How Long Can Malaysia Remain Sheltered?

alecasolutions
Jun 10
4 min read

Updated: 6 days ago

Malaysia’s power sector is entering increasingly challenging territory. On one hand, the country continues to offer some of the lowest electricity tariffs in Southeast Asia, starting at just RM 0.22 per kilowatt-hour (kWh). On the other hand, a growing share of that power is generated using imported liquefied natural gas (LNG) which is bought at fluctuating and often high international market prices. This pricing gap, quietly covered by subsidies and state energy revenues, is emerging as one of the most pressing issues in the country’s energy policy.

Understanding the Energy Chain: From LNG to the Socket

To appreciate the financial and energy loss involved, we need to unpack how LNG turns into electricity. One kilowatt-hour of electricity, enough to power an iron for about 30 minutes, contains about 3,412 British Thermal Units (BTUs) of energy. However, getting that electricity from LNG is far from efficient.

LNG has to be:

Liquefied at origin,
Shipped in cryogenic tankers,
Regasified at receiving terminals,
And burned in gas turbines at electrical power plants.

Each step comes with energy losses. Globally, only about 28% of the original energy in LNG makes it through to the consumer as usable electricity. This means that to generate 1 kWh, you don’t just need 3,412 BTUs. Instead, you need around 12,186 BTUs of gas energy after accounting for losses.

Let’s put this in terms of 1 MMBTU (one million BTUs) of LNG:

1,000,000 ÷ 12,186 ≈ 82 kWh of electricity

That means for every MMBTU of LNG Malaysia imports, it can produce and sell only 82 kWh of electricity.

The Pricing Mismatch

Now here’s where the economics get tricky.

If Malaysia’s national utility, Tenaga Nasional Berhad (TNB) sells that 82 kWh at the minimum regulated tariff of RM 0.22, it earns:

82 × RM0.22 = RM18.04

Convert that to US dollars (assuming RM 4.30 to USD 1):

RM18.04 ÷ 4.3 ≈ USD 4.20

So, the Malaysian utility provider earns about USD $4.20 per MMBTU of imported LNG.

But LNG is rarely that cheap. In recent years, spot prices for LNG have fluctuated between USD 10 to USD 25 per MMBTU; depending on market volatility, global supply-demand conditions, and geopolitical risk. At a price of USD 15, Malaysia is effectively losing over USD 10 per MMBTU when selling electricity at current tariffs. This is before even counting TNB’s operating and maintenance costs, infrastructure depreciation, or regasification fees.

To simply break even on LNG costs alone while ignoring other capital and operational costs, electricity tariffs would need to be between RM 0.53 to RM 1.31 per kWh for consumers. That’s more than double or triple the current baseline price.

Why Malaysia is Caught in This Trap

Malaysia is still a major LNG exporter, selling about 29 million tonnes per annum (MTPA) mostly to Japan, Korea, and China. But domestic gas production is declining, especially in Peninsular Malaysia. To maintain local supply, Malaysia now imports around 1 MTPA of LNG, primarily from Australia and Qatar.

This makes the country a net exporter globally, but also a net importer regionally, particularly in the power-hungry Peninsular grid, where 36% of electricity is generated using natural gas.

The government, via subsidies and controlled tariffs, is keeping electricity affordable as a cornerstone of national policy.

However, this comes at a cost:

Public funds are being stretched to maintain subsidies.
PETRONAS revenue is used to cover the gap, reducing funds available for national development.
Consumers are shielded from true global energy costs, which distorts market signals.

Where This Could Go

If global LNG prices remain high, and Malaysia keeps importing more LNG to meet rising demand, the pressure on subsidies will only grow.

Either:

Electrical tariffs will have to increase,
Subsidies will have to balloon, or
Malaysia will need to transition more aggressively into renewable energy (RE) to break its dependence on imported fuels.

There is some relief on the horizon: new LNG export projects in North America and the Middle East are expected to increase global supply, potentially bringing global LNG prices down to the USD 8–10 range. This would help reduce subsidy needs however, it could hurt Malaysia’s own LNG export revenues, especially for Sarawak, which relies heavily on LNG exports as a key economic driver.

In Conclusion

Malaysia is stuck between two conflicting priorities: keeping electricity cheap and importing expensive LNG to generate it. This pricing paradox is economically unsustainable in the long run. As demand grows, domestic supply shrinks, and global prices fluctuate, Malaysia must urgently rethink its pricing model or risk placing unbearable pressure on public finances, utilities, and consumers alike.

The only real escape? Greater efficiency, smarter tariffs, and a long-term pivot to renewables. These must be put in action before the cost of clinging to cheap power becomes too expensive to bear.