There is a growing concern about the high cost 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 price 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 domestic transport sector. Many medium and small scale industries are losing opportunities to tap into the Lng gas market as prices are soaring up because of the oversupply of this commodity lately.
The rising cost of Lng gas is having a negative effect on the competitiveness of the domestic energy sector. Domestic gas demand will deplete over time due to the rising price of Lng. Industry players are searching for ways to reduce the cost of production. Over the last few years, the Government has produced numerous changes to the way Lng is produced, which have helped to improve competitiveness and decrease the cost of Lng.
The Government’s efforts to market Lng production in Malaysia have resulted in many tax incentives for domestic production of Lng. Along with tax rebates, State Governments has also offered various incentives to Lng industry as a way of promoting competition. These incentives cover research and development costs, infrastructure development costs and the cost of maintaining a standard of production. Some of those rebates and incentives comprise the first point published in 2021, the extension of the current generation tax rate and the awarding of a 20 percent share of the total price of Lng development to all stakeholders.
Given the price of lng in Malaysian market, it is expected that the cost of lng in global market would also go up. This may result in the movement of Lng railroad cargo from Singapore into other Asian countries. If the trend continues, the cost of lng might become very high in Malaysia. In this scenario, the export of Lng could turn into an extremely competitive advantage for Malaysia in the global level.
The transportation of Lng by rail freight has a number of disadvantages. First, the cost 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 possibilities of a freight train accident are high on the open stretches of railroad track where you will find little or no railroad traffic and the probability of an accident is increased in areas where the population is dense.
On the other hand, the cost of air freight to Lng Industry in Malaysia is comparatively low because of the absence of government regulation and the lack of a railway network. Additionally, the expense of air cargo 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 absence of a railroad network, the expense of transportation by rail freight from and to Lng can be controlled. Air freight transport cost fluctuates from time to time in line with the fuel cost and the destinations. Hence, the cost of transport by air freight can be predicted fairly well.
Both the methods of transportation can offer the service of sending and receiving shipments to and from Lng by air or by rail. However, the cost of transport by air cargo remains high in comparison to that of rail freight. It’s important to note that if the Lng Industries believes that the expense of transport by air freight is high, they may reduce the volume of shipments. This could result in the loss of earnings for the Lng Industry.