This article first appeared in Forum, The Edge Malaysia Weekly on June 2, 2025 - June 8, 2025

Amid shifting global energy policies, Sarawak has positioned itself as a key player in Asean’s energy transition, balancing ambitions in low-carbon hydrogen, gas security and carbon capture and storage (CCS).

As global environment, social and governance (ESG) commitments waver — exacerbated by the “Trump 2.0” phenomenon — Sarawak’s move to secure greater control over local gas distributions through establishing Petroleum Sarawak Bhd (Petros) marks a watershed in Malaysia’s energy governance.

Effective February 2025, the move could potentially reduce Petroliam Nasional Bhd’s (Petronas) earnings by up to 11%, a setback partly mitigated by liquified natural gas (LNG) revenues, while reinforcing Sarawak’s role in resource governance and setting a precedent for other Malaysian states seeking similar autonomy.

Sarawak’s evolving energy governance highlights the need to balance regional priorities with national frameworks while optimising low-carbon resource management. Strengthening institutional frameworks through transparent dialogue, policy alignment and investment incentives is essential to sustain investor confidence and credibility.

One key driver in promoting investment-driven sustainable growth is the Sarawak Corridor of Renewable Energy (SCORE) initiative. However, to further influence the broader energy sector landscape and investor sentiment, a more collaborative framework between national and state stakeholders has to be developed.

With debates ongoing over the viability of hydrogen, Sarawak is systematically capitalising on its hydropower and gas assets to establish an unassailable first-mover advantage in hydropower and natural gas, further positioning itself as a competitive player in the emerging low-carbon hydrogen economy.

Sarawak’s planned 1GW renewable energy export to Singapore by 2032 via subsea cable signals its ambition to lead as a regional green energy provider, with potential annual revenues of US$800 million. Yet limited hydropower surpluses pose constraints. To meet export targets without affecting domestic supply, Sarawak must adopt hybrid models integrating diverse renewables.

Meanwhile, Vietnam’s rapid progress — targeting 7GW of offshore wind and a 47% renewable mix by 2030 — presents strong competition.

From 2033, Singapore plans to import 1.2GW of low-carbon electricity, primarily wind-generated, from Vietnam, contributing to its goal of importing 4GW of renewable energy by 2035. This follows similar agreements to import 2GW from Indonesia and 1GW from Cambodia, which includes a mix of hydropower, solar and potentially wind power.

For Sarawak to maintain its competitive edge, strategic planning and innovation are imperative. By leveraging its unique resources and adopting cutting-edge technologies, Sarawak can position itself as a resilient and adaptable leader in the clean energy sector.

Natural gas remains pivotal to Sarawak’s energy security and economic stability, with CCS a pillar of the energy transition ambitions where Sarawak’s seabed is estimated to hold 30 trillion cubic meters of carbon storage capacity.

At a regional level, CCS initiatives are steadily progressing. These include Indonesia's Gundih CCS project, which captures CO from natural gas processing for underground storage, and Malaysia’s Kasawari CCS project — led by Petronas and one of the largest offshore CCS projects in the region — which is estimated to reduce CO emissions by 3.3 million tonnes annually.

With global momentum behind CCS being essential for fossil fuel-reliant industries, Sarawak has made it central to its energy transition, including plans for a low-carbon hub. However, challenges remain — technology maturity and deployment timelines may lag behind decarbonisation goals.

Reassessing green hydrogen’s role — managing the global shift and uncertainties

While green hydrogen holds long-term promise, high costs (US$4-US$6/kg), market uncertainty and infrastructure gaps continue to challenge its near-term viability — especially compared to more affordable blue hydrogen (US$2-US$3/kg).

A transitional approach that leverages existing gas resources can ease this shift. Global demand remains uncertain, with IEA forecasts ranging from 150 to 500 million tonnes annually by 2050, underscoring the need for flexibility in Sarawak’s hydrogen strategy.

Shifts in global ESG investment sentiment or domestic political transitions could impact funding pipelines. Sarawak is tactically zeroing in on sectors with immediate economic advantages such as drawing invaluable insights from Japan’s Takasago Hydrogen Park to refine its integrated hydrogen roadmap.

Despite global uncertainties, Sarawak has diversified its risks, tackling sectoral decarbonisation gaps to cement its position as Southeast Asia’s hydrogen hub by forming international partnerships such as Japan’s JERA (hydrogen-ammonia projects), South Korea’s Kepco (industrial fuel cells), Thailand’s PTTEP (hydrogen infrastructure) and Singaporean R&D.

Financing mechanisms and workforce development — challenges to executing successfully

To strategically position Sarawak as a leader in sustainable energy, exploring diverse financing pathways is crucial. The state can create partnership models that combine concessional funding from development banks with private sector investments, optimising resource allocation and risk-sharing.

Additionally, strategically monetising carbon credits in emerging voluntary markets offers a viable funding stream for early-stage CCS and hydrogen projects, ensuring financial sustainability and advancing Sarawak's clean energy ambitions.

Human capital readiness is critical to Sarawak’s low-carbon transition. Industry-academia partnerships can drive specialised training in hydrogen, CCS and renewables, while global certification schemes enhance workforce credibility.

Aiming to upskill 5,000 workers by 2030, Sarawak is laying the groundwork to sustain project pipelines and lead in clean energy innovation.

Sarawak stands at a critical inflection point — shifting from vision-setting to execution of its energy transition journey.

To fully realise its ambition of becoming Southeast Asia’s clean energy powerhouse, Sarawak must aggressively operationalise financing mechanisms, accelerate human capital development and differentiate itself amid intensifying regional competition. Constraints such as hydropower surpluses, infrastructure scalability and global market volatility demand an adaptive, diversified strategy rather than a linear pursuit of singular technologies.

Sarawak’s future competitiveness will not be determined solely by its resources but by its ability to forge innovative governance models, commercialise new value chains and mobilise cross-sector partnerships at scale to cement its leadership in Asean’s new energy economy.

Trung Ghi is a partner and head of energy and utilities practice at Arthur D Little in Asia Pacific

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