.8 million tonnes per annum (mtpa). The completion of RGT-2 in Pengerang,
Johor, by 2017 would increase the gas supply level to 2,900 mmscfd. From 2010 to 2013, the
electricity subsector was the major consumer of gas, taking 52% of the total gas demand,
followed at 41% by the non-electricity subsector while the remaining 7% was exported to
Singapore. Notwithstanding the situation, the gas supply for electricity subsector is
expected to decline with the current efforts to shift the fuel mix from being dominated by
gas. However, gas demand for Sabah is projected to gradually increase from 350 mmscfd in
2013 to 523 mmscfd in 2015. For the same period, demand for gas in Sarawak is met by
existing volume of 279 mmscfd.
17.11 Export of liquefied natural gas (LNG) increased from 22.9 million metric tonnes in
2010 to 25.3 million metric tonnes in 2013 and is expected to increase to 26.7 million metric
tonnes in 2015. Main export destinations are Japan, the Republic of Korea and Chinese
Taipei. In 2015, total export earnings are expected to reach RM62.5 billion as compared to
RM38.7 billion in 2010.

17-7
17.12 Subsidy rationalisation measures were undertaken to address artificial demand and
inefficient allocation of resources. Periodic adjustments of gas prices for the electricity
subsector and non-electricity subsector were made when regulated prices fall way below its
market value. Gas which is a scarce and finite resource need to be priced at market value for
maximum optimisation of its most economic value. In the Tenth Plan, gas price for
electricity subsector was increased from RM10.70/million British thermal unit (MMBtu) to
RM15.20/MMBtu while for non-electricity subsector was revised from RM15.35/MMBtu to
RM21.35/MMBtu. The price for RON97 petrol was set using managed-float system since
2010. Subsequently, using the same system, the subsidy for RON95 petrol and diesel was
removed since December 2014.
17.13 In the transportation sector, initiatives were undertaken to control emissions from
motor vehicles through increase in usage of energy efficient vehicles and biofuels. The
Government gazetted EURO 4M standards in 2013 and enforce its use in RON97 in 2015. To
support implementation of bio-diesel B5 Programme (5% bio-diesel blending in automotive
fuel), 35 depots were constructed nationwide with in-line blending facilities. By end of 2014,
Malaysia introduced the bio-diesel B7 programme (7% bio-diesel blending) nationwide. The
introduction of B7 is expected to utilise 575,000 tonnes of bio-diesel, thus saving 667.6
million litres of diesel a year. The implementation of B7 programme has managed to reduce
greenhouse gases (GHGs) emission by 1.7 million tonnes of carbon dioxide equivalent
(tCO2eq).
17.14 Major developments are underway in the downstream oil and gas subsector to
ensure sustainable economic growth and security of energy supply. A large-scale project
with an area of approximately 9,100 hectares in Pengerang, Johor is being developed for
Pengerang Integrated Petroleum Complex (PIPC), which includes the Pengerang Integrated
Complex (PIC) by PETRONAS and Deepwater Petroleum Terminal by DIALOG-Vopak. This
terminal, which started operation in April 2014 will pave the way for PIPC to become the
regional hub for oil storage. In addition, expansion of LNG liquefaction plant in Bintulu,
Sarawak is scheduled to be ready for operation in 2016.
17.15 A total of 5,458 megawatts (MW) generation capacity was added with the
commissioning of 10 power plants to ensure the security and reliability of electricity supply.
Among the major projects commissioned during the Tenth Plan were Bakun Hydroelectric in
Sarawak as well as Kimanis and SPR gas-fired power plants in Sabah with an added capacity
of 2,785 MW. In terms of fuel mix, the share of coal to the total generation mix is expected
to experience minimal increase from 41.6% in 2010 to 43% in 2015, while natural gas is
expected to decline from 51.5% in 2010 to 40.1% in 2015, as shown in Exhibit 17-7.

Malaysia
Tenaga
Nasional
Berhad
Sabah
Electricity
Sdn. Bhd.
Sarawak
Energy
Berhad
Exhibit 17-7:
Percentage of Generation Mix, 2010-2015
Oil
Coal
Gas
Hydro
%
2010
1.4
41.6
51.5
5.4
2013
3.2
38.3
46.9
10.4
e
2015
0.4
43.0
40.1
14.4
2010
0.1
43.3
51.6
5.0
2013
2.5
43.0
49.6
4.6
e
2015
0.0
51.5
41.9
4.5
2010
26.3
0.0
60.0
10.2
2013
18.0
0.0
58.3
6.6
2015e
3.0
0.0
85.0
3.3
2010
3.6
43.3
45.7
7.4
2013
1.0
20.2
20.0
58.6
e
2015
1.7
10.5
12.8
75.0
RE
0.1
1.1
2.1
0.0
0.2
2.1
3.5
17.2
8.7
0.0
0.4
0.0
17-8
Total (GWh)
108,175
143,497
158,843
96,495
120,893
128,006
4,332
7,433
8,383
7,347
15,171
22,453
Note: Estimates
Source: Energy Commission
17.16 In tandem with the growth of the economy, peak demand increased from 16,943
MW in 2010 to 19,219 MW in 2013, as shown in Exhibit 17-8. Installed capacity rose from
24,275 MW in 2010 to 24,970 MW in 2013, which was sufficient to meet the demand. The
total annual electricity generation recorded a growth of 32.7% from 108,175 gigawatt hour
(GWh) in 2010 to 143,497 GWh in 2013. Bulk of the demand came from the industrial,
commercial and residential sectors, as shown in Exhibit 17-9. Transportation and agriculture
sectors consumed the lowest electricity at 616 GWh.

Year
2010
2013
2015e
Notes:
Exhibit 17-8
Installed Capacity, Peak Demand and Reserve Margin, 2010 2015
Generation
Installed Capacity1
Peak Demand2
Reserve
by System
(MW)
(MW)
Margin (%)
TNB
21,817
15,072
44.8
SESB
1,111
780
42.4
SEB
1,347
1,091
23.5
Total
24,275
16,943
43.3
TNB
21,753
16,562
31.3
SESB
1,172
874
34.1
SEB
2,045
1,783
14.7
Total
24,970
19,219
29.9
TNB
22,070
17,697
24.7
SESB
1,522
983
54.8
SEB
4,581
2,935
56.1
Total
28,173
21,615
30.3
Installed capacity is defined as the maximum possible capacity (nameplate rating) that
can be provided by the plant
2
Peak Demand is the maximum electricity demand registered by a customer or a group of
customers or a system in a stated period of time such as a month or a year. The value
may be the maximum instantaneous load or more usually, the average load over a
designated interval of time, such as half an hour and is normally stated in kilowatts or
megawatts
e
Estimates
Source: Energy Commission, Tenaga Nasional Berhad, Sabah Electricity Sdn. Bhd. and Sarawak
Energy Berhad
Exhibit 17-9
Electricity Consumption by Sectors, 2013
17-9

17-10
17.17 The transmission and distribution systems were further expanded to improve the
quality of services and meet the growing demand. The improvements include the
completion of new transmission projects, which linked new generation plants to the main
grids and connections to new industrial and commercial areas. The completed transmission
line projects, among others, were the Air Tawar-Bukit Merah in Perak, Bukit Kapar-Meru in
Selangor, Kimanis-Lok Kawi in Sabah and Bakun-Similajau in Sarawak. The distribution
network was also expanded to provide access to new development areas and extend
electricity to rural areas.
17.18 The Incentive-based Regulation (IBR) was introduced early 2014 for the electricity
subsector as part of the modernisation of the electricity supply industry. This allows a
structured, transparent and informed way of tariff setting taking into cognisance huge
requirement for capital expenditure (CAPEX) and operational expenditure (OPEX) by the
utilities, as shown in Box 17-1. IBR ensures the utility companies, namely, Tenaga Nasional
Berhad (TNB) and Sabah Electricity Sdn. Bhd. (SESB) to continuously enhance their
efficiencies and increase transparency in providing electricity supply to customers in full
compliance of the projected expenditures. In addition, Energy Commission (ST) continues to
audit and review past performances as well as accommodate new requests from the utility
companies. The main components of the IBR are:
Determination of the regulatory period to ensure the tariff revision is carried out
periodically and consistently;
Determination of the regulated and non-regulated business for the utility and the
separation of accounts;
Determination of financial performance and technical efficiency targets of the utility;
Implementation of the imbalance cost pass-through mechanism to enable the

recovery of actual fuel-related and other generation specific costs; and
Implementation of efficiency sharing mechanism to provide the utility a continuous

and sustained incentive to pursue cost efficiencies in every regulatory period.

17-11
Box 17-1
Incentive-based Regulation
IBR is an economic regulatory framework, introduced as part of the Malaysia Electricity Supply
Industry (MESI) restructuring exercise. MESI is a departure from the classical approach of
letting the utility companies solely responsible for all expenditures and tariff-setting
mechanism.
Key objectives of IBR are:

o
to safeguard consumer interest by ensuring competitively priced end user tariff; and
o
to allow utility companies to earn a fair return on investments for the electricity supply
infrastructure such as transmission facilities, to be installed within IBR period.
Benefits of IBR are as follows:
o
Efficient. Incorporates mechanisms to incentivise cost efficiencies over every regulatory
period and allows the efficiency gains to be passed through to end-users;
o
Transparent. Allows the regulator a greater transparency over the operational and
financial performance of every business unit including Generation, Transmission,
Distribution, Single Buyer and System Operator;
o
Financially Sustainable. Enables periodic pass-through of fuel-related and other
generation specific costs through the Imbalance Cost Pass-Through mechanism, while
providing a fair return to the utility; and
o
Enables Growth. Allows for recovery of future investments, provided they are done in a
cost-efficient manner and therefore ensures security of electricity supply to the nation.

17-12
17.19 Significant improvement was recorded in the productivity and efficiency of electricity
supply services. TNB, SESB and Sarawak Energy Berhad (SEB) registered improved
performance through reduction in the number of interruption incidences. System Average
Interruption Duration Index (SAIDI) for Sabah and Sarawak improved from 687
minutes/customer in 2010 to 424 minutes/customer in 2013 and 232 minutes/customer to
168 minutes/customer respectively. SAIDI in Peninsular Malaysia improved from 96.3
minutes/customer in 2010 to 60.5 minutes/customer in 2012, which is at par with SAIDI of
other selected countries, as shown in Exhibit 17-10.
Exhibit 17-10:
SAIDI Performance Comparison with Utilities of Selected Countries, 2010 and 2012
(minutes/customer)
Notes: * Malaysia: figures from Tenaga Nasional Berhad

** Thailand: figures from Metropolitan Electricity Authority
Source: Council of European Energy Regulators (CEER) and Tenaga Nasional Berhad
17.20 Electricity supply in Sabah has been a primary focus with the Government
continuously providing CAPEX to ensure SESB meets its key performance index (KPI) to
reduce SAIDI. The utility company has embarked on numerous transmission and distribution
network reinforcement projects including the commissioning of Kimanis and SPR power
plants to boost electricity supply, which would enhance the system resilience and network
reliability by 2020.
17.21 During the Tenth Plan, the supply of electricity to rural areas was further improved,
as shown in Exhibit 17-11. The implementation of rural electrification projects benefited
115,153 housing units, mainly in Sabah and Sarawak. Majority of the rural electrification
projects were undertaken through grid connection. In some remote areas which are too far
from the grid systems, alternative systems such as mini hydro, solar hybrid and biomass
were utilised.

17-13
Exhibit 17-11
Electrification Rates by Region, 2010-2015
Region
Peninsular Malaysia
Sabah
Sarawak
National
2010 (%)
98.9
84.4
72.1
92.5
2013 (%)
99.7
92.9
88.0
96.9
2015e (%)
99.9
95.1
94.0
98.2
Notes: Estimates
Source: Ministry of Rural and Regional Development
17.22 The RE development was given an impetus after the Renewable Energy Act, 2011
was enforced on 1 December 2011 and the Feed-in Tariff (FiT) mechanism was introduced.
The FiT allows electricity to be generated from RE sources to be sold to utility companies at
a fixed premium price for a specific duration. In 2014, RE sources contributed 243.4 MW or
1% of the total installed capacity in Peninsular Malaysia and Sabah, as shown in Exhibit 1712. As of 2013, this initiative reduced GHGs emission by 432,000 tCO2eq.
Exhibit 17-12
Renewable Energy Installed Capacity by Sources, 2014
Source: Sustainable Energy Development Authority

17-14

17.23 The Government has shifted focus from increasing supply to meet the demand to
reducing consumption by introducing EE and conservation measures. Agencies such as
Ministry of Energy, Green Technology and Water (KeTTHA), ST and Sustainable Energy
Development Authority (SEDA) have carried out programmes and projects to implement EE
and energy conservation. Among the programmes implemented were EE measures for
buildings, Sustainability Achieved via Energy Efficiency (SAVE) and Minimum Energy
Performance Standard (MEPS) as well as equipment labelling programmes.
17.24 During the Tenth Plan, efficient designs were incorporated in new Government
buildings while some existing buildings were retrofitted to reduce energy consumption. Four
government buildings located in Putrajaya were retrofitted between 2011 to 2014 and
successfully reduced electricity use ranging from 4% to 19% monthly, equivalent to RM7,000
to RM130,000 savings. Other measures promoted include setting air-conditioner
temperature at minimum of 24oC and reducing 5% of electricity bills for all Government
buildings. Uniform Building By-Law (UBBL), 1984 was also revised in 2012 to incorporate the
Malaysian Standard: Code of Practice on Energy Efficiency and Renewable Energy for NonResidential Buildings (MS1525). Currently, Selangor and Terengganu state governments
have incorporated MS1525 into their state UBBL.
17.25 In 2011, the SAVE programme was implemented to encourage utilisation of energy
efficient equipment. A total of RM44.3 million was allocated for the programme to offer
rebates for any purchase of new energy efficient refrigerators and air conditioners for
domestic use as well as chillers for industries. Total energy saved from these equipment for
the period from 2011 to 2013 was 306.9 GWh, as shown in Exhibit 17-13. This has resulted
in GHGs avoidance amounting to 208,705 tCO2eq.
Exhibit 17-13
SAVE Programme Output, 2011-2013
EE Sales
Savings Achieved
Appliance
(Unit)
(GWh)
Refrigerator
337,704
84.0
Air-Conditioner
166,505
124.9
Chiller
89,454 RT1
98.0
Total
306.9
1
Note: RT refers to Refrigeration Tonne


17-15
17.26 MEPS and energy labelling were completed for five products through the Electricity
Regulation 1994 (Amendment 2013). Efforts are also being undertaken to expand the MEPS
and labelling to cover six more products namely rice cooker, electric kettle, washing
machine, microwave oven, clothes dryer and dishwasher. These include data gathering and
setting criteria for the six products.
III.
ISSUES AND CHALLENGES
17.27 During the Tenth Plan, the energy sector faced multiple issues concerning the oil and
gas as well as the electricity subsectors. These include security and reliability of supply,
market distortion, lack of regulatory framework especially on third party access for gas
supply, overdependence on fossil fuels, governance and lack of awareness as well as
acceptance on energy issues among the public.
Energy Sector
Governance Issues
17.28 Fragmented governance and multiple agencies with overlapping roles, authorities,
responsibilities and jurisdiction have created complexities in governing the energy sector.
This has resulted in confusion and lack of holistic policies to the industry players and other
stakeholders. Among the main issues are inconsistent policies, lack of clarity in demarcation
of regulatory oversight as well as dual role of a single entity being the industry player and
the regulator at the same time. Strong and effective governance is required to compel all
stakeholders adhering to the proposed regiment to ensure the energy sector is managed
efficiently.
Ineffective Communication
17.29 Currently, there is a lack of coordination in communicating issues of public interests
with respect to the energy sector. To bring profound and impactful overall awareness, an
integrated approach by all stakeholders is essential.

17-16

17.30 The major issues in the domestic oil and gas subsector include security and reliability
of supply, lack of competition, market distortion and lack of coverage of compressed natural
gas (CNG) for transport and piped natural gas infrastructure. In addition, there is limited
growth in the downstream subsector namely refining and petrochemical processing. In
short, the issues faced by the oil and gas subsector during the Tenth Plan are as follows:
Fragility of security and reliability of energy supply;
Lack of regulatory framework for competition in gas business;
Barrier to clean fuel usage;
Lack of focus in the downstream subsector;
Heavy reliance of local players on domestic jobs in Oil and Gas Services Industry
(OGSI);
Uneconomic demand area for piped natural gas coverage; and
Heavily discounted fuel price.
Fragility of Security and Reliability of Energy Supply

17.31 Domestic hydrocarbon fields are maturing and their production is declining. Thus,
under business-as-usual condition, domestic production would not be able to meet demand.
Oil and gas reserves could last for more than 20 years, however, some of the fields are
currently not economical to be developed as they are small, scattered and remotely located.
Therefore, additional supply needs to be secured to cater for future demand growth.
17.32 Unplanned shut down of the upstream oil and gas infrastructure severely affects the
security and reliability of energy supply. During the Tenth Plan, gas curtailment was imposed
to users as a result of a fire incident at offshore Bekok C Platform in east coast Peninsular
Malaysia. The reduction of required gas supply volume from 1,350 mmscfd to 900 mmscfd
between the months of November and December 2011 severely affected the electricity
subsector, resulting in additional costs due to utilisation of other fuel sources. These
additional costs were collectively borne by the Government, PETRONAS and TNB. Such
incident warrants the need to increase energy security and reliability by securing volume of
gas from other sources.

17-17
Lack of Regulatory Framework for Competition in Gas Business

17.33 The scope of existing regulatory framework for gas subsector is limited to the
distribution pipeline. It does not cover the operation of regasification terminal and
transmission pipeline both owned and operated by Petronas Gas Berhad (PGB), which is a
subsidiary of PETRONAS. Access to this infrastructure at fair pricing for other players is
important to promote level playing field and competitiveness in the gas business. However,
lack of regulatory framework covering third party access to this infrastructure has not been
able to attract other parties to use the spare capacity in the regasification terminal.
Barrier to Clean Fuel Usage

17.34 The regulated price for CNG is the main barrier to new entrants and expanding the
service coverage. PETRONAS NGV Sdn. Bhd. is the only provider of CNG and its
infrastructure is heavily concentrated in the Klang Valley. When CNG was introduced in
1989, the price set was deemed sufficient to cover cost of production and profits. However,
the current price is insufficient to cover the cost of production. In 2013, PETRONAS had
subsidised an accumulated amount of RM3 billion for CNG.
17.35 Current petrol specification based on EURO 2M standard has a higher concentration
of sulphur at 500 parts per million (ppm) and 5% benzene, which is carcinogenic. In
comparison, EURO 4M which is of a higher petrol standard, contains 50 ppm sulphur and
3.5% benzene in its emissions. However, the roll-out of EURO 4M and EURO 5 for petrol and
diesel requires new investment for additional processing, which needs to be balanced with
the right pricing for the consumers. The benefit in the adoption of EURO 4M and EURO 5
fuel standards would be better air quality while usage of CNG as an environment-friendly
clean fuel could help the nation realise its pledge to reduce GHGs emission by 40% carbon
intensity to the gross domestic product (GDP) by 2020 as compared to 2005 baseline.
Lack of Focus in the Downstream Subsector

17.36 There has been limited growth in the downstream of oil and gas subsector as
currently the main focus is on upstream activities to yield crude oil and gas. The nation has
only four facilities refining oil and gas into petroleum products, with the combined refining
capacity of 635,000 bpd of crude oil. The largest refinery is in Sungai Udang, Melaka with a
capacity of 270,000 bpd, followed by 234,000 bpd in Port Dickson, Negeri Sembilan and
123,000 bpd in Kerteh, Terengganu which are not sufficient to tap into the increasing local
and regional demand for refined petroleum products by 2020. The Organisation of
Petroleum Exporting Countries World Oil Outlook 2014 forecasted the demand for refined
products in the Asia-Pacific region excluding Peoples Republic of China, is expected to
increase from 19.2 million bpd in 2013 to 21 million bpd in 2020. In addition, the

17-18
International Energy Agency Oil Market Outlook 2014 indicated the non-Organisation for
Economic Co-operation and Development countries in Asia demand is expected to expand
by approximately two million bpd by 2019. This is more than the regions planned refinery
capacity expansions thus, requiring the need to upgrade current refineries and construct
new infrastructure.
Heavy Reliance of Local Companies on Domestic Jobs in the Oil and Gas
Services Industry
17.37 There are more than 4,000 companies serving 40 different activities in the domestic
OGSI. Approximately 90% of the turnover for the local OGSI companies is derived from
domestic jobs of which 84% of the total turnover is from services and 16% from
manufacturing. The competitive edge of the local companies in the international front is
limited as compared to their counterparts due to the following factors:
Lack of size and capacity to bid for international tenders. Two thirds of the
companies have a paid up capital of less than RM1 million, as shown in Exhibit 17-14.
In addition, 78% of these companies have less than 50 employees;
Higher cost structure; and
Services activities in the upstream E&P mostly utilise off-the-shelf imported

technologies.
Exhibit 17-14:
Malaysian Oil and Gas Services Companies by Paid-Up Capital, 2011
Source: Malaysia Petroleum Resources Corporation

17-19
Uneconomic Demand Areas for Piped Gas Coverage

17.38 There are still pockets of areas with low demand which could not be reached by gas
distribution pipeline because it is not economically viable. These small pockets of demand
centres such as Pekan and Mentakab in Pahang, Kinta Valley in Perak and Kota Kinabalu in
Sabah, require gas for industrial purposes. Currently, more expensive fuel such as diesel,
liquefied petroleum gas (LPG) and medium fuel oil are used as alternatives. In order to lower
industrial production costs in these areas, alternative ways of delivering natural gas need to
be explored.
Heavily Discounted Fuel Price

17.39 Natural gas is heavily subsidised even though some are sourced at market prices
from Indonesia and Malaysia-Thailand Joint Development Area (JDA). Subsidised energy
prices are not sustainable which unintentionally promotes an energy intensive economy.
Efforts to rationalise gas subsidy were taken but has yet to bridge the price gap between
LNG and piped natural gas. Current regulated natural gas price of RM15.20/MMBtu for
electricity subsector is below the weighted average LNG price of RM48/MMBtu in 2014.
Cumulative subsidy for natural gas until 2014 is approximately RM227 billion. Compounding
the issue, the LPG price structure which is also heavily subsidised has not changed since
1983.
17.40 The electricity subsector faces multi-dimensional challenges to deliver reliable and
affordable electricity supply to consumers as well as to support national development
objectives. The key challenges are depleting indigenous energy resources, increasing costs
of new planting up, volatile fuel prices, high consumption growth rate and strong public
concerns on the issues of environment. The issues faced by the electricity subsector during
the Tenth Plan are as follows:
Overdependence on fossil fuels;
Impasse to comprehensively reform the electricity supply industry;
Moderate growth in renewable energy; and
Lack of holistic demand side management.
Overdependence on Fossil Fuels

17.41 The generation mix for the electricity subsector continues to rely heavily on fossil
fuel3 sources amounting to 92.6% in 2006, 92.4% in 2011 and 90.6% in 2013, as shown in
Exhibit 17-15. Although the Government has introduced the Four-Fuel Diversification Policy
3
Fossil fuel refers to oil, gas and coal.

17-20
in 1981 and Five-Fuel Diversification Policy in 2000, there are still economic constraints to
reduce dependency on fossil fuels, particularly natural gas and coal. One of the factors
contributing to the unbalanced energy mix is the highly subsidised natural gas, which is the
preferred fuel for the electricity subsector as it incurs the least cost. On the other hand, by
reducing subsidy for natural gas, coal would become a more economically attractive source.
In addition, hydro sources potential are almost exhaustively developed except in Sabah and
Sarawak. Apart from that, RE has limitation on the cost of the technology and stability of the
energy supply system.
Exhibit 17-15
Generation Mix by Fuel, 20062013
Notes: * Renewables including solar PV, mini hydro, biogas, municipal solid waste except biomass
** Others refer to co-generation and self-generation
Impasse to Comprehensively Reform the Electricity Supply Industry

17.42 Malaysia Electricity Supply Industry (MESI) was targeted to undergo gradual reform
through various initiatives, as shown in the Box 17-2. However, the reforms had not been
comprehensively carried out. Seven of these initiatives were successfully implemented
while another two initiatives namely establishment of Stabilisation Fund and separate
agency roles for policy and planning, were not implemented as they were deemed not
feasible. The implementation of tariff setting mechanism still requires approval from the
Government. The complete reform would require a holistic restructuring the existing
institutional frameworks involving Ministries and Agencies.

17-21
Box 17-2
MESI Reform Initiatives
MESI reform initiatives ensure a reliable, high-quality and cost-effective supply of
electricity. MESI has gradually departed from conservative and overlapping institutional
structures as well as rigid cost mechanism towards a well-defined industry that enables a
level playing field and implementation of performance based cost recovery structure.
MESI restructuring takes into account energy security and sustainability issues to increase
the competitiveness of the electricity subsector and thus attract new investors and
industry players. All nine MESI reform initiatives were introduced in 2011. The
implementation of these initiatives was prioritised due to their complexity and
involvement of multiple stakeholders.
The goals of MESI are to:
o
ensure uninterruptible electricity supply for industry players to invest in additional
capacity, operational improvements and new technology; and
o
provide equitable and affordable electricity through reasonable end-user tariff,
access for rural areas, increased consumer choice and enhanced service standards.
MESI reform covers 9+1 initiatives of which the last initiative is to ensure all the packages
are executed for a balanced outcome. All these initiatives relate to governance and policy,
tariff, fuels and industry structure. The initiatives under MESI reform are as shown below:
Notes: 1. Market price, paid to PETRONAS, offset by cash subsidy on fixed gas volume allocated to
the industry i.e. 1350 mmscfd
2. Single Buyer: Entity responsible for contracting power plant capacity. System Operator:
Entity responsible for scheduling and dispatching generation capacity
* Numbering does not indicate sequencing of reform packages
Source: MyPOWER

17-22
Moderate Growth in Renewable Energy

17.43 SEDA has targeted 415.5 MW of RE out of total installed capacity based on approved
FiT applications by 2014. However, as of 31 December 2014, only 243.4 MW was connected
to the grid. There are many challenges in the RE industry, especially on the reliability of RE
plants and problems in securing adequate feedstock for long-term supply, particularly for
biomass. Other challenges are lack of experts in the sector including RE project developers,
financial personnel as well as service providers and difficulties to secure financing to
develop RE installations. The current RE sources are focusing on biomass, biogas, mini hydro
and solar photovoltaic (PV) while new RE sources has not been explored extensively.
Lack of Holistic Demand Side Management

17.44 Many efforts were taken to implement EE and energy conservation measures by
various government and private agencies such as retrofitting of selected government
buildings, MEPS, SAVE programmes and usage of green building rating tool namely Green
Building Index (GBI). However, there is no comprehensive long-term DSM policy for efficient
management of energy sources. The DSM master plan would cover the entire spectrum
including electrical, thermal and transportation sector energy usage. A comprehensive
policy would ensure well-coordinated efforts could be undertaken rather than
independently pursued projects with short-term targets. This will provide holistic and
comprehensive information for nationwide DSM implementation. Beside this, the Special
Industrial Tariff (SIT) discourages efficient use of energy by the industrial customers.
IV.
ELEVENTH MALAYSIA PLAN, 20162020: WAY FORWARD
17.45 The main strategies for the energy sector will be focused on improving infrastructure
and service deliveries. Specific strategies in tackling governance and public communication
issues will be undertaken. The oil and gas subsector will be strengthened by improving
security and reliability of supply, instituting regulatory framework for gas market, enhancing
the downstream business and eliminating market distortion. The strategies for the
electricity subsector will focus on creating a sustainable tariff framework, better
management of resources and enhancing rural electrification. DSM marks an important
paradigm shift for Malaysia towards efficient management of energy sources.

17-23
Energy Sector
Improving Governance
Establishing Focal Point for Energy-Related Issues
17.46 The energy sector governance landscape across various ministries and agencies
mandated to plan and implement policies relating to supply, demand and market
intervention. There are currently many Government agencies which have jurisdiction on
energy issues making it a hugely fragmented sector. The roles of these multiple agencies
need to be streamlined for greater accountability, clarity in roles and responsibilities in the
energy sector. This includes oil and gas, electricity supply industry involving policy and
regulatory functions for effective management of the subsector.
17.47 Comprehensive governance allowing more structured inter-agency collaboration in
the area of planning and management for the energy sector will be instituted. In this regard,
National Petroleum Advisory Council has been established to oversee comprehensive
planning and management of the energy sector and streamline the interests of all parties.
Communication Plan
Improving Communication Plan on Tariff Increase
17.48 A comprehensive and effective communication plan on the sustainable use of energy
sources is required. This will improve public awareness and understanding as well as
manage public acceptance of the subsidy rationalisation programme. KeTTHA with the
collaboration of related agencies and utility companies will continuously develop a rigorous
communication plan to improve public awareness on these issues through the electronic,
printed, and social media. This is to ensure the industries and public are well informed on
energy-related decisions made by the Government.
Implementing Communication Plan on Coal and Nuclear Power Plant

17.49 Managing public perception towards development of coal-fired and nuclear power
plant are crucial to overcome negative perceptions. The public must be informed on
availability of new clean coal and emission control technologies to protect the environment.
This includes communication and public awareness programmes to build buy-in for the
development of coal and nuclear power plants required for security of electricity supply. As
the country is preparing to embark on use of nuclear power, communication plan need to

17-24
be rolled out immediately. The Government will spearhead coordinated communication

plan for this purpose. This initiative will incorporate public communication, stakeholder
management strategies and plans of actions. Specific strategies will be targeted for civil
society, non-governmental organisations (NGOs), mass media, teachers, community leaders
and other relevant groups.
Inculcating Sustainable Energy Use

17.50 A comprehensive communication plan will be undertaken in the Eleventh Plan to
create awareness and educate the public, industry players and business people on
sustainable energy use. The action plans will inculcate EE measures as a way of life through
behavioural changes by understanding the principles of sustainable development and
efficient use of energy beginning from their homes, schools and also at work places.

17.51 The strategy canvas for the oil and gas subsector, as shown in Exhibit 17-16.
Exhibit 17-16
Strategy Canvas for Oil and Gas Subsector

17.52
17-25
There are seven initiatives identified for the oil and gas subsector as follows:
Strengthening gas supply security and connectivity;
Enhancing regulatory framework to promote competition;
Enforcing cleaner fuel standard;
Stimulating investment in downstream subsector;
Increasing local oil and gas services industry competitiveness;
Improving distribution of natural gas; and
Rationalising fuel subsidy.
Targets
No. Item
1.
2.
3.
4.
5.
6.
7.
Target
Security of natural gas Peninsular Malaysia:

supply
supply a total of 2,500 mmscfd
operationalise RGT-2 by 2017
provide additional buffer from:
o 10% supply from swing field offshore East Coast of
Peninsular Malaysia (100-200 mmscfd)
o 15% supply storage in RGT-1 Sungai Udang, Melaka
(39,000 m3)
Sabah:
link Sabah-Sarawak Gas Pipeline (SSGP) to Federal
Territory (FT) Labuan
provide alternative bypass between platforms
Regulatory framework
Enforce amendment of Gas Supply Act, 1993 (Act
501) in 2016
Ensure third party access to the Peninsular Gas
Utilisation pipeline and regasification terminal
Clean fuel usage
Roll out EURO 4M fuel standard for RON95 by 2018
Roll out EURO 5 diesel standard by 2020
Growth in downstream oil Increase petrochemical production capacity to 19.8
and gas industry
mtpa
Attract private investment worth RM125 billion
Developing the oil and gas Increase OGSI contribution to 15% of the overall oil
services industry (OGSI)
and gas subsectors GDP
Increase the ratio of revenue from domestic to
international to 85:15
Virtual pipeline
Promote operation of 24 prime mover trucks
equipped with 74 trailers in Peninsular Malaysia for
delivery of Compressed Natural Gas (CNG)
Operation of 17 prime mover trucks equipped with 28
trailers in Sabah for delivery of CNG
Fuel subsidy rationalisation Rationalise piped natural gas and CNG price to market
parity

17-26
Strengthening Gas Supply Security and Connectivity

17.53 Concerted efforts will be undertaken to increase and enhance security of gas supply
as follows:
Construction of additional pipeline from JDA to the gas receiving terminal in Kerteh,
Terengganu;
Development of RGT-2 in Pengerang, Johor;
Commissioning of two floating LNG units offshore Sabah and Sarawak;
Continuous application of advanced technology to extract oil and gas from matured
and marginal fields;
Additional pipeline connections from offshore fields to the demand centres in

Kimanis and Kota Kinabalu, Sabah as well as Federal Territory (FT) Labuan;
Provision of alternative bypass through multiple links in the event of any platform
shutdown;
Establishment of a pipeline connection between SSGP and FT Labuan; and
Strengthening of National Strategic Reserve to reduce risk of gas curtailment during

unplanned events through the following measures:
o
A swing field from offshore Peninsular Malaysia will provide 10% buffer of
total supply volume between 100-200 mmscfd into gas processing plant in
Kerteh, Terengganu to cater for east coast and southern Peninsular Malaysia
demand; and
o
RGT-1 to have a 15% buffer of storage capacity to cover west coast
Peninsular Malaysia demand centres.
Enhancing Regulatory Framework to Promote Competition

17.54 The Gas Supply Act, 1993 (Act 501) will be amended to create a level playing field for
third party gas players to utilise natural gas supply infrastructure which are the Peninsular
Gas Utilisation (PGU) pipeline and regasification terminal (RGT) at fair and transparent fees.
The amended Act will be enforced in 2016 by ST covering economic regulation of domestic
natural gas market spanning RGT, PGU pipeline and distribution pipeline infrastructure. This
effort will unlock the additional revenue from the gas industry valued at estimated RM2.9
billion.
Enforcing Cleaner Fuel Standard

17.55 During the Eleventh Plan, higher fuel standard will continue to be enforced towards
making the transportation sector more environment-friendly. RON95 petrol with EURO 4M
standard will be rolled out by 2018 and EURO 5 diesel standard by 2020. The superior EURO
4M petrol standard with maximum 50 ppm sulphur content and 3.5% benzene will replace

17-27
the current EURO 2M petrol standard, in line with the Environmental Quality (Control of
Petrol and Diesel Properties) (Amendment) Regulations 2013. The usage of bio-diesel will
reduce the nations dependency on imported diesel fuel. In addition, the current B7
programme will be further enhanced to the B15 programme (blending of 15% palm-based
methyl ester with 85% petroleum diesel) in all sectors by 2020. The bio-diesel programme
led by the Ministry of Plantation Industries and Commodities, offers the energy and
transportation sectors, a sustainable, renewable, and environment-friendly source of
energy.
Stimulating Investment in Downstream Subsector

17.56 The downstream subsector development will be anchored by the PIPC Project.
National petrochemical production will be increased to 19.8 mtpa and refining capacity to
1.2 million bpd, requiring investment worth RM125 billion. Investments in PIPC will include
development in refineries, petrochemical plants, crude oil and petroleum products storage
as well as trading. In addition, the complex will have a 1,220 MW co-generation power plant
of which 620 MW will be utilised by RAPID and the remaining 600 MW exported to the grid.
The Government will provide support to construct essential infrastructure such as roads,
drainage, and utilities for this development. The third project will be secured by the Johor
Petroleum Development Corporation during the Eleventh Plan to complement existing
investments by DIALOG-Vopak and PETRONAS.
Increasing Local Oil and Gas Services Industry Competitiveness

17.57 Increasing technological prowess and workforce capabilities among the local players
will be the special emphasis in the Eleventh Plan. Industry players will be assisted to develop
and own proprietary technologies to gain competitive edge to penetrate the regional
market. Efforts will be focussed in developing specific technologies in the three identified
clusters. This will be achieved via intense collaboration between industries and universities.
An initiative to create an Industry Centre of Excellence (ICoE) for each cluster will be
implemented. Initially, this initiative will be anchored by Universiti Teknologi Petronas for
process engineering, Universiti Teknologi Malaysia for marine systems and Universiti Malaya
for subsurface.
17.58 ICoE will assist local companies to enhance regional competitiveness and
competency of the workforce in the industry. Programmes namely Structured Internship
Programmes, Graduate Employability Programmes and industry driven research and
development (R&D) programmes will be implemented to ensure adequate supply of
qualified skilled oil and gas manpower. Malaysia Petroleum Resource Corporation will
coordinate and monitor the implementation of this initiative.
Improving Distribution of Natural Gas

17-28
17.59 Distribution of natural gas to scattered demand areas in Peninsular Malaysia and
Sabah will be improved through the virtual pipeline, which is the distribution of natural gas
from city gate to consumers using trucks. A total of 41 prime mover trucks and 102 trailers
are expected to be in service for this purpose. Industrial users in these areas are expected to
be able to produce products at a lower energy cost. Alternative distribution methods, which
are safe and economic will also be explored.
Rationalising Fuel Subsidy

Reducing Market Distortion
17.60 Sustained efforts to institute market-based energy pricing will be carried out to
reduce the energy subsidies. Initiatives to review the pricing structure for gas supply will be
continued to gradually align current piped gas prices towards market parity. In addition, IBR
for gas will be introduced to ensure efficient resource allocation, usage and sustainable
financial performance. The price for RON95 petrol, RON97 petrol and diesel will continue to
be regulated using managed-float system to stem leakages. CNG prices will also be reviewed
accordingly to gradually remove subsidies and encourage expansion of CNG retail
infrastructure.
17.61 The strategy canvas for the electricity subsector, as shown in Exhibit 17-17.
Exhibit 17-17
Strategy Canvas for Electricity Subsector

17.62
17-29
There are 5 initiatives identified for the electricity subsector as follows:

Ensuring energy security through better management of resources;
Creating a sustainable tariff framework;
Improving efficiency and reliability of electricity supply;
Augmenting rural electrification; and
Increasing share of renewables in energy mix.
17.63 The electricity subsector needs to strike a balance between security of supply,
efficient utilisation and environment preservation. The targets set for the Eleventh Plan are
as follows:
No
1.
2.
3.
4.
5.
6.
Item
Fuel diversity index, the HirchmannHerfindahl Index (HHI)
Installed Capacity & Reserve Margin for:
Peninsular Malaysia
Sabah
Sarawak
Target
Achieve below 0.5
24,943 MW with reserve margin of 20%
RE capacity in Peninsular Malaysia and

Sabah
2,080 MW or 7.8% of total installed capacity
Increase generation capacity in Peninsular

Malaysia
SAIDI for generation, transmission and
distribution
Peninsular Malaysia
Sabah
Sarawak
Strengthen Sabah electricity grid for
reliability
Subsidy rationalisation for electricity tariff
Initial milestones for nuclear power
development
7,626 MW from new generation capacity &

2,253 MW by extending retiring units
50 minutes/customer/year
Transmission and distribution networks
reinforcement
Tariff review to achieve market price
Establishment of an atomic energy regulatory
commission
Atomic Energy Regulatory Bill passed by
Parliament
Public engagement for acceptance of nuclear
power plant development
Achieve 99% national coverage
Instituted before 2020
Exploring new RE sources

Enhancing capacity of RE personnel
Implementing net energy metering
Initiated by 2017
7.
8.
9.
10.
Augmenting rural electrification

A high level focal point in the Government
for decision making on energy policy
Increasing share of renewables in energy
mix
A comprehensive communications plan on
issues related to tariff increase as well as
construction of coal and nuclear power

17-30
plants
Ensuring Energy Security through Better Management of Resources

17.64 The development of the electricity subsector will continue to take into account
economic, social and environment considerations with view towards maintaining optimum
generation mix. In managing the resources efficiently, the Hirchmann-Herfindahl Index (HHI)
will be adopted with target to maintain below 0.5 in 2020 for electricity subsector. HHI
exceeding 0.5 reflects overdependence on certain fuel resource and HHI for 2014 is 0.45
which indicates a healthy index. In reducing the electricity generation from fossil fuels, RE
needs to be enhanced and the potential of implementing nuclear energy for electricity
generation need to be initiated. The possibility of transferring hydro power from Sarawak to
Peninsular Malaysia will also be considered.
17.65 Utilisation of RE sources including biomass, biogas, solar PV and mini hydro will be
continued as alternative fuel sources for electricity generation. In addition, the potential of
geothermal, wind and ocean energy will also be explored. RE capacity is expected to reach
2,080 MW by 2020, contributing to 7.8% of total installed capacity in Peninsular Malaysia
and Sabah.
17.66 The implementation of Nuclear Power Infrastructure Development Plan and Nuclear
Power Regulatory Infrastructure Development Plan would be an important step to develop
nuclear power for electricity supply in the Eleventh Plan. This will support the multiple goals
of improving energy security, spurring economic development as well as reducing GHGs
emission. A new independent atomic energy regulatory commission will be established. A
10-Year Comprehensive Communication Plan and Strategies on Nuclear Power for electricity
will be continued to increase awareness and public acceptance.
Creating a Sustainable Tariff Framework

Strengthening of Incentive-based Regulation
17.67 The implementation of IBR will be continued to ensure utility companies provide
efficient services. The IBR framework is designed to incentivise utility companies to reduce
costs and improve service levels. The separation of generation, transmission and
distribution tariffs with automatic adjustments will take into account changes in fuel prices
to increase transparency and efficiency of electricity supply. New power plants and
extensions of existing power plants will continue to be undertaken through competitive
bidding for greater transparency. This will create healthy competition among industry
players resulting in more competitive tariffs and in turn benefiting end-consumers.

17-31
Rationalising Subsidy for Electricity Tariff

17.68 Fuel cost is the largest input in the electricity tariff and the generation fuel mix needs
to be optimised to ensure low cost of supply and affordable tariff. In line with the policy to
gradually remove energy subsidies, the tariff requires periodical adjustments. Therefore, the
electricity tariff will be reviewed to achieve market parity. Based on current tariff structure,
the first 300 kilowatts hour (kWh) of electricity consumption, which is the lifeline band will
not be affected with the tariff increase.
Improving Efficiency and Reliability of Electricity Supply

Ensuring Security of Natural Gas Supply
17.69 Various efforts will be undertaken to ensure security of natural gas supply which is
significant to the reliability of electricity supply. Key efforts include increasing PGU capacity
through the laying of additional pipelines and installing another receiving terminal in Kerteh,
Terengganu to receive additional gas volume from JDA. In addition, the commissioning of
RGT-2 is expected to increase the gas supply to Peninsular Malaysia.
Increasing Generation Capacity, Reinforcing Transmission and Distribution

Networks
17.70 New investments on generation capacity and reinforcement in transmission and
distribution networks will be continued. Construction of new power plants to generate
7,626 MW will be initiated to meet the growing demand and replace retiring plants. A
number of 500 kilovolts (kV) and 275 kV transmission projects are currently under
construction and will be completed during the Eleventh Plan. These projects will enhance
the security of supply to major load demand centres, particularly the central region
encompassing Kuala Lumpur-Klang Valley area and to other strategic locations in Prai, Pulau
Pinang; Tanjung Bin and Pengerang, Johor.
17.71 Electricity supply in Sabah will be strengthened through constructing and upgrading
of generation, transmission as well as distribution systems to reduce limitation on the
system and improve operational flexibility. The peak demand is projected to increase at an
average rate of 6.4% per annum from 983 MW in 2015 to 1,331 MW in 2020. A 180 MW
hydro power plant in Upper Padas and a 300 MW gas-fired power plant in Sandakan are
scheduled to be constructed in the Eleventh Plan to ensure sufficient generation capacity. In
addition, several transmission and distribution lines projects will be undertaken which are as
follows:

17-32
Construction of transmission lines from Upper Padas to Mengalong, Sipitang and

Segaluid to Seguntor; and
Construction of 33 kV and 11 kV distribution lines in Kent, Donggongan and
Menggatal.
17.72 In anticipation of the projects planned in the Sarawak Corridor of Renewable Energy,
the peak demand in the state is projected to increase at an average rate of 10.3% per
annum from 2,935 MW in 2015 to 4,306 MW in 2020. The projected demand will require
additional capacity in the system from the installed capacity of 4,109 MW in 2014. Thus, two
units of 300 MW Balingian coal-fired power plants will be commissioned by 2018.
17.73 SAIDI in Peninsular Malaysia is targeted to improve from 60.4 minutes/customer in
2013 to 50 minutes/customer in 2020 indicating further improvement to the electricity
supply. In Sabah, the completion of major networks and additional generations in Upper
Padas and Sandakan by 2019 will further reduce SAIDI from 424 minutes/customer in 2013
to 100 minutes/customer by 2020. SAIDI in Sarawak is expected to be reduced from 168
minutes/customer in 2013 to 157 minutes/customer by 2020 with the completion of
Balingian power plant as well as several transmission and distribution networks
reinforcement projects.
Augmenting Rural Electrification

17.74 Rural electrification programmes, especially in Sabah and Sarawak will be enhanced
to improve national coverage to 99% by 2020 from the current coverage of 94% and 91%
respectively. Electricity supply would be provided through off-grid systems for areas which
are too far from the grid.
Increasing Off-grid Generation

17.75 The focus of rural electrification is to continue with off-grid generation for remote
and isolated areas. The development of alternative systems such as solar hybrid, mini and
pico hydro will be supported by off-grid networks to ensure wider coverage. A pico hydro is
a small-scale system with a generation capacity between 0.1 kW and 1 kW which uses
flowing water to rotate electrical generator turbines. This system is suitable for rural areas
as it does not require construction of dams and has no impact on the environment.

17-33
Strengthening Community Involvement

17.76 Community involvement in providing rural electrification will be promoted. The
Government will explore collaborations with relevant communities to ensure sustainability
of rural electrification systems. Partnership with NGOs will be formed to provide electricity
supply for the rural communities using micro hybrid and RE sources. The communitys
involvement from an early stage is important to reduce the cost of development and
maintenance of the electrification system.
Increasing Share of Renewables in Energy Mix

17.77 In the Eleventh Plan, focus will be given in exploring new RE sources, enhancing
capacity of RE personnel and implementing NEM to further intensify the development of RE.
Exploring New Renewable Energy Sources

17.78 Studies will be conducted to identify new RE sources to diversify the generation mix.
In the Eleventh Plan, new RE sources such as wind, geothermal and ocean energy will be
explored. Currently, the national wind mapping exercise is underway and it is expected to
be completed by 2016. The exercise will further enable a study on the feasibility of wind
energy to be developed. Geothermal potential will also be further explored with the
discovery of a 12 square kilometres geothermal field in Apas Kiri, Sabah. Viability of ocean
energy will be explored to take advantage of Malaysias geographical position of being
surrounded by sea.
Enhancing Capacity of RE Personnel

17.79 The RE industry will diversify Malaysias energy mix in a more sustainable manner,
create employment, and enhancing skills. The industry is expected to create about 15,300
jobs, comprising of skilled and semi-skilled jobs. In this regard, the Government will provide
training to 1,740 personnel through SEDA, as shown in Exhibit 17-18. These trainings will
create experts in the field of biomass, biogas, mini hydro and solar PV. The participants will
be employees from the industry such as RE project developers, financial institutions and
potential service providers. In addition, the private sector will be encouraged to conduct
training and increase the number of RE experts.

17-34
Exhibit 17-18
Proposed Training Programme for Renewable Energy Capacity Building, 2016-2020
Mini
Training
Biomass
Biogas
Solar PV
Total
Hydro
New training module
1
1
1
3
Participants (skilled)
130
100
150
300
680
Participants
210
170
250
430
1,060
(semi-skilled)
Number of training
13
10
16
30
69
Implementing Net Energy Metering

17.80 To complement the current FiT mechanism in encouraging the take-off of RE, a new
instrument termed as NEM will be implemented in the Eleventh Plan. The objective of NEM
is to promote and encourage more RE generation, by prioritising internal consumption
before any excess electricity generated is fed to the grid. NEM is anticipated to encourage
manufacturing facilities and the public to generate electricity without any restriction on
their generation capacity. This will further assist the Governments effort to increase the
contribution of RE in the generation mix. NEM will be executed by KeTTHA and utility
companies and regulated by ST based on amended legal provisions.

The strategy canvas for the DSM, as shown in Exhibit 17-19.
Exhibit 17-19
Strategy Canvas for Demand Side Management

17-35
17.81 The initiatives for DSM are as follows:

Reinvigorating demand side management
Formulating a comprehensive demand side management master plan

Demand side measures for buildings, industries and households
Increasing number of registered electrical energy manager
Promoting energy services companies for Government and private buildings

maintenance
Increasing number of retrofitted Government buildings
Promoting ISO 50001 for buildings and industries
Implementing Enhanced Time of Use (EToU) tariff
Abolishing the Special Industrial Tariff (SIT)
Promoting co-generation
Implementing smart grid
Enhancing Minimum Energy Performance Standard (MEPS) and labelling

17.82 DSM is set to be a major shift for the energy sector in the Eleventh Plan. In the
previous five year development plans, focus was on supply-side management to meet the
energy demand. DSM is expected to bring significant cost benefits to energy users through
reduction of energy demand and prudent management of energy sources. The targets in the
Eleventh Plan are as follows:
No.
Item
1. Comprehensive longterm DSM master plan
2.
Buildings
3.
Industries
4.
Households
Target
Formulating policy and action plan covering the entire
spectrum of the energy sector including electrical, thermal
and usage in the transport sector
Achieve 700 Registered Electrical Energy Manager (REEM)
Extend Energy Performance Contracting (EPC) to other
government buildings
All new government buildings to adopt energy efficient design
Retrofit 100 government buildings
Register 70 Energy Service Companies (ESCOs)
Target 100 companies to implement ISO 50001
Introduce Enhanced Time of Use (EToU) with three different
time zones
Abolish Special Industrial Tariff (SIT)
Install 4 million smart meters
Increase on-grid co-generation capacity of 100 MW or more
by reviewing utility standby charges
Additional appliances with Minimum Energy Performance
Standard (MEPS) and labelling programme

17-36
Reinvigorating Demand Side Management

17.83 A comprehensive long-term DSM master plan is required for prudent energy usage.
The Economic Planning Unit, Prime Ministers Department (EPU) will initiate a study on DSM
which covers the whole spectrum of the energy sector. DSM is a vital tool to reduce peak
electricity demand impacting the overall load on an electricity network. This will have
beneficial effects including mitigating electrical system emergencies and increasing system
reliability. It will also result in less dependence on expensive imports of fuel, reducing peak
electricity demand and minimising harmful emissions to the environment.
17.84 DSM will be able to maximise the return on utilisation of existing and new electricity
supply assets. The flattening of the demand curve will positively constrain demand growth
and result in deferment of construction of new electricity supply infrastructure. The scope
of the new DSM master plan will include the electric and thermal energy, including usage in
the transportation sector.
Buildings
Increasing Numbers of Registered Electrical Energy Manager
17.85 ST expects to enlist 700 Registered Electrical Energy Managers (REEM) by 2020,
which is an increase of 29% from the current 497 REEM. These energy managers will
strengthen the enforcement of the Efficient Use of Electrical Energy 2008 Regulations to
ensure all electrical installations comply with the law. Currently, two entities are offering
training for REEM to accelerate the number of competent energy managers. ST will continue
to accredit identified universities and skill training institutes to conduct the REEM
programmes.
Promoting Energy Services Companies for Government and Private Buildings

Maintenance
17.86 Currently, there are 50 active Energy Service Companies (ESCOs) in the country. By
the end of the Eleventh Plan, the number will be increased by 29% to 70 ESCOs. This is a
new business venture which could be promoted in the energy sector. The ESCOs are
essential in accelerating the implementation of Energy Performance Contracting (EPC)
concept which could spin off new entrepreneurs. EPC has an important role in assisting
building owners to use energy efficiently as well as reduce utility bills.

17-37
Increasing Numbers of Retrofitted Government Buildings

17.87 Most of new government buildings currently are fitted with EE features. The
Government has initiated retrofitting measures for existing buildings in an effort for them to
be energy efficient. This has been a promising venture as the EPU and Ministry of Finance
buildings were retrofitted with a payback period of 1.6 years and 4.7 years, respectively.
During the Eleventh Plan, the EPC concept will be used to retrofit 100 government buildings.
Promoting ISO 50001 for Buildings and Industries

17.88 ISO 50001 is the Energy Management System (EMS) framework to improve the
organisations energy management. A total of 100 companies are targeted to implement ISO
50001 from the current eight companies. This standard will ensure companies undergo a
systematic measure for EE practices. All government agencies will be encouraged to develop
and implement an EMS plan in line with ISO 50001.
Industries
Implementing Enhanced Time of Use Tariff
17.89 At present, the Time of Use tariff offers two time zones which are peak and off-peak.
The EToU tariff will be introduced as an option to the low and medium voltage commercial
users as well as high voltage industrial users. This is an improved scheme with three
different time zones namely off-peak, mid-peak and peak to improve efficiency in load
management as well as minimising operational costs. The tariff will also be extended to
domestic users. In the long-term, the EToU tariff will also be able to reduce generation
costs.
Abolishing the Special Industrial Tariff

17.90 In line with the rationalisation of energy subsidy and adoption of EE measures, SIT
will be abolished by 2020. Based on current SIT mechanism, companies with higher usage of
electricity will benefit from eligibility to more discounts. The total cumulative discounts
given from 1997 to 2013 under the SIT were RM5.2 billion. The abolishment of SIT will cause
electricity-intensive industries to implement EE measures and reduce their operation costs.

17-38
Promoting Co-Generation
17.91 Co-generation or combined heat and power system has been practiced in some of
the earliest installations of electrical generation. The result is a much more efficient use of
fuel which can generate substantial savings for the end user. Utility standby charges offered
by utilities will be reviewed to encourage industries to produce electricity through cogeneration. In the Eleventh Plan, policy and regulations on future co-generation
development will be comprehensively studied and formulated.
Implementing Smart Grid

17.92 The implementation of smart grid systems for the electricity industry with the
introduction of smart meters will assist customers in managing their own electricity supply.
A total of 4 million smart meters will be installed by 2020 at an estimated cost of RM4 billion
by the utility company. Smart grid will benefit customers to obtain information on their
electricity usage. By harnessing smart grid facilities, consumers can make decisions in
optimising their electricity consumption and reduce their bills. It will also allow faster
outages detection and restoration of services, resulting in less disruption to customers.
Households
Enhancing Minimum Energy Performance Standard and Labelling
17.93 MEPS and energy labelling help to improve the energy efficiency of appliances
enabling consumers to choose products which uses less energy. An additional four domestic
appliances which are vacuum cleaner, instant water heater, iron and electric oven will be
included in the MEPS and labelling programme. There will be 14 appliances under this
programme and the scope of MEPS for air-conditioner and refrigerator will be expanded.
V.
CONCLUSION
17.94 Energy security is paramount to any economy. Sustainable usage of energy with
prudent and efficient management of resources will be a major focus in the Eleventh Plan.
Measures will be undertaken to ensure the reliable supply of energy and minimise supply
disruption. This will be done by strengthening the security of supply in the oil and gas
through enhancement of upstream and downstream infrastructure. The efficiency and
reliability of the electricity supply will be further improved through continued investments
in generation, transmission and distribution projects. A comprehensive DSM master plan
will pave the way towards a balanced management of the entire energy spectrum. In
addition, local capabilities in the energy-related industries and services will be promoted.

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Sustainable

For further information refer to:

Eleventh Malaysia Plan

TENTH MALAYSIA PLAN, 2011-2015: PROGRESS

Eleventh Malaysia Plan

2010 2013 2015e

Industrial include manufacturing, construction and mining.

Eleventh Malaysia Plan

Oil and Gas Subsector

Eleventh Malaysia Plan

Eleventh Malaysia Plan

Eleventh Malaysia Plan

Eleventh Malaysia Plan

Eleventh Malaysia Plan

Eleventh Malaysia Plan

Source: Energy Commission

Eleventh Malaysia Plan

Determination of financial performance and technical efficiency targets of the utility;

Implementation of the imbalance cost pass-through mechanism to enable the

Implementation of efficiency sharing mechanism to provide the utility a continuous

Eleventh Malaysia Plan

Key objectives of IBR are:

Eleventh Malaysia Plan

Notes: * Malaysia: figures from Tenaga Nasional Berhad

Eleventh Malaysia Plan

Source: Sustainable Energy Development Authority

Eleventh Malaysia Plan

Demand Side Management

Note: RT refers to Refrigeration Tonne

Eleventh Malaysia Plan

ISSUES AND CHALLENGES

Eleventh Malaysia Plan

Oil and Gas Subsector

Fragility of security and reliability of energy supply;

Lack of regulatory framework for competition in gas business;

Barrier to clean fuel usage;

Lack of focus in the downstream subsector;

Uneconomic demand area for piped natural gas coverage; and

Heavily discounted fuel price.

Fragility of Security and Reliability of Energy Supply

Eleventh Malaysia Plan

Lack of Regulatory Framework for Competition in Gas Business

Barrier to Clean Fuel Usage

Lack of Focus in the Downstream Subsector

Eleventh Malaysia Plan

Higher cost structure; and

Services activities in the upstream E&P mostly utilise off-the-shelf imported

Source: Malaysia Petroleum Resources Corporation

Eleventh Malaysia Plan

Uneconomic Demand Areas for Piped Gas Coverage

Heavily Discounted Fuel Price

Overdependence on fossil fuels;

Impasse to comprehensively reform the electricity supply industry;

Moderate growth in renewable energy; and

Lack of holistic demand side management.

Overdependence on Fossil Fuels

Fossil fuel refers to oil, gas and coal.

Eleventh Malaysia Plan

Impasse to Comprehensively Reform the Electricity Supply Industry

Eleventh Malaysia Plan