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There is an increasing concern about the high price of Lng Malaysia. The purchase price of oil is an integral factor in the cost of living of Malaysia. As the country relies heavily on oil products and crude oil exports, the high price of petroleum products and crude oil imports is felt by the Malaysian economy every day. The high cost of Lng gas in particular is affecting the domestic transport sector. Many small and medium 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 national energy sector. Domestic gas demand will deplete over time due to the rising price of Lng. Industry players are looking for ways to decrease the cost of production. Over the last few years, the Government has made numerous changes to how Lng is produced, which have helped to improve competitiveness and decrease the expense of Lng.
The Government’s efforts to promote 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 price of maintaining a standard of manufacturing. Some of those rebates and incentives include the first point released 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 price of lng in Malaysian market, it is expected that the expense of lng in global market would also go up. This might lead to the movement of Lng rail cargo from Singapore into other Asian countries. If the trend continues, the expense of lng may become very high in Malaysia. In this scenario, the export of Lng could become a very competitive edge for Malaysia in the global level.
The transportation of Lng by rail freight has a lot of disadvantages. First, the cost of lng is high due to the higher 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 there are little or no railroad traffic and the risk of a collision is heightened in areas where the population is dense.
On the other hand, the expense of air cargo to Lng Industry in Malaysia is comparatively low due to the lack of government regulation and the absence of a railway network. Moreover, the expense of air freight can be controlled because the cost of fuel is minimal. Moreover, air freight is fast way of transporting Lng from one location to another.
Due to the absence of a railway network, the expense of transport by rail freight from and to Lng could be controlled. Air freight transport cost fluctuates from time to time in line with the fuel cost as well as the destinations. Hence, the price of transportation by air freight can be predicted rather well.
Both the methods of transport can provide the service of sending and receiving 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 if the Lng Industries believes that the expense of transport by air cargo is high, they may reduce the quantity of shipments. This would result in the loss of revenue for the Lng Industry.