Abdul Aziz B Othman Discusses His Visions for the Company
– Abdul Aziz B Othman
Managing Director and CEO, PETRONAS Gas Berhad
Abdul Aziz B Othman, a highly regarded business leader and the Managing Director and Chief Executive Officer of PETRONAS Gas Berhad (PGB), warmly welcomes the International Business Review team to the PETRONAS Twin Towers. In an exclusive discussion, Aziz shares his insights on navigating the challenges in the energy sector as a leader at PGB and his vision for an energy-secure future for Malaysia.
With an impressive 36-year career within the organisation, Aziz has emerged as a visionary force in the country’s business landscape. He started as an engineer at the Peninsular Gas Utilisation Project (PGU) and has consistently risen to prominent roles, including CEO of Vinyl Chloride Malaysia Sdn Bhd, Head of Strategy & Ventures of PETRONAS Chemicals Group Berhad, and Vice President of Strategy and New Ventures at PETRONAS Energy Canada Limited. In his current role as Managing Director and Chief Executive Officer of PGB, Aziz oversees strategic operations and drives sustainable growth while remaining committed to making a positive impact on the community and the environment.
Fuelling the Nation, The Evolution of Natural Gas in Malaysia
When Petroliam Nasional Berhad (PETRONAS) was established in 1974, natural gas remained largely untapped, and the country heavily relied on oil for power generation. However, a turning point came about a decade later when the Kerteh Gas Processing Plant began operations in 1984. Gas quickly emerged as a superior economic alternative to oil, offering a cleaner fuel option with lower carbon emissions compared to oil. PGB, as the gas transportation arm of PETRONAS, took the lead in promoting natural gas as a viable energy source.
PGB’s efforts had a remarkable impact, leading to a peak where gas accounted for an impressive 80 percent of the nation’s power generation fuel. However, today coal holds the majority share at approximately 60 percent, while gas maintains a significant 40 percent share.
Navigating Challenges: Rising Costs and Market Dynamics
The decline in the prominence of gas, compared to coal, as the primary power generation fuel can be attributed to two key factors: finite domestic resources and a regulated gas price regime. The surge in demand has pushed domestic pipeline gas availability to its limits, making it increasingly challenging to meet market demands. As a result, imports became necessary, but they posed significant challenges as importers had to purchase gas at market prices and sell it at regulated prices. This makes importing gas almost impossible, even though Third Party Open Access (TPA) has been in place for four or five years.
Gas sales are divided into two sectors: the power sector and industries (non-power sector). In the power sector, prices are regulated, and any increase in costs is not transferred to the power tariff, placing the burden on PGB while insulating the public from any increase in power prices. This arrangement protects the general public from energy price fluctuations.
However, in the non-power sector, gas is sold at market prices, meaning that any increase in production costs will be passed on to consumers, contributing to the current rising cost of living in Malaysia.
Due to capping in domestic production and resources, imports are necessary to ensure energy security. However, the regulated price regime hampers gas importation as it requires purchasing gas at a higher cost and selling it at a lower price.
According to Aziz, the importation of gas falls short of the growing demand. Despite the existing import capacity, limited importation occurs due to challenges posed by the price regime, which could hinder energy security. “To achieve energy security, it is crucial to liberalise prices. Without price liberalisation, balancing gas prices and power tariffs becomes a challenge. Increasing the gas price without a corresponding increase in the electricity tariff would negatively impact electricity would dissuade third-party gas suppliers from entering into the country. Addressing these complex issues and finding sustainable solutions require political leadership and strategic decision-making from the government,” he added.
The Global Economic Unrest and PGB
Disruptions to the delicate balance between supply and demand caused by global phenomena like the COVID-19 pandemic and the Russia-Ukraine conflict have led to a staggering increase in global gas prices. Last year, prices soared above RM40 per MMBtu, a significant surge compared to the previous years’ modest range of RM20-30/ MMBtu.
Stemming from the global economic instabilities over the past two years, PGB has encountered two major challenges. Firstly, there has been a global increase in gas molecule prices, impacting overall profitability. Secondly, rising costs of doing business, including steel prices and service expenses, have created a higher-cost operating environment. These challenges have influenced PGB’s profit level, decreasing it from slightly above RM2 billion in 2020 and 2021 to around RM1.7 billion in 2022.
Moving forward, managing costs and ensuring safe, reliable, and efficient operations remain PGB’s focus. Despite these challenges, PGB remains committed to navigating the ever-changing landscape of the gas industry and seeks innovative solutions to meet energy demands sustainably.
Price Liberalisation: The Ultimate Solution
“My colleagues at PGB and the Malaysian Gas Association (MGA) have been advocating for a regulatory framework that supports a liberalised market price. It has been one of our key initiatives. We believe that without price liberalisation, long-term energy security cannot be achieved,” states Aziz. If domestic gas resources become insufficient or depleted, the need to import Liquefied
Natural Gas (LNG) arises. However, if the market price is not embraced, it becomes difficult to attract importers. This raises concerns about the future energy security for the country.
The liberalisation of gas prices is vital to achieving energy security. Without this step, the challenges of balancing costs, tariffs, and importation will persist. It is crucial for the government to recognise the importance of price liberalisation and take necessary actions to ensure a sustainable energy future for Malaysia.
The PETRONAS DNA: Energy Received, Energy Returned
PETRONAS has made significant contributions to both the government and the community, leaving a positive and lasting impact on Malaysian society. PETRONAS has always embraced the motto “Energy Received, Energy Returned.” This philosophy underscores the company’s commitment to give back to the communities where it operates, ensuring they are left better than before.
Among the ways in which PETRONAS has given back to society are job creation throughout the entire energy sector, providing educational scholarships, generating government revenue through dividends, taxes, and royalties, implementing sustainability measures, and improving the quality of life in the country’s less fortunate areas.
One notable initiative that Aziz highlights of PETRONAS’s commitment to giving back to society is via the PETRONAS Education Sponsorship Programme. Education holds a special focus for PETRONAS. Wherever it operates, the company provides tuition assistance to schools, helping students improve in subjects they may be struggling with. In regions such as Terengganu, where PETRONAS has a significant presence, efforts have been made to support less fortunate students who lacked sufficient mathematics and English language skills.
“PETRONAS awards scholarships to deserving students. These scholarships have played a transformative role in the lives of many, including myself. Hailing from a humble background in a village in Kedah, I am a proud PETRONAS scholar. Without the scholarship, I wouldn’t have been able to reach the position I am in today,” says the Managing Director and CEO of PGB.
Over the years, PETRONAS has invested over RM3.3 billion in scholarships, benefiting more than 38,000 students. The primary objective is to contribute to the development of human capital in Malaysia. Many scholarship recipients, like Aziz himself, have gone on to work with PETRONAS, and some have made significant contributions to the country’s industry in various capacities.
PETRONAS has made substantial contributions to the nation’s development. Having paid more than RM1.2 trillion in dividends, taxes, and royalties since its inception in 1974, PETRONAS has played a significant part in bringing substantial revenue to the country, which has been instrumental in shaping Malaysia into what it is today.
PETRONAS’s commitment to social contributions extends to its subsidiaries as well. Over 100 subsidiaries are actively involved in various programs aimed at making a positive difference. For instance, one of PETRONAS’s subsidiaries, PETRONAS Energy & Gas Trading (PEGT), provided solar panels to the Orang Asli community that lacked access to the electricity grid, empowering them with sustainable energy solutions. Additionally, PGB recently completed a tree-planting program in Johor, where approximately 10,000 mangrove trees were planted, contributing to coastal environmental conservation.
PGB demonstrates its unwavering commitment to sustainability through the publication of a comprehensive sustainability blueprint. Aligned with the United Nations Sustainable Development Goals (UNSDGs), PGB focuses on eight key areas that hold the potential for significant societal impact. These areas encompass good health and well-being, quality education, affordable and clean energy, decent work and economic growth, industry, innovation and infrastructure, responsible consumption and production, and climate action. Guided by four pillars of sustainable governance – Continued Value Creation, Environmental Stewardship, Positive Social Impact, and Responsible Governance – PGB adopts a holistic approach to ensuring a sustainable and prosperous future.
Future Plans, Opportunities. and Aspirations
Aziz expresses his aspirations for PGB in two categories: contributing to the 2050 Net Zero nation and achieving sustainable business growth.
Net Zero Nation Ambitions
Regarding Malaysia’s transition to a Net Zero nation, PGB recognises the crucial role of natural gas in supporting the country’s energy transition initiative. As part of the government’s plan to go green and achieve Net Zero emissions by 2050, there is a need to replace coal-burning power plants, which are considered the most polluting among all fossil-based power plant fuels. The alternatives for replacement are renewable energy sources such as solar panels, wind, or hydro, or the utilisation of gas. However, Malaysia faces challenges due to low solar radiation intensity, limited wind potential, and a lack of hydro energy potential in the peninsula. Therefore, as the cleanest-burning fossil fuel, gas appears to be the most viable option for power generation in the country.
As a key player in the gas industry, Aziz believes that gas can play a significant role in ensuring the nation’s energy security. If the complete liberalisation of gas prices takes place, PGB has an opportunity to contribute more to the Net Zero Carbon Emission plan by supplying larger amounts of gas to the power sector to replace the coal power plants. Moreover, as an Independent Power Producer (IPP) in Sabah with a capacity of 300 megawatts, PGB has the experience to offer gas-fired power production to support the nation in transitioning into a cleaner generation. Aziz is optimistic about the transition to gas and believe that gas will play a long-term role in supporting Malaysia’s energy transition efforts.
Gas is not a perfectly clean fuel as it still emits carbon dioxide when burning, As such, Aziz acknowledges the importance of making gas more environment-friendly. One of the ways through which PGB is solving this issue is the Carbon Capture and Storage (CCS) method, which involves sequestering captured carbon dioxide and injecting it into depleted gas reservoirs. PGB has already sanctioned a project in Sarawak, serving as its first centre in Malaysia for CCS. The company is also planning to implement CCS in Peninsular Malaysia, aiming for the first injection to occur by 2028. However, implementing CCS incurs costs, and the crucial question is whether customers are willing to pay the higher price to support this carbon capture initiative. PGB is actively collaborating with the government in this area, recognising that the shift from coal to gas and the adoption of CCS represent a realistic pathway to achieve a Net Zero future.
PGB’s Sustainability Blueprint
Aziz and PGB’s commitment to sustainable growth is evident in their recently published sustainability blueprint. While prioritising profitability for shareholders, PGB emphasises three key pillars that Aziz says govern the practices of PGB – above board and transparently. Firstly, the company strives to minimise environmental pollution and adopt sustainable practices. Secondly, PGB places a strong emphasis on making a positive social impact by actively contributing to communities. Lastly, the company maintains a commitment to transparency and integrity, enforcing a zero-tolerance policy against bribery, human rights abuses, and corruption. These pillars guide PGB in its pursuit of financial growth, ensuring responsible and ethical business practices.
Abdul Aziz B Othman’s 40-year Journey with PETRONAS
Aziz is not only a distinguished leader but also an embodiment of humility and gratitude. Despite his high position and numerous accolades, he remains grounded and genuine, making him approachable. His amicable nature and warm smile exude confidence and kindness, creating an instant connection with those around him.
Coming from a humble village in Kedah, where his mother worked as a farmer, Aziz recognises that his life took a transformative turn with PETRONAS’s scholarship program.
Aziz’s affiliation with PETRONAS spans an impressive four decades, with 36 years of dedicated service, from an engineer to a high-ranking policymaker, and four years spent as a PETRONAS scholar. This profound association has shaped him into the exceptional leader he is today.
The story of PGB and Aziz is one of constant dedication and commitment. They both epitomise conscious contribution to the environment that nurtured them in the first place, and embody the noble motto of “Energy Received, Energy Given.” Through their unwavering efforts, PETRONAS has not only become a global leader in the energy industry but has also set a remarkable example of sustainable business practices. Aziz’s leadership and vision have guided PGB to new heights, emphasising the importance of balancing economic growth with environmental stewardship. As Malaysia continues its journey towards a greener and more sustainable future, the legacy of PGB and Aziz will undoubtedly be remembered as a shining example of how corporate entities can make a positive impact on society and the planet.
