Higher Natural Gas rates benefits Gas Malaysia

The government seems poised to list more companies that will benefit from subsidy rationalization.  Gas Malaysia, a recently listed company looks to capitalize as gas prices rise.  From my understanding, the company doesn't carry any inventory and is just the mode of transportation for the gas.

This is good as they do not bear any commodity risk on the balance sheet.  They also have a monopoly which is another plus factor to this stock.

For me, the market is in an uptrend still with the trend line at RM 3.40 not yet broken convincingly.  Of course my favourite area to buy this stock would be near RM 2.50 area.  But that is wishful thinking.

Apparently the subsidy rationalization for natural gas has underperformed the Government's promises.  The market was expecting stronger hikes, and that has disappointed investors.  Nevertheless, the company has a clear path for revenue growth through government rate hikes.  That can't be said for a lot of other companies slugging it out in the business world.

Positive on MISC and even MMHE (long term)

When MISC lists MMHE, it will obviously be good for MISC shareholders, but overall I think both should do well over a long period. One of the most expensive parts of doing business in the natural gas business is the building of huge LNG ports to convert the natural gas to liquid form. This is no small feat and is very costly from a fixed cost point of view.

Recently, there has been a breakthrough converting the Natural Gas to LNG on a ship. The FLNG vessel will then offload the LNG to a tanker for transporting to places around the world. This platform goes from rig to rig converting Nat gas to LNG and offloading it to a tanker.

Some advantages include:

• Smaller fields can be developed, that were previously unfeasible,
• Less red tape
• More share of the Natural gas pie for shipbuilders and rig construction.
• Less fixed cost for ports on land.
  
• More natural gas for everyone.

This is good for both MISC and MMHE. Petronas, MISC, and Mustang has also started a joint venturel on constructing a FLNG vessel. It will be expected to be in operation by 2013.

disclosure: long MISC.

Natural gas supplies, effect on Malaysian companies

From Politics Daily:

But natural gas has suddenly emerged as both a factor in this year's energy debate and a potential game-changer on the political landscape for the long term. A few facts, dramatic new supply projections, and a geological map help explain why.

First, natural gas is up to twice as clean as coal and 30 percent cleaner than oil when it comes to carbon emissions that contribute to global warming. Second, because of new drilling technology and shale gas discoveries in the last few years, America now is estimated to have a 100-year supply of natural gas at current consumption levels (see page 7 of the linked document). And third, check out where that gas is located. It's in Rustbelt states where senators are worried about how the energy bills would affect polluting industries, and in conservative states where they are concerned about how the measures would affect the cost of electricity.

Malaysia is a very large producer of natural gas. The companies that would have problems with the currently over abundant resource are MISC and Petronas. Petronas Gas could see some problems if prices keep falling. MISC is exposed through its large LNG shipping fleet. These tankers basically are made for LNG shipments only. They can't easily be converted to anything else. If countries like the US don't need as much gas shipped to them as indicated by their 100 years supply of gas, then MISC will surely suffer.

This oversupply of natural gas has caught many countries by surprise. For instance, the US is now only incorporating natural gas as a big part of their energy plans. They are in the law-writing stages only and infrastructure will take years to come online to make use of this over supplied resource. In the mean time, exporters of natural gas will have problems on what to do with all the supply.