Friday 29 Mar 2024
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KUALA LUMPUR (Dec 9): Malaysians may have to contend with more electricity subsidy rationalisation in 2016, amid lower oil and gas (O&G) prices, according to research firm Frost & Sullivan.

Subsidy rationalisation or cuts in the power industry essentially means policy makers will spend less money to subsidise consumers' electricity usage, as lower O&G prices hit government revenue.

Frost & Sullivan's Asia Pacific energy and environment vice president Ravi Krishnaswamy said developing countries, including Malaysia and India, could expect further rationalisation of subsidies as liquified natural gas (LNG) prices were likely to trade between US$7 per one million British thermal units (mmbtu) and US$8 mmbtu in 2016.

"It is a good opportunity (for subsidy rationalisation), because prices are low," Ravi said after a briefing on Frost & Sullivan’s energy and environment industry outlook for 2016.

Meanwhile, Frost & Sullivan Asia Pacific energy and environment director Subramanya Bettadapura said O&G-related companies would have to brace for lower revenue in 2016, as crude oil prices were expected to range between US$40 to US$50 a barrel.

He said countries like Malaysia and Brunei would have to brace for lower revenue from the O&G sector.

“Countries like Malaysia are trapped in debt due to subsidies, but with the GST (goods and services tax), cuts in fuel subsidies, and toll hikes, this won’t be a worry,” he said.

Crude oil prices have fallen. According to Bloomberg data, US oil for Feb 2016 changed hands at US$39.62 a barrel at 2:11pm. Over the last five years, US oil prices had traded at an intraday high of US$115.27 on May 6, 2011.

In LNG markets, gas for Jan 2016 delivery was traded at US$2.08 per mmbtu at 2:15pm. Over the last five years, prices reached an intraday high of US$6.49 on Feb 28, 2014.

Yesterday (Dec 8), the Malaysian government announced an electricity rebate of 1.52 sen per kilowatt-hour (kWh) from Jan 1 to June 30, 2016, from 2.25 sen per kWh currently.

The revised rebate will be applicable to all users, except domestic consumers with monthly consumption of 300 kWh and below.

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