Analysis: Malaysia in a sweet spot to be regional CCUS hub
LUMPUR: Malaysia stands as an ideal candidate for the development of a regional Carbon Capture, Utilisation and Storage (CCUS) hub, as several major gas-producing fields are nearing the end of their lifespan for carbon storage.
In a statement, Hong Leong Investment Bank Bhd (HLIB) said over 2.4 gigatonnes of potential storage capacity have been identified across 16 of Malaysia’s depleted fields.
“The Kasawari project is at the forefront of Malaysia’s CCUS development, followed by the Lang Lebah project,” the investment bank said yesterday.
The Kasawari project involves the construction and installation of a fixed offshore platform where it will be linked to Kasawari phase 1 (gas extraction), located in Block SK316, about 200 kilometres off Bintulu, Sarawak.
Both high CO2 gas fields – Kasawari and Lang Lebah are expected to be operational by 2026 and 2028, respectively.
Under the National Energy Transition Roadmap (NETR), Malaysia aims to develop three CCUS hubs with a total storage capacity of up to 15 million tonnes per year by 2030.
However, HLIB pointed out that, unlike Indonesia, Malaysia lacks the regulatory framework and governance required to galvanise CCUS development.
Indonesia became the first country in Southeast Asia to introduce the CCUS framework in Asean, where its Ministry of Energy and Mineral Resources (MEMR) regulation 2/2023 allows production-sharing contract holders to store carbon dioxide (CO2) within existing leasing areas.
The MEMR regulation also outlined technical and legal requirements to ensure safe and secure storage, as well as potential pathways to monetising carbon credits.
“Meanwhile, Malaysia has yet to accede to regulations such as the London Protocol and the European Union Carbon Capture and Storage (CCS) Directive to facilitate the transboundary transport and storage of CO2 due to the absence of a domestic framework which enables integration with international regulations.
“Malaysia would need to introduce a robust framework for CCUS like Indonesia to unleash its full economic potential, as legal and regulatory frameworks provide a legal basis for the effective stewardship of CCUS activities and the safe and secure storage of CO2,” it said.
Nonetheless, the investment bank hoped that the nation’s first CCUS-related framework would pan out in the first half of 2025.
It reported that over 20 jurisdictions have already formed legal regulatory frameworks for CCUS projects to-date.
“On the local front, the Madani government introduced a tax incentive scheme in Budget 2023 to limit the CO2 emissions using CCS technologies, which include investment tax allowance, import duty and sales tax exemption,” it said.
Overall, HLIB has maintained its “overweight” recommendation on the oil and gas sector, naming MISC Bhd, Malaysia Marine and Heavy Engineering Holdings Bhd and Wasco Bhd as potential beneficiaries of the accelerating CCUS development.