Economic Transformation Programme (ETP).....Part 1

Assalamualaikum,

Now we are in Feb 2011. Clock is ticking much louder alarming us we are only have 9 years 10 months to Vision 2020, where we as a nation becoming developed country. There are a lot of criteria indicating developed country. Some like to compare with other developed country such as UK, USA etc. However, one of the main indicator is Gross National Income,GNI per capita or in Bahasa Melayu we call it as “Pendapatan Negara Kasar” per capita. Currently our GNI per capita is RM 23 700 per annum which translate average income of Malaysian are almost RM2000 per month. Towards 2020, as developed nation we must double this income into RM48000 per annum. With current GNI is RM 661 Billion, by 2020 with projected growth 6% per annum, the GNI must be RM 1.7 trillion.

To achieve this mission, 12 new key economy area, NKEA was highlighted under Economic Transformation Programme, ETP. Initiate by our Prime Minister, and steward by Dato Idris Jala, former CEO and mastermind behind turnaround programme for MAS, this is the first time Malaysia Goverment reveal its master economic plan. I must say that this is really bold and brave move by our government. When the plan already reveal to the public, now people are watching very closely the “delivery” process of the plan. Any mismanagement will might cause “death penalty” for current administration in the next General Election.

Back to GNI story, to achieve at least 6% growth, CHANGE is a must. Currently, most of our GNI come from:

1. 1. Service sector
2. 2. Palm Oil Industry
3. 3. Oil & Gas

However, for the 1^st part of this article, I will like to write about Oil & Gas Industry. One of the biggest obstacle for this Oil & Gas Industry in our country, we do not have large oil reserves like OPEC country. Even though number of wells drilled for the last 5 years are 3 times more than 70s, number of O&G resources decrease by 1/3 compared to the same period time as shows in Figure 1 & 2 below.

Next, our second biggest obstacle is energy industry itself. One of the major attraction for FDI in Malaysia is cheap electricity. Currently, Petronas is supplying Gas and fuel to power provider at subsidized price. Then, the power provider can produce and sell the electricity at cheaper price. However this contribute inefficiency in electrical usage in Malaysia. Most of gas from national gas grid are goes to power provider. As the resources are limited and demand from other industry, Petronas already set the limit amount of gas supply to this power provider. This situation already jeopardizing our electricity reserves as if no action taken now, we will has serious electricity problem by 2021, not very good for the beginning era as developed country. Besides that, our petrol and diesel for transportation also are heavily subsidized by government. Due to bad public transportation system had resulted increase of personal vehicle ownership every year.

Instead of these obstacles, we should together focus on our strength to move forward. 3 steps, SUSTAIN, GROW & DIVERSIFY. To continue develop O&G production (upstream), recovery of marginal oil fields are likely becoming the next growth in this sector. The marginal oil fields are the already explored oil wells but being abandoned due to lack of economic of scale for big player (Shell, Exxon). However, this is the first time we develop this sector in Malaysia, therefore pros and cons of it nobody is sure.

Our energy industry are heavily depends on petroleum which its price is very volatile. Malaysia now wants to focus itself as hub for LNG storage where this LNG price is not volatile as Petroleum. Our “beloved” neighbor, Singapore already develops its LNG storage underwater which can hold up to 10million cubic. However, due to lack of space to further expand its storage, Malaysia can complement Singapore by offering huge storage facility at various strategic locations, such southern Johor. Besides that, due to strategic location and availability of space to expand, we should create a policy to increase presence of major international oil services players like Houston in USA and Aberdeen in UK. However, bear in mind, Indonesia also aiming the same segment and already dedicated Tanjong Periuk at Pulau Jawa as integrated O&G services hub. Again, failure to achieve this target will resulted “death penalty” in the next General Election.

Moving forward in energy industry, the key to success lies in two words, DIVERSIFY & EFFICIENT. There are a lot of things can be done to improve efficiency such as:

• 1. Changing habits in using electricity such as increase the air-conditioning to 1C can save up to 4,300GWh.
• 2. Using high efficient appliance, eg: 5 stars refrigerators or lamp can save up to 7,300GWh.
• 3. Building Insulation can save energy 1,700GWh.

Government also expanding option in energy resources besides Oil and Gas such as Nuclear power plant for electricity generator, biodiesel blend in diesel and petrol start with 5%, expanding capacity for coal power plant, and encourage solar power generated.

Finally, as we discuss about oil&gas industry, we must see the energy industry as a whole. Dependent to fossil fuel such as gas, oil and coal are perfect disaster due to volatility of their price (demand from energy hungry like China & India and politic and natural disaster which can disrupt the supply chain as happens to coal when Quenssland in Australia, the biggest supplier coal to world facing massive flood last month.) Currently, Malaysian are waiting for incentives and encouragement from government to use green product such solar panel and reward in use energy efficiency. But yet, till now, nothings happens.