Over 2.4 gigatons of potential storage capacity has been identified across 16 of Malaysia’s depleted fields — 11 of which are off Sarawak and the rest off Peninsular Malaysia.
CARBON capture, storage and utilisation (CCUS) is a big buzzword today and holds vast potential.
Essentially, it entails gathering vast amounts of carbon dioxide emitted by industries and shoving that into the ground in places such as disused or depleted oil wells. It is one of the most effective ways for countries to reach their net zero emission targets.
Malaysia is at the epicentre of this phenomenon and is quickly trying to pass legislation and stimulate incentives to start projects. Indonesia has already passed its law and is set on inviting companies to invest in such projects there.
CCUS projects can be profitable ventures. It is a service that can be offered globally to industries that need to dispose of their carbon emissions. Carbon credits can also be harvested from the activity and then there is the possibility of utilisation of that carbon in other industrial activity.
To start, the low hanging fruit is carbon capture and storage or CCS, minus the utilisation element, which will come as the sector progresses.
Malaysia has an advantage with its advanced oil and gas sector. Led by Petroliam Nasional Bhd (Petronas), Malaysia’s oil and gas, services and equipment (OGSE) is the most developed in the region as it has been active since the 1980s. This puts the country in a solid position from which to transition from exploration and production and related services into CCUS activities, which experts say is a natural progression.
Amidst the excitement, however, the East Malaysian states of Sarawak and Sabah have voiced concern about the federal law being planned. They fear about rights over the wells that the carbon will be injected into.
The Sarawak government asserts that the proposed CCUS bill should not interfere with its constitutional authority over land and land use. They emphasise that any regulation concerning carbon storage must receive approval from the state government, as the land on the continental shelf within its borders is under state control.
The state government is advocating for a regulatory framework that respects its constitutional rights while still facilitating collaboration on carbon capture initiatives. The good news is that the Sarawak government has expressed willingness to collaborate with the federal government on this matter. Sabah has expressed similar views.
Unless all parties compromise, the outcome will be detrimental. Time is of the essence. If Malaysia dilly-dallies, it will be at a disadvantage in the race towards building CCUS projects as other countries are aggressively pursuing them.
If any party makes unreasonable demands, everyone in Malaysia loses. The disagreement is believed to be potentially impacting the viability of the first test case project.
Petronas is building its first CCS project in the Kasawari gas field, off Sarawak. It is touted to be one of the world’s largest offshore CCS facilities. Late last year, the group announced that the ambitious project is scheduled to come online in 2025. Petronas expects the project to capture 3.3 million tonnes of CO2 equivalent per year.
CCS projects are capital-intensive and financing models need to be worked out clearly. If a new element such as fees to the owners of the real estate (in this case the disused oil and gas wells) crops up, it will have a major impact on the viability of the project.
This is why the issues between the states and federal government have to be worked out before Malaysia can proceed with its CCS and CCUS ambitions.
To recap the potential of CCUS in Malaysia, Hong Leong Investment Bank Research recently pointed out that over 2.4 gigatons of potential storage capacity has been identified across 16 of Malaysia’s depleted fields — 11 of which are off Sarawak and the rest off peninsular Malaysia.
The research house added that Malaysia is positioned as a gateway of the Asia-Pacific, making it an ideal storage site for international carbon for major markets such as Australia and Japan. Under the National Energy Transition Roadmap (NETR), Malaysia aims to establish three CCUS hubs by 2030, targeting a total storage capacity of up to 15 million tonnes per annum.
Ultimately, the success depends on the country having a robust regulatory framework.
This article first appeared in Star Biz7 weekly edition.
