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Gas for Growth – An Urgent Call for Kinta Valley

Cover Story
By James Gough
The availability of natural gas supply has been a hot topic in the Kinta Valley recently. The issue was raised twice in the past two months, the first in September at the FMM’ (Federation of Malaysia Manufacturers) dinner while the Malaysian International Chambers for Commerce and Industry (MICCI),  highlighted the same topic at its luncheon a month later. On both occasions, Dato’ Mohamed Zahir Abdul Khalid, State Exco for Investment, Industry and Corridor Development, represented MB Dato’ Seri DiRaja Dr Zambry Abdul Kadir during which he described the natural gas supply issue as a “perennial topic” but reassured that the state government was committed to making the “project a reality”.

“Natural Gas Supply to Kinta valley will be my KPI” – Zahir
Ipoh Echo met with Zahir a few weeks later to follow up on the subject. He intimated that the state government had already met the Minister of International Trade and Industry, Datuk Seri Mustapha Mohammed and Second Finance Minister, Dato’ Seri Ahmad Husni Hanadziah. Both had agreed in principle to provide the “shortfall fund” of RM40.9 million.
His subsequent meeting with the Minister at the Economic Planning Units, Datuk Seri Wahid Omar revealed that EPU similarly supported the proposal and indicated that the state could use the federal government’s ‘facilitation fund’ to get the project started. However, no indicator was given when the fund would be released. Nevertheless, Zahir acknowledged that natural gas was a positive factor for the state. He would lobby for the funding and had now made this topic his personal ‘Key Performance Index’ (KPI).
 
History
According to FMM Perak Chairman, Dato’ Gan Tak Kong, of all the energy sources available, natural gas is the most cost-effective energy for industries. He added that although gas prices are reviewed every quarter, the switch to gas would provide savings to companies.
The request for natural gas was first made by Gan to the State Government and Gas Malaysia in 2004. The initial proposal envisioned a 150km pipeline stretching from Ayer Tawar to Chemor, estimated to cost RM160 million.  The proposal would have been realized in 2006 but due to the shortage of natural gas, Gas Malaysia Berhad was forced to shelve the project.
The scenario changed with the establishment of Petronas Receiving Terminals at Malacca and Pengerang, enabling natural gas to be imported and supplied to more industries throughout the country. Since 2012 , FMM together with the State Economic Planning Unit (UPEN) have held discussions with the Energy Commission and Gas Malaysia Berhad to make the Kinta Natural Distribution System a viable project.
 
Two Phases
The outcome of the discussion was to implement the project in two phases. Phase one of the pipeline will be from Ayer Tawar to Lahat, a distance of 85.822km costing RM102 million and benefiting 16 companies. The project duration is 24 months and a savings of RM40 million could be realized over a period of 3.5 years.
The capital contribution required for phase 1 is RM96 million which will be provided by Gas Malaysia Berhad and the industries. However, there is a shortfall of RM40.9 million from the contribution and this is where the government has been requested to assist.
The second phase of the project will continue from Lahat to Chemor where 35 customers have been identified.

Gas, Investors and Reinvestments
Should the supply of natural gas become a reality in Kinta Valley, potential investors will be attracted while existing industries will want to reinvest to expand their production lines.
Gan gave the example of Kamunting and Kamunting Raya Industrial Estate in Taiping where natural gas is available. Toyo Tyres has invested RM800 million while two glove manufacturers have pledged to invest RM1 billion to expand their existing production lines and possibly creating employment for 3000 local workers.
Similarly, in the Lahat area a multinational company has plans to reinvest RM50 million “if” natural gas is made available, while a glove manufacturer indicated it might want to revive its production operations.
Nihon Canpack Berhad provides services to canned-beverage drinks. Based in Bemban Industrial Estate, it has been requesting for natural gas since 2004. Its factory manager, En Rosdy Abdullah is full of support for natural gas supply providing multiple reasons of its benefit. “Converting the plant machinery to natural gas is a one-time cost factor which can be recovered in a short time,” he told Ipoh Echo. The factory started with 60 workers and one production line. It currently has two production lines and 200 workers. Rosdy forecasts that the savings derived from the conversion to gas will enable the factory to move into automation.
The reason for automation is due to the difficulty in getting labour. Skilled labour is difficult to get while unskilled labour, though available, is mobile and uncertain. The minimum wage while benefitting the worker does not correspond to improved productivity. Hence the introduction of natural gas provides industries more options to improve productivity, create a better working environment and hopefully, will attract workers.
And by extension, the Bemban Industrial Estate will attract more factories and create more job opportunities.
 
Revival of Industrial Estates
According to Gan, Perak has several industrial estates that are underutilised. He highlighted the Sri Iskandar High-Tech Park and the Pharmaceutical Park both at Sri Iskandar as well as the Ceramic Park at Chemor which was created around the availability of natural gas supply.
“These industrial parks are good for the state but they require gas to be cost competitive,” he reasoned.  “Investors are on the look-out for locations with cheap energy source. If they do come one can expect the Kinta Valley to grow and be vibrant,” he added.
 
Critical Mass and Catalyst
One individual who has experienced the benefits of switching to natural gas is David Ho, Managing Director of Hovid. Two years ago Ho converted to natural gas at his factory, Carotech at Kampong Acheh, Lumut and realized a savings of over 50 per cent from his energy bill.
Ho described gas as “a basic necessity and part of the infrastructure for the state. Manufacturers who use a lot of energy can have big savings and this is an attraction”. Speaking with much passion, Ho explained that providing gas will bring economic growth to the ‘corridor from Ayer Tawar to Chemor’.
Prolonged economic growth especially in the Kinta Valley will create a critical mass that will create jobs and employment and become a catalyst to attract Investors and workers to the state.  Every state needs a catalyst and the Kinta Valley can be to Perak what Klang Valley is to Selangor or Sri Iskandar to Johore.
“The growth of the Kinta valley will affect the whole of Perak. The longer we delay the introduction of gas, the more Ipoh will lose out from investment,” added Ho.

Overwhelming Support for Gas Supply
All those interviewed had positive support for gas supply except possibly for glove manufacturer MAPA located at Meru Industrial Estate. Its General Manager Lim Kim Hock’s only lament was that he would have to wait for Phase 2 before he got his supply and he had been “kept waiting for many years”. A check with a spokesman from UPEN also indicated a positive response describing “if the gas supply is firm it would leapfrog industrial development in the state”.
The overwhelming positive response was not just for its cost savings. Rosdy Abdullah stated that natural gas was clean and green and would reduce his maintenance time. As for Ho, he elaborated that once the gas pipeline was completed, the next beneficiaries would be the consumers and identified the hotels and shopping malls that used a lot of air-conditioning.
It is becoming apparent that the implementation of natural gas is an option we cannot ignore any longer. Gas is certainly an attraction for industry to invest and expand in Ipoh which would create better job opportunities. This in turn would encourage our children to come home to work and play and in doing so create that critical mass needed as the catalyst for more growth.
That being the case, delaying the introduction of natural gas will not be to our advantage.
 
James Gough

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