This article first appeared in The Edge Malaysia Weekly on December 19, 2022 - December 25, 2022
THE RM4.5 billion mega carbon capture storage (CCS) project in the Kasawari gas field off Sarawak, spearheaded by Petroliam Nasional Bhd (Petronas), marks a new chapter in the regional upstream oil and gas (O&G) industry.
The project, essentially Phase 2 of the Kasawari project, is a significant milestone in Petronas’ efforts to decarbonise, particularly for the 900 million cu ft per day Kasawari gas field scheduled to come online in 2023.
While Phase 1 extracts natural gas from the Kasawari field to be sent via pipeline for processing at the Petronas Bintulu LNG Complex some 300km away, it will also extract unwanted carbon dioxide, said Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) managing director and CEO Pandai Othman.
Phase 2 of the project will send up to 3.3 million tonnes of that carbon dioxide back underground into the reservoir each year, Pandai tells The Edge. When completed, it will house the world’s largest offshore CCS platform.
MHB is involved in the development of the offshore structure for both phases of the deepwater project.
This comprises the RM2.5 billion contract in 2019 for Phase 1 for the construction of a 47,000-tonne central processing platform (CPP), an 8,600-tonne wellhead platform (WHP) and a flare structure, together with two bridges linking the CPP to the WHP and the well flare structure.
Included in the contract is the transport and installation of an 85km pipeline linking the CPP to an existing platform.
The RM4.5 billion Phase 2 project, announced recently, involves a 14,000-tonne topside, a 15,000-tonne eight-legged jacket CCS platform and a bridge linking that platform with the CPP platform from Phase 1.
The sheer difference in value between the two contracts underlines the additional cost for the technology involved to remove the carbon dioxide from the existing gas stream and put it back underground.
It also makes sense for Petronas to form an alliance contract with MHB for the CCS project, each sharing half of the risk, says Pandai.
“CCS is a new technology. There are some additional risks over and above what we normally have to manage in offshore O&G projects,” he says.
Should the project structure remain as the normal lump-sum engineering, procurement, construction, installation and commissioning (EPCIC), the contract value will be much higher to take into account higher contingency portions to cater for the additional risks.
“So, by managing the risks together, we have a pain-and-sharing concept. If the cost is lower than targeted, we share the gain 50:50 [as well],” Pandai says.
The alliance contract also entails having a team comprising both Petronas and MHB personnel for quicker decision-making.
The CCS project, lasting until 2025, is also seen as a catalyst for the wider oil and gas services and equipment (OGSE) sector.
To be sure, Pandai says, MHB will be “busy awarding procurement packages from now through the whole of next year”, the most recent one for CCS being the RM50 million one to perform detailed engineering design works.
It is understood that the pre-qualification process is on track. “We are doing them progressively. The next ones will be the compressors; we go for the big ones first,” he says.
Other beneficiaries will include local fabricators, which will take on works for certain components such as flare structures and bridges, as well as vessel players and those involved in hook-up and commissioning towards the tail end of the project cycle.
The project is also in line with carbon-offsetting efforts seen in the O&G industry globally. It will be interesting to see similar decarbonisation efforts emulated in other parts of the local industry in the future, such as by vessel operators, which are one of the sector’s key pollutants.
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