KUALA LUMPUR: Malaysia needs a robust framework for Carbon Capture, Utilisation, and Storage (CCUS), much like Indonesia, to unleash its full potential and become a regional hub for the industry, an analyst said.
"Despite having "carrots" (tax incentives) in place, Malaysia would need to introduce a robust framework for CCUS like Indonesia to unleash its full economic potential. "We identified MISC Bhd (chartering LCO2 carriers), Malaysia Marine and Heavy Engineering (undertaking engineering, procurement, construction, installation & commissioning (EPCIC) jobs for CCUS developments) and Wah Seong Corporation Bhd (pipelines to be built for CCUS translates to ample pipe-coating jobs) as the potential beneficiaries of the accelerating CCUS development," Hong Leong Investment Bank (HLIB) research said in a note today.
It said robust framework and supportive policies are essential as legal and regulatory frameworks provide a legal basis for the effective stewardship of CCUS activities and the safe and secure storage of CO2. "So far, over 20 jurisdictions have already formed legal regulatory frameworks for CCUS projects. "Cost reduction policies are in the form of grants (direct financial contribution), loan support and tax credits (i.e. investment tax credit) offered by the governments," said the research house.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 import tax allowance, import duty, sales tax exemption, among others
With several major gas-producing fields nearing the end of their lifespan for carbon storage, and over 2.4 gigatons (GT) of potential storage capacity identified across 16 of Malaysia's depleted fields, the country stands as an ideal candidate for CCUS development.
CCUS is a process involving the capture of CO2 from sources like power plants, industrial facilities, or directly from the atmosphere.
The captured CO2 will either be stored under deep geological formations, or used for purposes such as production of chemicals, fuels and building materials and enhanced oil recovery (EOR).
Under the National Energy Transition Roadmap (NETR), Malaysia aims to develop 3 CCUS hubs with a total storage capacity up to 15 million tonnes per annum by 2030.
HLIB said the Kasawari project is at the forefront of Malaysia's CCUS development, followed by Lang Lebah.
Under the International Energy Agency's net zero emissions scenario, total scope 1 and 2 emissions from oil and gas operations decline by 60 per cent between 2022 and 2030.
One of the five levers to achieve the target is by deploying CCUS, it said. HLIB said although operational CCUS projects would only be able to fulfill 25 per cent of the required 1 gigaton carbon dioxide per annum to meet the net zero emissions scenario, its deployment is set to gather pace.
This acceleration is anticipated as capture capacity is expected to jump 12-fold if all announced projects in the pipeline come to fruition by 2030, said the research house.