Malaysia in sweet spot as CCUS hub
PETALING JAYA: Malaysia is ideal to be developed into a regional carbon capture, utilisation and storage (CCUS) hub, says Hong Leong Investment Bank (HLIB) Research.

This is underpinned by some major gas-producing fields nearing the end of their lifespan, local oil and gas (O&G) companies equipped with technical knowledge capabilities to support carbon capture and storage (CCS) developments and tax incentives by the government.

Under the National Energy Transition Roadmap (NETR), the country aims to develop three CCUS hubs (two in the Peninsular and one in Sarawak) with a total storage capacity of up to 15 million tonnes per annum by 2030.

“The Kasawari project is at the forefront of Malaysia’s CCUS development and is listed as one of the flagship projects and initiatives under the NETR, followed by Lang Lebah.

“In collaboration with the Sarawak government, both high carbon dioxide (CO2) gas fields are expected to be operational by 2026 and 2028, respectively, while CCS technology will be deployed to capture CO2 from the gas fields and store it in the depleted fields,” HLIB Research said.

Malaysia is touted as an ideal geography for one of the regional CCUS hubs, firstly because some major gas-producing fields are nearing the end of their lifespan.

This is ideal for carbon storage especially since existing infrastructure such as injection wells and platforms are already in place.

“Citing Malaysia Petroleum Management, over 2.4 gigatons of potential storage capacity has been identified across 16 of Malaysia’s depleted fields – 11 of which are located at fields in offshore Sarawak while the rest are located offshore Peninsular Malaysia.

“Malaysia is positioned as a gateway of the Asia-Pacific, making it an ideal storage site for international carbon for major markets such as Australia and Japan.

“Secondly, O&G companies are already equipped with technical knowledge capabilities to support CCS developments. Lastly, the Malaysian government already introduced an aforementioned tax incentive scheme in Budget 2023,” the research house said.

HLIB Research noted the two sets of policy mechanisms; enabling legislation and rules as well as cost reduction measures, are essential to get CCUS projects off the ground.

On this end, the government has introduced a tax incentive scheme in Budget 2023 for CCS to limit the CO2 emissions using CCS technologies, while ensuring the achievement of the Low Carbon Aspiration by 2040.

Subsequently in Budget 2024, the government also stated that the Petroleum Income Tax Act 1967 Revision Committee is currently reviewing and formulating tax incentives for CCS and hydrogen sulphide projects, which should be finalised by the end of this year.

“We applaud the government for taking initial steps to encourage CCUS deployment via fiscal incentives as this form of tax credit is only available in the US, besides Malaysia.

“Nevertheless, a federal legal framework for CCS and CCUS has yet to be in place in Malaysia to accelerate large-scale deployment,” HLIB Research said.

HLIB Research said MISC Bhd (chartering liquefied CO2 carriers), Malaysia Marine & Heavy Engineering Holdings (undertaking engineering, procurement, construction, installation and commissioning jobs for CCUS developments) and Wasco Bhd (pipelines to be built for CCUS translates to ample pipe-coating jobs) are identified as the potential beneficiaries of the accelerating CCUS development.

The research house maintained a “buy” call for Wasco, with a target price (TP) of RM1.40 and a “hold” call for MISC with a TP of RM7.55. Malaysia Marine & Heavy Engineering Holdings is not rated.
Economy
PETALING JAYA: Malaysia is ideal to be developed into a regional carbon capture, utilisation and storage (CCUS) hub, says Hong Leong Investment Bank (HLIB) Research.