MRP: the future of Malaysian gas pricing
June 2023
Angus Rodger, Joshua Ngu, Huong Tra Ho, Daniel Toleman, Asti Asra
Inspiring Decisions
woodmac.com
Executive Summary
Our aim: to explain and forecast the Malaysia Reference Price (MRP) for gas
1) Large LNG exporting country wants to create their own LNG-linked benchmark
➢ Malaysia exports two-thirds of its produced gas as LNG and is the world’s fifth-largest LNG exporter.
➢ The NOC, PETRONAS, is the sole gas buyer in Malaysia. Until 2020, it was also the sole gas seller in the domestic market.
➢ Most existing upstream gas sales agreements (UGSAs) are based on a netback price to Brent. A linkage to HSFO is
common among legacy UGSAs for gas supplies from Peninsular Malaysia, while in East Malaysia a few older GSAs are
linked to downstream products (ie. methanol) or fixed pricing.
➢ In 2014, PETRONAS began to develop the MRP - a weighted average price of all Malaysian LNG exports - to be the basis
of all future UGSAs and domgas sales. As it owns all Malaysian LNG, this allows PETRONAS more control of MRP versus
other international benchmarks. However, industry players find MRP lacking transparency and difficult to forecast.
2) MRP forecast exercise finds MRP complex and subject to uncertainties
➢ We attempt to forecast MRP by calculating the weighted average price of all future Malaysian LNG exports. This is subject
to both price and volume uncertainties. At present, 75% of its LNG exports are under contracts with ‘known’ price formula –
this will reduce to <25% after 2028. This makes it very hard to forecast how future/new/renewed contracts will be priced.
➢ Assuming 70% of ‘unknown-priced’ volumes will yield similar prices to Asia oil Indexed contracts and the remaining 30% will
be sold on the spot market - and Brent stays around $80/bbl in the long term - then MRP is forecast to average
US$10.5/mmbtu (in real 2023 terms) between 2025-2035.
➢ This implies a long-term upstream price of between US$3.7 – 5.8/mmbtu, which is low by regional standards
➢ Nevertheless, companies and banks will need to base their investment/lending decisions on a “planned price” (long-term
Brent price of around US$50-60/bbl), under which MRP will be lower.
➢ For MRP to become a preferred industry pricing benchmark, greater transparency into Malaysia LNG marketing/pricing is
required to instill confidence.
Malaysian provinces unevenly split by growth in gas supply and demand
Peninsular needs both domestic and imported gas, while East Malaysia’s abundance has led to LNG exports
66% of Sabah gas is supplied to two floating
LNG plants (PFLNGs), owned by PETRONAS.
LNG (~2.5 mmtpa) is exported.
3
A third PFLNG (‘ZLNG’) due to start-up in 2027.
2
Remaining gas sold to growing domestic
market.
bcf/d
Peninsular Malaysia ,
2023
Pipeline to Sarawak (SSGP) meant to transport
gas to MLNG but has been plagued with
operational issues, and currently offline
1
0
Supply
Demand
Peninsular Malaysia
commands three quarters of
Malaysia’s gas demand, but
only 20% of supply.
Upstream gas is sold to
PETRONAS then transported
via the Peninsular Gas
Utilisation network to
domestic buyers.
3
2
1
0
Supply
Demand
Sarawak, 2023
4
3
bcf/d
Gas is sourced from offshore
fields, imports piped gas
from MTJDA (*), and
imported LNG, mostly from
Brunei & Australia.
Sabah, 2023
4
bcf/d
4
2
1
0
Supply
Demand
90% of Sarawak gas production is supplied to
Malaysian LNG plants.
MLNG produces approx. 26 mmtpa. LNG is
exported, mostly to North Asia.
Gas and LNG production projected to increase,
with SISGES (**) being developed and major
new fields on stream in 2026/27.
Gas is prone to contaminants; developments
are often complex and capital intensive.
Source: PETRONAS MPM & Wood Mackenzie Lens. Charts show local gas supply/demand in 2023. (*) MTJDA is the Malaysia Thailand Joint Development Area. (**) SISGES: Sarawak Integrated Sour Gas Evacuation System.
LNG is an important revenue source for world’s fifth largest LNG producer
LNG supply into Peninsular Malaysia currently imported from PETRONAS portfolio abroad
Malaysia’s top exports by
revenue (2022)
Forecast: Malaysia LNG output and domestic LNG demand
30
Annual output (mmtpa)
Top global LNG producers
(2022)
E&E products
Petroleum prods
Others
Australia
Palm oil (agriculture)
Indonesi
a
Nigeria
Chemical prods
LNG
Malaysia
25
20
15
10
5
Qatar
Metals
Russia
US
0
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Machinery &…
Optical & scientific…
0
US$ billion
50
100
150
MLNG
MLNG Tiga
PETRONAS FLNG 1
PETRONAS ZLNG (FLNG 3)
MLNG Dua
MLNG Train 9
PETRONAS FLNG 2
Malaysia LNG demand
• MLNG and two PFLNGs produce >26 mmtpa in 2022-2024. With ZLNG online in 2027 and new upstream gas projects onstream around 2026, this
will rise to 27-29 mmtpa between 2027-2035. Not counting future exploration success, this is forecast to decline post-2035.
• Malaysia imported ~1.8 to 2.5 mmtpa of LNG (equivalent to 7 – 10% of its LNG output) in 2020-2022 into two regasification facilities in Peninsular
Malaysia. Much of these volumes come from outside Malaysia (Australia and Brunei).
• LNG imports are projected to rise as Peninsular Malaysia gas production declines.
Source: Wood Mackenzie, Malaysia External Trade Development. E&E: electric & electronics products.
The Malaysia Reference Price (MRP): a definition
The weighted-average price of Malaysian exported LNG will be the basis of all future upstream and
downstream gas contracts across Malaysia
MRP formula
MRP’s point of price determination
MRP for a reference period is based on the Weighted Average Price (WAP) of LNG exports:
MRP ($/mmbtu) =
𝑇𝑜𝑡𝑎𝑙 𝑒𝑥𝑝𝑜𝑟𝑡 𝑣𝑎𝑙𝑢𝑒 𝑖𝑛 𝑀.𝑅𝑖𝑛𝑔𝑔𝑖𝑡 𝑜𝑓 𝐿𝑁𝐺
𝑇𝑜𝑡𝑎𝑙 𝑒𝑥𝑝𝑜𝑟𝑡 𝑣𝑜𝑙𝑢𝑚𝑒 (𝑐𝑜𝑛𝑣𝑒𝑟𝑡𝑒𝑑 𝑡𝑜 𝑚𝑚𝑏𝑡𝑢)(∗)

Sources of data are Department of Statistics (DOSM) and Malaysian Customs

(*) Conversion rate is set at 52 mmbtu per metric ton of LNG

MRP is derived from monthly data on LNG value and volumes from the DOSM website.
There is also a published MRP price, also known as the ‘Applicable Price’. This is published
at the beginning of every quarter (calendar year), based on LNG values and volumes four
months prior. This is only applied to downstream contracts.

For individual UGSAs, the ‘timeframe’ for indexation can vary through negotiation e.g.
quarterly average, three preceding months etc.

For LNG contracts to end-users: point of export is overboard LNG tanker

For remaining LNG contracts that are rolled into PETRONAS portfolio, uncertainty lies in:
» when, where, and at what price, PETRONAS ultimately sells LNG from its portfolio to end
users
Source: Petronas MPM & Wood Mackenzie
MRP will ultimately replace all other gas price benchmarks in Malaysia
Most upstream and downstream GSAs will be linked to MRP rather than international benchmarks
MRP-based upstream price formula
MRP-based downstream price formula
• We believe in recent years all operators have been obliged to follow
MRP formula, and all future upstream GSAs and extensions of
existing UGSAs will also be subject to MRP.
• Buyers are obliged to follow MRP formula – all future downstream GSA
and GSA extensions signed with PETRONAS will be linked to MRP.
• Upcoming gas price formula for new GSAs and GSA extensions
»
beta x MRP
• In which beta is negotiated between upstream producer and
PETRONAS.
• We understand a beta of 0.35 to 0.55 on MRP is likely for upstream
gas delivered PETRONAS, acting as gas aggregator.
• Example: if MRP averages $10/mmbtu during a quarter, the
upstream price could be in the range of US$3.5 – 5.5/mmbtu,
depending on this multiplier, which depends on the perceived
project complexity and IRR at GSA negotiation.
Source: Wood Mackenzie and MPM
• Upcoming domestic gas price formula for new downstream GSAs and
GSA extensions:
»
MRP (- or + alpha) + T
• In which alpha is negotiated and agreed by gas seller (PETRONAS)
and buyer at the onset of GSA negotiation, and T stands for applicable
transportation tariff. For gas buyers based in Peninsular Malaysia, this
is tariff for the usage of PETRONAS-owned Peninsular Gas Utilization
(PGU) pipeline system.
• Example: if MRP averages $10/mmbtu during a quarter and a domestic
buyer has agreed with an alpha of 20%, then the downstream price for
such quarter would be $12/mmbtu, plus the transport tariff.
• In most cases, the downstream domestic prices would likely be MRP
minus alpha to discount the liquefaction costs.
Primer: How Malaysia upstream gas commercial arrangements work
PETRONAS is the sole gas buyer, and has an upper-hand in price negotiations
Diagram of Malaysia gas commercial arrangements
Upstream GSA negotiation: producer vs PETRONAS
•
PETRONAS takes the role of Gas Aggregator and is the only
buyer of Malaysian upstream gas. Upstream producers cannot sell
gas directly to end-use buyers.
•
The negotiation on gas supply term for a Malaysian field usually
starts once the field development concept is selected, and is
conducted along with FEED and FDP studies. A GSA must be
concluded for FID to be taken, and is usually one of the last steps.
•
Key terms of GSA include supply duration, delivery quantities, gas
specification, delivery point and gas price.
•
Gas price is set on upstream cost-plus basis, which allows for a
negotiated return (IRR%) on the upstream project.
•
Future gas price is set as [alpha x MRP], whereby alpha is
negotiated between Petronas and upstream.
•
We assume gas price negotiation is for each upstream investment
decision. Projects with multiple development phases may see gas
price of later phases being lower than that for earlier phases
dependent on potential returns of incremental phases, and
negotiation power. However, this is not yet confirmed.
*
Historic and existing gas price formulas
•
A multiplier x oil price (with option of adding a constant)
•
A multiplier x HSFO price (with option of adding a constant)
•
Base price inflated by CPI (minor number of GSAs)
Upcoming gas price formula for new GSAs and GSA extensions
•
beta x MRP
Source: PETRONAS MPM and Wood Mackenzie. *Could be domestic or international buyer or brought into PETRONAS portfolio.
Malaysia downstream gas commercial arrangements
PETRONAS has been the sole gas seller until 2017 and will continue to be dominant
Diagram: Downstream gas commercial arrangements
in Peninsula Malaysia*
SELLER
Downstream GSA negotiation – PETRONAS vs gas users
•
PETRONAS takes the role of Gas Aggregator. Historically was the sole supplier to
domestic market until the Gas Supply (Amendment) Act 2016
•
Since 2022, gas prices are now freely negotiated between buyer and supplier for
any new GSAs in non-power sector. And buyers can purchase their own LNG
supply directly from the market, rather than just PETRONAS
•
However, the NOC remains the dominant player in the domestic market. All
pipeline gas from upstream producers is still held by PETRONAS, and to date
there only has been two non-PETRONAS LNG cargoes.
•
In negotiating with buyers, PETRONAS is offering a price formula indexed to MRP
for new GSAs. Buyers were previously either under a regulated price, or indexed to
an alternative fuels, such as HSFO.
•
Moving to MRP, buyers are exposed to more volatility (vs a regulated price), and to
a price index that is new and comprised of only one supplier (vs market oil index)
•
While buyers can theoretically purchase their own LNG cargo, that option may not
be feasible, especially for smaller buyers who cannot afford an LNG cargo, or do
not have experience with LNG procurement, negotiation and operations.
BUYER
Established
TNB
PEGT
Gas
Malaysia
Other LNG
suppliers
Industries/
IPPs/other
buyers
Historic and existing gas price formulas have been based on oil price,
petroleum products prices, and inflation, plus transportation tariff
Upcoming gas price formula for new GSAs and GSA extensions
•
[1 + alpha**] x MRP + Tariff
*MRP pricing may not necessarily apply for large gas buyers in Sabah and Sarawak .
**Note alpha could be positive or negative which implies a premium or discount to MRP
Source: PETRONAS MPM and Wood Mackenzie. IPPs stands for independent power plants.
Why is MRP favoured by PETRONAS? (1)
A consistent basis for both up- and downstream reduces price risks and enables market balancing
 MRP is indirectly linked to international market indexes
MRP and Brent correlation
» Published MRP since 2015 shows a strong correlation
14
MRP (US$/mmbtu)
12
Published MRP between Q4/2014 and Q2/2022 shows
correlation coefficient of 0.79 to Brent price with three
months’ lag (equivalent to ~11.5% slope to Brent)
100
80
10
8
60
6
40
4
2
coefficient to Brent price with a lagging of 3-4 months. MRP
since Q2/2018 shows a slope averaging 11.5% to Brent
with a three month lag
120
Brent of last quarter ($/bbl)
16
20
MRP ($/mmbtu)
Brent
functions as a consistent basis for PETRONAS across
upstream and domestic downstream prices
» Previous pricing mechanisms include netback to Brent, or
linked to downstream product prices
» Much of Peninsular Malaysia (PM) gas is linked to HSFO,
which has become less relevant since the IMO 2020
regulations came into force.
» A consistent basis for both upstream and downstream prices
0
Sept-Nov 2014
Dec-Feb 2015
Mar-May 2015
Jun-Aug 2015
Sept-Nov 2015
Dec-Feb 2016
Mar-May 2016
Jun-Aug 2016
Sept-Nov 2016
Dec-Feb 2017
Mar-May 2017
Jun-Aug 2017
Sept-Nov 2017
Dec-Feb 2018
Mar-May 2018
Jun-Aug 2018
Sept-Nov 2018
Dec-Feb 2019
Mar-May 2019
Jun-Aug 2019
Sept-Nov 2019
Dec-Feb 2020
Mar-May 2020
Jun-Aug 2020
Sept-Nov 2020
Dec-Feb 2021
Mar-May 2021
Jun-Aug 2021
Sept-Nov 2021
Dec-Feb 2022
Mar-May 2022
0
 MRP moves away from older & less relevant indexes and
Source: Petronas MPM, Royal Malaysian Customs and Wood Mackenzie. IMO: the International Maritime Organisation.
shields PETRONAS from price fluctuations and maintain
steady predictable margin
» MRP also allows PETRONAS to manage subsidiaries and
markets to optimize pricing, to sell cheaper gas where
required, and to distribute and allocate gas accordingly.
Why is MRP favoured by PETRONAS? (2)
It introduces LNG-linked prices to downstream as LNG will play a bigger role in Malaysia’s domestic market
 MRP supports Malaysia’s liberalisation of downstream gas markets
Malaysia LNG imports by source country
and effectively introduces export parity prices for downstream users
3
2.5
» Domestic gas in Malaysia has historically traded at below international
prices. It was necessary to gradually increase downstream prices and
reduce government and PETRONAS subsidies for downstream gas.
Note: PETRONAS has 27.5% stake in the
GLNG project in Australia, with an offtake
agreement for 3.6 mmtpa until 2031
» Gas market liberalization started 2010, accelerating in 2016 with
amendments to the Gas Supply Act. Peninsular Malaysia gas prices
initially raised every 6-12 months to reach export parity. Starting 2024,
gas prices will be unregulated.
mmtpa
2
1.5
 MRP helps PETRONAS to position optimally in Malaysia’s growing
domestic LNG market
1
» LNG imports into Malaysia have increased and are forecast to grow.
Most delivered to Peninsular Malaysia has been from Australia and
Brunei.
0.5
» LNG therefore will play a bigger role in Malaysia’s downstream market
0
2012
2013
2014
2015
Australia
Algeria
Qatar
Source: Wood Mackenzie’s LNG Tool
2016
2017
2018
Brunei Darussalam
Nigeria
Other
2019
2020
Malaysia
Yemen
2021
2022
» LNG imported into Peninsular Malaysia is linked to global benchmarks.
» MRP establishes the link between downstream and LNG gas pricing
Problems with MRP – transparency is a key concern for industry players
MRP may lose relevance when Malaysia exports less LNG, if/when output declines
Illustrative diagram of Malaysia’s LNG value chain
Companies are reluctant to use benchmarks within which
movements are hard to explain or have ‘unknown’ elements.
There is some skepticism and hesitancy from existing gas producers,
mainly based on visibility and ‘forecast-ability’.
Some
visibility
1
Upstream
Field 1
Petronas
Gas
Trading
Petronas
Upstream
Field 2
1
Point-to-point LNG contract
2
Spot LNG sales
2
(MLNG
PFLNG1
PFLNG2
ZLNG)
LNG sold to trader into their
portfolio
4
Domestic LNG sales
Point-to-point LNG contracts: industry has some visibility on
volumes, duration, pricing of LNG exports.
2
Spot LNG sales fetch high prices, but LNG marketing is
dominated by PETRONAS and industry/upstream producers
have limited visibility into how much LNG is sold on spot basis,
and at what price
3
LNG sold to traders into their portfolio are not auditable
4
No visibility on domestic LNG sale pricing at present. These are
low volumes currently, but will increase as Peninsular Malaysia
gas demand rises and local gas production declines.
Basis for MRP
calculation
LNG
Trader
3
4
3
International
LNG Buyer
1
No visibility
Source: Wood Mackenzie. PGTT is Petronas Gas Trading, a subsidiary of PETRONAS.
Domestic
Buyer
Other concerns
➢ For reserves-based lending, banks and lenders require to know
forecasted price. An untransparent or unfamiliar price benchmark
makes it difficult for lenders to make financing decisions.
➢ MRP may lose relevance in the next few decades when Malaysia
gas production declines and Malaysia potentially exports less LNG
Forecasting MRP (1): what do we know about the market for Malaysian LNG?
Two-thirds of Malaysian LNG exports will potentially be sold via PETRONAS’ portfolio, into which external
parties have limited visibility
Malaysian LNG output by buyers
Contracted LNG volumes
•
30
•
LNG volume (mmtpa)
25
20
At present, ~ 60% of LNG production is under contracts to buyers other than
PETRONAS, mainly Japanese, Korean and Taiwanese buyers (‘end-users’).
•
Significant uncertainty
regarding
price
of apply
It is unclear
which
prices
to
Significant
uncertainty
regarding
Petronas-portfolio
volumes
PETRONAS
portfolio
volumes. This
price of
PETRONAS-portfolio
makes forecastingvolumes*
MRP challenging.
Many of these contracts are due to expire in the next five years. Some
will be extended or re-signed, with terms and prices yet to be known.
The remaining ~ 40% of LNG production is lifted by PETRONAS into its LNG
portfolio (typically via PETRONAS LNG Ltd)
•
For PETRONAS’ portfolio, the volumes are sold from MLNG/PFLNG to
PETRONAS. Here the latter can be considered similar to an international
LNG trader that takes market risks by purchasing from LNG facilities on
an FOB basis for onward sales to customers/end buyers.
10
•
PETRONAS selling LNG from its portfolio to end users can therefore
considered the point of ‘export’ for MRP calculation.
5
•
Price information, how much and to whom these volumes will be
marketed are not visible to the industry.
0
•
This makes forecasting MRP challenging.
15
LNG for domestic use vs exports
Total lifted by Petronas and future contracts
Contracts to end-users**
Malaysia LNG output
•
Malaysia has not needed to allocate its own LNG from East Malaysia to supply
Peninsular Malaysia. Its imports have come from Australia & Brunei.
•
We assume that this will continue, and, for forecasting purpose, that 100% of
future LNG production will be exported.
Source: Wood Mackenzie’s LNG Tool. *Under assumption all volumes taken into portfolio.**End-users in most cases = international gas buyers.
Forecasting MRP (2): methodology and assumptions
We use our LNG contract database and long-term Brent of ~ $80/bbl (real, 2023)
Malaysian LNG supply by availability of price information
MRP is the weighted average of the following components:
1
Malaysian LNG volumes (mmtpa)
30
Contracts with known price formulas:
-
Many are existing LNG contracts to North Asian end-users
-
Most contracts has a slope of between 0.11 and 0.145 to Brent or JCC
-
These accounts for two thirds of Malaysia’s output in 2023 but many will
soon expire.
25
2
20
2
15
Volumes without price formulas:
-
Much of these are PETRONAS-portfolio volumes
-
We have price data on numerous PETRONAS portfolio contracts, but
which price (between LNG facility and PETRONAS or between
PETRONAS and end-user) is used for the MRP calculation is unclear
-
For these volumes, 70% is assumed to be sold at Asia Oil-indexed price
(or Japan oil-linked, at approx. 13% of Brent + $0.5/mmbtu
-
The remaining 30% will be sold at a spot price for NE Asia. Estimated as
115% Henry Hub + $5/mmbtu
10
5
1
0
*
Volumes with price info
Volumes without price info
Total Output
Other assumptions:
Wood Mackenzie forecasts that Brent price (real, 2023) will be in the
range of US$78 – 85/bbl between 2025-2040.
Ceiling prices are not taking into account for this analysis (only one current
contract with known price information has a ceiling price).
Source: Wood Mackenzie’s LNG Tool Q1/2023. For pricing calculations, we use all MLNG, and are FOB (*) Domestic LNG has been excluded from calculations.
MRP price is forecast to average US$10.5/mmbtu (real) between 2025-2035
Long-term upstream price range between US$3.7 - US$5.8/mmbtu if Brent stays around US$80/bbl (real)
Illustrative upstream and downstream prices (real, 2023)
14
14
12
12
2040
2039
2038
2037
2036
2026
2040
2039
2038
2037
2036
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
Assumptions:
Brent price to be in the range of US$79 – 85/bbl (nominal) between 2025-2040.
Asia Oil Indexed price is the average of all LNG contracts with known price information
and with formula indexed to oil, that are tracked in our LNG Tool.
2025
0
0
45% MRP
Avrg gas price to industries
2034
35-55% MRP range
Avrg gas price to GMB
Avrg gas price to power
2035
2
2033
2
MRP-based upstream range
4
2032
Contracts with price info
HH delivered to NE Asia (HH*1.15+$5)
Asia Oil Indexed Contract (13% Brent + $0.5)
MRP
2031
4
6
2030
6
Midstream
expenses and
margin
8
2029
8
10
2028
10
Downstream gas prices: ~108% - 114% of MRP
following historical trends
2027
Gas price, US$/mmbtu (real, 2023)
Gas price, US$/mmbtu (real, 2023)
Illustrative MRP price simulation (real, 2023 term)
Downstream gas price (for comparison):
Historical unregulated piped gas prices during 2017-2019 show that gas price for power
sector averaged 108% of MRP; gas price for Gas Malaysia Bhd (GMB) and other
industries averaged 113-114% of MRP. These prices are LNG-indexed.
The Energy Commission of Malaysia stopped publishing these prices in 2020.
Source: Wood Mackenzie’s LNG Tool. HH: Henry Hub gas price. Gas Malaysia Berhad (GMB) is owner and developer of gas distribution networks in Malaysia and a subsidiary of the MMC Group.
MRP: what does it mean for upstream players?
Different gas project breakevens vs forecast MRP
For those already in Malaysia, with assets:
Increasing project complexity, cost and b/even
•
Existing gas field GSAs will slowly transition over time to
MRP-based pricing regime
7
•
Issues around transparency causing some concerns, but
overall the shift is not a hurdle for lower-cost incremental
new developments
6
•
Crucial to understand MRP pricing dynamics
•
As per chart, as developments in Sarawak move into
deepwater and/or higher levels of gas contamination and
development cost/complexity, it will push higher end of
MRP boundaries to meet expected returns
•
Highlights importance of negotiating a suitable multiplier
for the complexity, costs and risk of the project
Potential MRP-based upstream price range
Breakeven gas price (US$/mcf)
For those looking to enter, or start exploring:
3.5 tcf, pre-FID high
CO2*** sour gas SW*
field, 2027 start-up
5
1.8 tcf post-FID DW**
cluster, 2026 start-up
1.8 tcf SW* field,
2022 start-up
4
3
2
1
0
Pegaga (SK320)
Rosmari / Marjoram (SK318)
10% b/even
Source: Wood Mackenzie Lens, GEM. *SW = shallow-water. **DW = deepwater. ***Model includes CCS project cost
Lang Lebah (SK410B)
15% b/even
Key takeaways: a complex benchmark with a single-country application?
➢ Good intentions: MRP has been created to reflect the blended export price of Malaysian LNG and provide a consistent basis for both
upstream and downstream industries
➢ It also supports Malaysia’s liberalisation of the downstream gas market and effectively introduces export parity prices for downstream users
➢ Nevertheless, it is a complex formula that lacks full transparency, making it challenging – but not impossible – to use for planning and
investment decision-making. Greater transparency in LNG contracting/marketing will help instill confidence in the marker
➢ No benchmarks are easy to forecast, but the well-established (Brent, HH etc) are preferred by industry and its lenders, for the greater ease
in hedging and forecasting
➢ Using our LNG database and assuming long-term oil price ~ $80/bbl, MRP is forecast to average ~$10.5/mmbtu in the coming two decades.
A lower oil price or assumption will lead to a lower MRP.
MRP-based upstream price
➢ Negotiating a suitable multiplier for the complexity, costs and risk of the project is essential to ensuring upstream returns
➢ With a multiplier between 0.35 and 0.55, upstream transfer prices will be on par or lower than most other gas supply projects in Asia.
APPENDIX: Comparison of regional Asian gas prices and pricing regimes
Our MRP forecast price band of US$4/mcf to US$6.2/mcf is on-par or slightly lower than regional peer prices
Regional Asian gas pricing regimes, for comparison
Country/region
Indonesia
MTJDA
Existing Pen Mal
gas: PM3 CAA
Myanmar
Vietnam
Philippines
India
Gas pricing regime
Indicative gas price in 2025 (real, 2023 terms) (*)
Sample
field/asset
Gas heat
(mcf/btu)
Price at
Wellhead price Wellhead price
delivery (real,
(real, $/mmbtu) (nominal, $/mcf)
$/mmbtu)
Price for new GSAs or new contract extension is capped at US$6/mmbtu at
buyers’ gate.
Indonesia new
GSAs
Higher priced Natuna Sea gas delivered to Singapore linked to HSFO under
legacy GSAs.
Natuna Sea
1,050
A-18
900
PM3 CAA
1,080
5.5
6.2
8.2
Zawtika
930
5.5
5.3
9.3
Sao Vang
1,090
6.2
7.0
10.0
Blk B (pre-FID)
950
9.6
9.5
12.5
Price indexed to Brent
Malampaya
1,000
10.7
Seller has the liberty to formulate their own gas pricing formula and choose their
preferred indexations subject to price cap set by PPAC
India (PPAC
Cap)
1,000
12.5
Prices indexed to HSFO, Consumer Price Index, US Oilfield & Machinery Index.
Price indexed to HSFO, similar to other Peninsular Malaysia pipe gas
Prices indexed to HSFO, Consumer Price Index, US Oilfield & Machinery Index.
Fixed price + escalation, irresponsive to oil price
5.7
8.8
9.7
11.7
4.7
Source: Wood Mackenzie Upstream Service, GEM. (*) Brent price in 2025 is forecast to be US$85 (real, 2023 term). MTJDA: Malaysia Thailand Joint Development Area.
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