LITTLETON, Colorado, Oct 24 (Reuters) - It's not just the U.S., Qatar and Australia that are vying for a share of the lucrative LNG export market. Malaysia wants a cut too, and is retooling its own power generation system to do it.

So far in 2025, Malaysia has lifted its imports of thermal coal to a record and boosted coal-fired electricity generation to all-time highs, data from Kpler and Ember shows.

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Malaysia's coal binge allows the country - the world's 11th largest natural gas producer - to free up gas supplies for export in the form of liquefied natural gas, and generate valuable trade revenues in the process.

The coal-for-gas adjustment comes at a cost, as the country needs to import a majority of its coal supplies, and it has resulted in a surge in power sector emissions to the highest on record this year.

But the coal use boom is justified by the fact that the country rakes in roughly twice as much income from LNG exports as it spends on coal imports.

On economic grounds alone, Malaysia's LNG export drive looks set to persist, even though the additional LNG volumes the country is looking to sell may add to already oversupplied global markets in the years ahead.

IMPORT BOOM

Malaysia produces between 3 million and 4 million metric tons of thermal coal a year, according to the U.S. Energy Information Administration (EIA), but imports around 30 million to 35 million tons a year, Kpler data shows.

Those coal imports - mainly from neighbour Indonesia - cost around $5 billion to $6 billion a year, according to customs data.

The burning of that coal - which generates roughly half of Malaysia's electricity - yields around 72 million tons of carbon dioxide (CO2) emissions each year, according to Ember.

Yet by steadily increasing coal's share of its electricity generation mix from under 10% at the start of this century, Malaysia has been able to sharply cut natural gas' share of electricity production.

Natural gas generated around 80% of the country's electricity in the early 2000s, but only accounts for around 30% of Malaysia's electricity supplies so far in 2025, Ember data shows.

FREEDOM (TO SELL) GAS

Reduced use of gas for domestic power generation has allowed Malaysia to boost gas supplies for export, which the country recognized was a valuable revenue earner decades ago.

Indeed, for a brief spell in the early 2000s, Malaysia was the world's largest exporter of LNG, and since then it has consistently ranked in the top five suppliers of the super-chilled fuel.

Until about a decade ago, Malaysia's energy firms relied on domestic gas supplies as both the primary source of domestic electricity and one of the country's most lucrative export items.

Since then, however, authorities have worked to slow the growth of domestic gas use for power generation so that more of it could be diverted to LNG export hubs and then onto high-paying end-use markets such as Japan and South Korea.

A key driver of Malaysia's decision to conserve gas was the realization that its domestic gas reserves have peaked and are now in terminal decline.

Malaysia's proven gas reserves were estimated at around 1.15 trillion cubic meters around 20 years ago, but were last estimated at 910 billion cubic meters, according to Energy Institute data.

MONEY MATTERS

To extract maximum value from those reserves, Malaysia's national oil and gas company Petronas remains committed to boosting LNG export volumes, and plans to bring on a third floating LNG export facility in 2027, per company filings.

While the exact terms of its LNG export deals are not reported, industry estimates put the country's annual earnings from LNG exports at around $12 billion.

As those export receipts are roughly twice what it costs the country to import the coal it needs, the economic case to continue exporting LNG over the long term seems solid.

That said, Malaysia's enduring need for gas as a key part of its overall energy mix means it is also an occasional importer of LNG, when the price is right and its power needs dictate.

Malaysia has also agreed to make purchases of U.S. LNG as part of trade talks aimed at avoiding U.S. tariffs on Malaysian goods exports.

Overall, however, Malaysia looks set to remain a regular net exporter of LNG for the foreseeable future.

And given its closer proximity to key Asian buyers compared to the U.S. and Australia, the country's planned growth in LNG export volumes may pose a fresh headache for rivals as they try to map out how to profitably boost sales in the years ahead.

The opinions expressed here are those of the author, a columnist for Reuters.

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https://www.reuters.com/markets/commodities/malaysias-coal-binge-shows-what-nations-do-cash-lng-boom-2025-10-24/