There is a growing concern about the high price of Lng Malaysia. The purchase price of oil is an integral factor in the expense of living of Malaysia. As the country relies heavily on petroleum products and crude oil exports, the high cost of oil products and crude oil imports is felt by the Malaysian market every day. The high price of Lng gas particularly is affecting the national transport sector. Many medium and small scale businesses are losing opportunities to tap into the Lng gas market as prices are soaring up due to the oversupply of this commodity in recent years.
The increasing cost of Lng gas is having a negative impact on the competitiveness of the domestic energy industry. Domestic gas demand will deplete over time due to the rising cost of Lng. Industry players are searching for ways to decrease the expense of production. Over the last few decades, the Government has made numerous changes to how Lng is generated, which have helped to improve competitiveness and decrease the cost of Lng.
The Government’s attempts to market Lng production in Malaysia have led in several tax incentives for domestic production of Lng. In addition to tax rebates, State Governments has also offered various incentives to Lng industry as a means of promoting competition. These incentives cover research and development costs, infrastructure development costs and the price of maintaining a standard of production. Some of these rebates and incentives include the first point published in 2021, the expansion of the current generation tax rate and the granting of a 20% share of the whole cost of Lng development to all stakeholders.
Given the cost of lng in Malaysian market, it’s expected that the expense of lng in global market would also go up. This might result in the movement of Lng rail cargo from Singapore to other Asian countries. If the trend continues, the cost of lng may become very high in Malaysia. In such situation, the export of Lng could turn into a very competitive edge for Malaysia in the global level.
The transportation of Lng by rail freight has a number of disadvantages. First, the expense of lng is high due to the increased cost of fuel. Secondly, the risk of accidents and the likelihood of accidents is high on the railroad freight. The chances of a freight train accident are high on the open stretches of railroad track where there are little or no rail traffic and the risk of a collision is increased in areas where the population is dense.
On the other hand, the cost of air cargo to Lng Industry in Malaysia is relatively low because of the absence of government regulation and the lack of a railroad network. Moreover, the cost of air freight can be controlled since the cost of fuel is minimal. Moreover, air freight is fast means of transporting Lng from one location to another.
Due to the lack of a railway network, the cost of transport by rail freight from and to Lng could be controlled. Air freight transport cost varies from time to time according to the fuel cost and the destinations. Hence, the cost of transportation by air freight can be predicted fairly well.
Both the methods of transport can provide the service of receiving and sending shipments to and from Lng by air or by rail. However, the cost of transport by air freight remains high compared to that of rail freight. It’s important to remember that when the Lng Industries feels that the expense of transport by air cargo is large, they may reduce the volume of shipments. This would result in the loss of earnings for the Lng Industry.