There is a growing concern about the high price of Lng Malaysia. The purchase price of oil is a key factor in the expense of living of Malaysia. As the nation relies heavily on petroleum products and crude oil exports, the high price of oil products and crude oil imports is sensed by the Malaysian market daily. The high price of Lng gas in particular is affecting the national transport sector. Many medium and small scale industries are losing opportunities to tap into the Lng gas market as prices are soaring up due to the oversupply of the commodity in recent years.
The increasing cost of Lng gas is having an adverse impact on the competitiveness of the national energy sector. Domestic gas demand will deplete over time because of the rising cost of Lng. Industry players are looking for ways to decrease the expense of production. Over the last few years, the Government has made a number of changes to how Lng is produced, which have helped to improve competitiveness and minimize the cost of Lng.
The Government’s efforts to promote Lng manufacturing in Malaysia have led in many tax incentives for domestic production of Lng. In addition to tax refunds, 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 price of maintaining a standard of manufacturing. Some of these rebates and incentives include the first point published in 2021, the expansion of the current production tax rate and the awarding 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 may result in the movement of Lng rail cargo from Singapore into other Asian countries. If the trend continues, the cost of lng may become very high in Malaysia. In this situation, the export of Lng could become an extremely competitive edge for Malaysia in the global level.
The transport of Lng by rail freight has a lot of disadvantages. First, the expense of lng is high due to the higher cost of fuel. Secondly, the risk of accidents and the probability 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 railroad traffic and the risk of an accident is increased in areas where the population is dense.
On the other hand, the expense of air cargo to Lng Industry in Malaysia is relatively low because of the absence of government regulation and the absence of a railroad network. Moreover, 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 lack of a railroad network, the cost of transport by rail freight from and to Lng can be controlled. Air freight transport cost fluctuates from time to time according to the fuel cost and the destinations. Hence, the price of transport by air cargo can be predicted fairly well.
Both the methods of transportation can provide the service of sending and receiving shipments to and from Lng by air or by rail. However, the cost of transportation by air freight remains high in comparison to that of rail freight. It’s important to note that if the Lng Industries feels that the cost of transport by air cargo is high, they may reduce the volume of shipments. This would result in the loss of revenue for the Lng Industry.