KUALA LUMPUR (March 21): In the same month that the Malaysian government extended RM1.1 billion in support for ailing Sapura Energy (KL:SAPNRG), it also introduced the Carbon Capture, Utilisation and Storage (CCUS) Bill 2025. Economy Minister Rafizi Ramli emphasised the urgency of the bill, stating: “The tender for carbon storage is currently ongoing. If Malaysia cannot enforce this by March 31, we will be out — we cannot enter the bid.” However, it remains unclear what precisely Malaysia is bidding for.

Although Deputy Economy Minister Datuk Hanifah Hajar Taib told Parliament that “drafting of the CCUS Bill was implemented based on a whole-of-nation approach”, clearly, parts of the nation were not on board. Environmental groups such as Klima Action Malaysia, Sahabat Alam Malaysia, RimbaWatch and Greenpeace all criticised the bill for lacking sufficient environmental safeguards. Also not part of the “whole-of-nation” are Sabah and the Deputy Minister’s home state of Sarawak, where the bill does not apply.

While the deputy minister also told Parliament that “this CCUS Bill has been drafted based on the best practices of CCUS at the international level”, specifically citing Australia, the bill contains no provision for an independent oversight body, such as Australia’s National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA). The new Malaysian CCUS Agency, which is funded by the Economy Ministry, is charged with both developing and regulating the CCUS industry.

The motivation for the bill is clearly economic, and the national petroleum company, Petronas, has signed a number of MOUs with parties in the UAE, Norway, Japan and Korea to explore carbon storage projects.

Taken at face value, Petronas’ focus on CCUS seems to make strategic sense. Injecting carbon dioxide into old reservoirs can be a way of storing it, while maintaining pressure in the reservoir to extend its productive life, a process called enhanced oil recovery (EOR), or enhanced gas recovery (EGR), as the case may be. According to BP’s Statistical Review of World Energy, Malaysia has approximately 15 years of oil production and 40 years of natural gas production left. EOR/EGR can thus extend the productive life of Malaysia’s hydrocarbon reserves, while generating additional revenue from carbon storage.

In this sense, CCUS is at best a marginal climate solution. For every tonne of carbon dioxide injected, approximately 3.7 to 4.7 tonnes of carbon dioxide are eventually emitted by burning the fossil fuels produced using EOR. In the case of the flagship Kasawari CCUS project, while upstream emissions are reduced by approximately 70%, Greenpeace calculates that CCUS will reduce total life cycle emissions by only 15% (when assuming that the gas produced is eventually burned).

The Kasawari project also offers insight into the cost of CCUS. IHS Markit, a research firm, notes that the Kasawari project will store 46 million tonnes of carbon dioxide over its lifetime and estimates the project capital expenditure at RM4.5 billion and operating expenditure of RM10.5 billion. This means the cost per tonne of carbon stored, is approximately RM326. The same study notes that carbon re-injection increases the cost of gas production at Kasawari by 38%.

At RM326 per tonne, the cost of Kasawari CCUS is much higher than the price of carbon offsets traded on the Bursa Carbon Exchange (BCX), whose most recent auction for credits from the Kuamut Rainforest Conservation Project yielded a price of RM50 per tonne. Viewed from that perspective, the CCUS project is not commercially viable, unless Petronas can find customers who are willing to pay much higher prices to store carbon dioxide.

Domestically, a carbon price of RM326 per tonne, if it were to apply to the entire Malaysian economy, would also harm the cost-competitiveness of using gas for electricity generation. Even a carbon price of RM50 per tonne already makes natural gas (and coal) uncompetitive compared to renewable energy sources such as solar, biomass or small-scale hydropower. While there would still be demand for gas for certain industrial processes, domestic and transportation use, and shifts in energy generation would not happen overnight, long-term domestic demand for natural gas could be much reduced.

Instead of focusing on CCUS, the oil and gas industry could explore other cleaner energy opportunities, such as white hydrogen (naturally occurring hydrogen deposits), and geothermal energy generation, as well as geothermal cooling. Decommissioned offshore platforms can be used for ocean thermal energy conversion (OTEC), supplying clean electricity or hydrogen, and potentially also offering a carbon storage solution.

Granted, many of these technologies are still emerging, but that also means they are “blue oceans” in which Malaysia could play a leading role if it chooses to invest in them now.

The risk of doubling-down on CCUS is that this path will generate technological lock-ins, causing Malaysia to delay investments in other emerging energy technologies. CCUS is a technology whose future is limited by Malaysia’s depleting hydrocarbon reserves, whose costs are high and unlikely to fall further, and whose impact on reducing overall emissions is limited because it can only be commercially viable when combined with further oil and gas production.

The question Malaysians, and especially their elected representatives should ask, is if the RM4.5 billion invested in the Kasawari CCUS project, and the RM1.1 billion investment in Sapura Energy are the best use of public funds with a view of securing the long-term future of the Malaysian energy sector.