This article first appeared in The Edge Malaysia Weekly on January 30, 2023 - February 5, 2023

NATIONAL oil company Petroliam Nasional Bhd (Petronas) is spending billions of ringgit in an effort to reduce global greenhouse gas emissions. One of the projects it is investing in involves carbon capture and storage (CCS), which is the process of capturing and storing carbon dioxide (CO2) before it is released into the atmosphere.

Efforts to remove CO2 from the atmosphere and store it underground have gained steam across the world, especially in Europe, over the past years as heavy industries and governments seek to reduce emissions to meet their climate goals.

But it is new to Malaysia. And Petronas is in the process of building its first CCS project in the Kasawari gas field off Sarawak, which is touted to be one of the world’s largest offshore CCS facilities. Late last year, the group announced that the ambitious project is scheduled to come online in 2025.

While the total cost of the project was not disclosed, Petronas has appointed its subsidiary Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) to take on the engineering, procurement, construction, installation and commissioning (EPCIC) portion for RM4.5 billion.

In an email interview with The Edge, Petronas says it expects the project to be the largest offshore CCS project in the world, capturing 3.3 million tonnes per year of CO2 equivalent.

It has also identified other gas fields in Malaysia for other potential CCS projects, and is currently evaluating their viability.

“As a global energy company, Petronas takes the view that energy development and transition must balance between energy security, affordability and sustainability,” it says.

“CCS will be an important component of Petronas’ (as well as Malaysia’s and the region’s) response to the energy transition. CCS is one of the levers to help Petronas achieve its ambition of achieving net zero carbon emissions by 2050,” the group says.

In addition, Petronas aspires to unlock Malaysia’s potential as a regional CCS solutions hub.

“In this regard, it is undertaking efforts to collaborate with companies across the CCS value chain to help achieve this aspiration,” it says.

To steer the mammoth development plan of CCS, Petronas has allocated 20% of its annual capital expenditure (capex) from 2022 to 2026 for its overall decarbonisation efforts. Last year, the oil major announced its plan to allocate RM60 billion in annual capex, RM12 billion of which is for its clean energy solutions.

Petronas says it chose the Kasawari gas field as its first CCS project as the plant there is one of the major gas suppliers in Sarawak that could see high CO2 emissions. “The deployment of CCS is required to ensure that the field, which is high in CO2 content, could be developed.”

To reduce the group’s operational greenhouse gas emissions, Petronas has identified and is undertaking four main decarbonisation levers: zero routine flaring and venting; energy efficiency; electrification; and CCS.

It is worth noting that the CCS project is not cheap and fairly new in the market. Petronas explains that its bet on CCS is due to “technologies and innovation in that space” and “it will drive Petronas’ efforts towards achieving net zero carbon emissions by 2050”.

Apart from its CCS project in the Kasawari plant, Petronas has entered into various partnerships to accelerate its CCS programme as the technology is fairly new in Malaysia.

Last year, the group signed two separate memoranda of understanding (MoUs) with Japan Petroleum Exploration Co Ltd (Japex) and Mitsui & Co Ltd to collaborate on CCS opportunities, including suitable CO2 storage solutions in Malaysia.

The group also signed an MoU with six South Korean companies to undertake conceptual and feasibility studies towards establishing a full value chain related to CO2 capture, transport and storage. The companies are Samsung Engineering Co Ltd, Samsung Heavy Industries, SK Earthon Co Ltd, SK Energy Co Ltd, GS Energy Corp and Lotte Chemical Co.

In addition, Petronas signed a joint study and collaboration agreement with Sarawak Shell Bhd to explore opportunities and project collaborations in CCS storage solutions in Malaysia and the region.

The most recent one was last week, when Petronas announced that it has signed two project development agreements with ExxonMobil Exploration and Production Malaysia Inc to jointly pursue CCS activation projects in Malaysia. Under the agreements, both parties will be looking into maturation of technical scopes for the CCS value chain, evaluation of the identified fields for CO2 storage utilisation and development of appropriate commercial framework.

The CCS project is in line with the carbon-offsetting efforts seen in the global oil and gas (O&G) industry.

The project marks a new chapter in the regional upstream O&G industry, but how will local service providers benefit from it?

While Petronas did not specify what the potential spillover effects will be for local players, it says the group will be working with several companies on its CCS ambitions.

“In undertaking projects such as the Kasawari CCS project, multiple levels of expertise and capabilities are required. In this regard, Petronas works together with a multitude of companies and industry players on the project.

“In this process, it also allows for the upskilling of local players, which is beneficial for potential CCS projects in the future,” it says.

For now, the clear winners in the Petronas CCS projects are MHB and Ranhill Utilities Bhd via its subsidiary Ranhill Worley Sdn Bhd.

As the Kasawari CCS project is a pioneer carbon capture project for Petronas, the group has to form an alliance contract with MHB and Petronas Carigali Sdn Bhd to share the risks and the benefits during the construction period.

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