CGSI Research said current incentives would likely see CCUS development to be slow and limited and other business options could be more viable.
PETALING JAYA: More incentives to drive carbon capture, utilisation and storage (CCUS) projects are needed to support the country’s aspirational emission targets.
CGS International (CGSI) Research said current incentives would likely see CCUS development to be slow and limited and other business options could be more viable.
The research house said these include the development of offshore carbon dioxide (CO2) storage hubs to cater to the export of CO2 captured from industrial sources in Japan, South Korea and/or Singapore as well as the development of sour gas reserves via the capture and permanent sequestration of CO2 (natural gas processing).
“Development of storage hubs in Malaysia geared towards storage of foreign-origin CO2 may go ahead as it may be economically viable.
“Malaysia has ongoing negotiations with emitters in Japan, South Korea and/or Singapore to store their captured CO2 into subsea reservoirs in Malaysia.
“This may proceed if Japanese and South Korean industrial emitters are willing to pay for the costs,” CGSI Research stated in a thematic report.
It added the country would have to ratify the London Convention that is required to facilitate the cross-border shipping of CO2.
CGSI Research said the cost of carbon capture and storage (CCS) adoption remains too high in industrial, hard-to-abate sectors.
“The contrast to the proposed low carbon price of RM15/total CO2 is too wide, and we think CCS adoption in sectors outside of natural gas processing will be delayed as a result,” it stated.
The country is planning to introduce a carbon tax next year at the above indicative rate, according to news reports.
This, according to CGSI Research, is too low to stimulate the adoption of CCS projects.
CCUS is economically viable if the full-chain cost of decarbonisation is lower than the carbon taxes or cost of carbon allowances and when the full-chain cost is lower than the benefits arising from CO2 utilisation, such as with enhanced oil recovery (EOR) or enhanced gas recovery (EGR) projects.
It added the full-chain cost can be recouped via the price premium on low-carbon products.
To support CCUS, governments can step in with incentives such as capital grants, operating expenditure subsidies, tax grants, preferential loans and direct equity investment, among other options.
Governments can also implement CCS initiatives via state-owned companies or via public-private partnerships.
There are currently no operating CCUS in Malaysia or the Asean region but several are under development, including the Kasawari gas field offshore Sarawak.
The project aims to inject CO2 from the Bintulu liquefied natural gas plant into the depleted M1 field from 2026 or later.
Meanwhile, CCS in the region is mainly used in the oil and gas industry to develop sour gas reserves or for EOR/EGR while applications in the non-oil and gas industry are currently limited or non-existent.
This is because the cost of CCS is potentially recovered by way of additional oil and gas production, the research house said.
CCS can be used to develop low-carbon hydrogen and ammonia production.
Sarawak is currently evaluating options to produce such products in Bintulu via its H2biscus and H2ornbill initiatives – two major green hydrogen projects to establish the state as a hub for clean energy.
