In pursuit of the supply objective, policy initiatives, particularly with respect to crude oil and gas, we have aimed at both extending the life of domestic depletable energy resources, as well as diversification away from oil dependence to include other forms of energy sources.

The national depletion policy of 1980 was aimed at safeguarding the depleting oil reserves.

The policy, aimed at major oil fields of over 400 million barrels of oil initially in place (OIIP), restricted their productions to 1.75 per cent of OIIP. However, in 1985 the ceiling was revised to 3 per cent in view of the fact that 1.75 per cent was on the conservative side. As a result of this policy, the total production of crude oil is currently limited to about 650,000 barrels per day. As such, at the current production rate, proven oil reserves are expected to last another 16 years.

The national depletion policy was later extended from crude oil to include our natural gas reserves. An upper limit of 2,000 million standard cubic feet per day (mmscfd) has been imposed in Peninsula Malaysia. At the current rate of production, known natural gas reserves are expected to last for about 70 years.

In 1981, the Government adopted the four-fuel strategy, complementing the national depletion policy, aimed at ensuring reliability and security of supply. The strategy was, effectively, designed to reduce the country's over dependence on oil as the energy source. The strategy aims for a supply mix of oil, gas, hydropower and coal in energy use. As much as possible, local resources of these fuels will be used to enhance security of supply.

In 1998, the proportion of the four fuels in power stations was 16 per cent fuel oil, 2 per cent diesel oil, 67 per cent gas, 8 per cent hydropower and 7 per cent coal.

The table below shows a comparison of fuel mix of commercial energy supply between 1990 and 1998.

A Comparison of Fuel Mix of Commercial Energy Supply between 1990 and 1998. (in ktoe)

Amongst the various economic sub-sectors, the electricity sub-sector has shown the greatest achievement in terms of the four fuel policy. Generation fuel mix in this sub-sector for 1990 & 1998 (excluding co-generation and private licensed plants) is shown in the following table

Being too dependent on gas currently, the electricity industry is also expected to increase its utilization of coal at the turn of the millennium although the coal option has both environmental implications and foreign exchange implications. This is in line with the four-fuel policy, and the need to cap gas production to allow for longevity. Hydropower development is also being pursued for electricity generation, but the recent economic crisis has caused some setback to the planned increase of hydropower's share in the country's energy supply mix in the medium term.

The transport sector has been and continues to be the least diversified in terms of fuel use, that is, it is highly oil dependent. In 1983, the Government introduced the "Go Gas" initiative. This initiative saw limited success despite the sales tax incentives. Except for the limited electric train network in the vicinity of the Federal capital, and the proposed electric and gas-based transport modes in the proposed Putrajaya Administrative Centre, new policy-directed initiatives have been constrained to push or pull the transport sector towards greater diversification in fuel use. As in other countries, technology and costs continue to be the major constraints in Malaysia to achieve the fuel diversification objective in the transport sector. The table below shows a comparison of fuel mix in the transportation sector in 1982 and 1996.

A Comparison of Fuel Mix in the Transportation Sector in 1982 and 1996