Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Malaysia is embarking on aggressive plans to promote carbon
capture and storage (CCS) in Southeast Asia in the hope of
developing natural gas fields with high contaminant levels and
decarbonizing its economy simultaneously.
With many undeveloped fields containing high CO2 and hydrogen
sulfide, the country is facing a stiff challenge in meeting its
carbon neutrality goal by 2050 or later while
retaining its status as the world's No. 5 LNG exporter.
But opportunities also exist as CCS projects have better
economics in those fields. CO2 would have to be extracted to make
the gas commercially usable in any case, so actual costs for those
projects are limited to transportation and storage
infrastructure.
Noriani Yati Mohamad, a senior manager of state-run Petronas,
the energy firm tasked with managing Malaysia's petroleum resources
by law, said CCS development is at a relatively advanced stage
compared with other means of emissions reduction in the
country.
"CCS is a tool to monetize high-CO2 resources," said Noriani,
who serves as general manager for resource development and
management for the Bornean state of Sarawak. Petronas has plans for
two CCS facilities with a combined sequestration capacity of more
than 6 million metric tons (mt)/year in Sarawak waters.
Big projects
Last August, Petronas awarded a conceptual engineering design
contract to energy consulting firm Xodus for a CCS project tied to
the Kasawari field due to come onstream by 2023.
Two consortiums—Malaysia Marine and Heavy Engineering and
Ranhill Worley, and National Petroleum Construction and Technip
Energies—are carrying out front-end engineering design work,
and Petronas plans to make a final investment decision (FID) by the
end of this year.
Speaking at a forum held by the Global CCS Institute last week, Noriani said
the project would be capable of capturing 4.5 million mt/year from
the fourth quarter of 2025 onwards if the green light is given. The
sequestered CO2 will be routed to the depleted M1 field via a new
138-km, 16-inch subsea pipeline.
Separately, Thailand's PTT Exploration and Production (PTTEP) is
mulling over a CCS project for its Lang Lebah field, in which
Petronas holds a 15% stake.
Lang Lebah is hailed as PTTEP's biggest exploration success in
Southeast Asia with its potential to pump up 1 Bcf/d of gas. An FID
for the field's production is due in 2023, and PTTEP could make a
decision on the carbon capture project then.
According to Noriani, the CCS facility could have a
sequestration capacity of 2 million mt/year and begin operations in
2027.
Make both ends meet
With gas prices expected to stay high, Noriani suggested the two
projects could theoretically go ahead without extra
funding—though she did not go into more detail.
Still, cost management would remain the top priority. "What we
are focusing on right now is actually a way to reduce costs. Cost
reduction is very important to us," Noriani said.
To cut CCS costs, Petronas has been advancing technology
developments while signing memorandums of understanding (MOUs) with
ExxonMobil, Shell, POSCO,
JAPEX, and Mitsui OSK Lines for cooperation in related fields.
The goal is to create a "full ecosystem" in Malaysia for CCS
development by accumulating technological and commercial expertise
from various stakeholders, according to Noriani. "For CCS to be
successful, we can't do it alone … We are looking to sign more
[MOUs] in the coming months."
In a recent high-level study, Petronas found 46 Tcf of potential
carbon storage in Malaysia's depleted reservoirs. Having identified
six clusters of storage sites off Sarawak and Peninsular Malaysia,
the company is hoping to establish Malaysia as a regional carbon
hub in order to obtain extra revenues.
"We want to offer carbon storage for new revenue," Noriani
said.
An unusual model
Despite these ambitions, the Malaysian government has yet to
formulate a legal framework for CCS, and domestic carbon pricing
mechanisms—such as an emissions trading system and a carbon
tax—remain under study.
Paola Perez Pena, an ENR principal research analyst at S&P
Global Commodity Insights, said CCS developers would need to fully
assume project costs due to the lack of regulations and policy
incentives.
Based on S&P Global estimates, the carbon capture,
transportation, and storage cost for Kasawari stands at around
$60/mt of CO2. But Petronas would need to bear part of the cost
even if the CCS project does not go ahead, as gas production at the
field—which has a high CO2 content—requires carbon
extraction.
"Petronas will have to pay for this process regardless of the
CO2 being injected [into the M1 field] or not," said Perez Pena,
adding that the main expenses associated with the CCS project lie
in transportation and storage infrastructure.
"The model Petronas is developing is unique because of their
need to produce from fields with high CO2 content … They are taking
a risk that could pay out in the long term if they can position
themselves as CO2 storage providers for the region," Perez Pena
said.
However, many analysts have questioned the financial feasibility
of CCS projects in Southeast Asia, with none of the region's
countries—bar Singapore—imposing a carbon
levy on emitters.
"In a region where a carbon price is practically non-existent …
widespread CCUS use would likely be constrained," Putra Adhiguna,
an energy analyst at the Institute for Energy Economics and
Financial Analysis, said in a recent note. Gas producers
could be among the limited number of CCS developers in Southeast
Asia, as many of them need to extract carbon from their production,
Adhiguna added.
Perez Pena said Petronas' model is not yet sustainable as
Southeast Asian nations have limited demand for carbon storage
based on current policy designs. "Only very specific CCS projects
with the right conditions will make sense … The region definitely
needs policy incentives to accelerate the deployment of CCS
projects," she added.
Posted 06 May 2022 by Max Tingyao Lin, Principal Journalist, Climate and Sustainability
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
{"items" : [
{"name":"share","enabled":true,"desc":"<strong>Share</strong>","mobdesc":"Share","options":[ {"name":"facebook","url":"https://www.facebook.com/sharer.php?u=http%3a%2f%2fcleanenergynews.ihsmarkit.com%2fresearch-analysis%2fpetronas-poised-to-drive-aggressive-ccs-development-in-malaysia.html","enabled":true},{"name":"twitter","url":"https://twitter.com/intent/tweet?url=http%3a%2f%2fcleanenergynews.ihsmarkit.com%2fresearch-analysis%2fpetronas-poised-to-drive-aggressive-ccs-development-in-malaysia.html&text=Petronas+poised+to+drive+aggressive+CCS+development+in+Malaysia+%7c+IHS+Markit+","enabled":true},{"name":"linkedin","url":"https://www.linkedin.com/sharing/share-offsite/?url=http%3a%2f%2fcleanenergynews.ihsmarkit.com%2fresearch-analysis%2fpetronas-poised-to-drive-aggressive-ccs-development-in-malaysia.html","enabled":true},{"name":"email","url":"?subject=Petronas poised to drive aggressive CCS development in Malaysia | IHS Markit &body=http%3a%2f%2fcleanenergynews.ihsmarkit.com%2fresearch-analysis%2fpetronas-poised-to-drive-aggressive-ccs-development-in-malaysia.html","enabled":true},{"name":"whatsapp","url":"https://api.whatsapp.com/send?text=Petronas+poised+to+drive+aggressive+CCS+development+in+Malaysia+%7c+IHS+Markit+ http%3a%2f%2fcleanenergynews.ihsmarkit.com%2fresearch-analysis%2fpetronas-poised-to-drive-aggressive-ccs-development-in-malaysia.html","enabled":true}]}, {"name":"rtt","enabled":true,"mobdesc":"Top"}
]}