Malaysia enacts new regulation to accelerate carbon capture and storage development. (Image: iStock)
Malaysia, a major oil-producing country, has used carbon capture and storage (CCS) technology to enhance oil recovery and generate foreign exchange. As the world moves toward energy transition, CCS has emerged as a key decarbonization technology.
The Malaysian government has passed the legislation to support CCS development. RECCESSARY takes a closer look at Malaysia’s CCS ambitions, highlighting the country's advantages, emerging challenges, and what Taiwan can learn from global frontrunners.
Malaysia’s parliament passed the Carbon Capture, Utilisation and Storage Bill (CCUS Bill) in March 2025, with a plan to establish a dedicated agency to build out the industry’s market and supply chain. The government estimates the sector could generate up to USD 250 billion in added value.
What potential CCS partnerships are already on the table? And how are the government and participating companies envisioning the industry’s prospects?
High-pressure carbon storage in rock formations paves way for industrial carbon neutrality
Carbon storage and capture refers to the process of capturing CO2 emissions, typically from large point sources such as industrial facilities, and storing them underground to prevent their release into the atmosphere. When the captured CO2 is repurposed for industrial use, the process is referred to as carbon capture, utilization, and storage (CCUS).
CCS is widely regarded as a crucial decarbonization tool for hard-to-abate industries, as the captured CO2 is treated and stored with minimal risk of leakage.
The principle of carbon storage involves compressing CO2 until it reaches supercritical state—a phase where it exhibits the high density of liquid but remains in the form of gas that can permeate porous rock formations and be injected into underground geological structures for permanent storage, preventing it from releasing into the atmosphere. According to the Global CCS Institute, such storage usually takes place at depth of 2 to 3 kilometers beneath the Earth’ surface in formations like depleted oil and gas reservoirs or deep saline aquifers.
Experts believe that the ideal depth of carbon storage is 2 to 3 kilometers beneath the Earth’s surface. (Image: Global CCS Institute)
It’s worth noting that most CCS technologies are designed to achieve carbon neutrality rather than remove carbon from the atmosphere. Only methods that do not add additional emissions and actively reduce CO2 from the atmosphere are considered “negative emissions” technologies, such as direct air carbon capture and storage (DACCS) and bioenergy with carbon capture and storage (BECCS).
According to Professor Hsieh Bieng-zih (謝秉志) of Department of Engineering at the National Cheng Kung University, the oil industry has been using carbon storage technology since the 1970s, injecting CO2 underground to enhance oil recovery. Today, such technique has evolved into a key decarbonization tool to help carbon-intensive industries, such as fossil fuel generation, to move toward carbon neutrality.
Japan, South Korea, and Singapore eye Malaysia for cross-border carbon storage
The National Energy Transition Roadmap (NETR) published by the Malaysian government in 2023 identifies CCUS as one of six key focus areas. The government plans to establish three industrial centers by 2030, with an additional three slated for development by 2050.
The CCUS Bill provides a legal framework focused on industry compliance and regulatory oversight, covering areas such as environmental assessments and monitoring of storage infrastructure. According to Siti Aishah Mohd Hatta, senior manager at the Global CCS Institute, the bill marks only the beginning. The government is expected to follow up with more detailed regulations on implementation, licensing, fees, technical standards, and monitoring requirements.
Although the regulatory framework is still in progress, Malaysia’ state-owned oil companies Petronas and Petros have taken an active role in the government-led initiative. International players from Japan, Abu Dhabi, the U.K., and the U.S. have either joined or expressed interest in participating. Local NGO RimbaWatch’ statistics shows that there are currently ten CCUS project proposals at various stages of development in the country.
The Kasawari CCS project, located about 200km off the coast of Bintulu in Sarawak, is the most advanced among all and is expected to begin operation in 2025. As one of the world’s largest offshore CCS projects, it has a total storage capacity of 71 million to 76 million tons. With a comprehensive process from capturing CO2 from natural gas fields to transporting it via subsea pipelines for injection into depleted oil and gas reservoirs, the project is expected to capture 3.3 million tons of CO2 annually.
Malaysia, rich in oil and gas reserves, offers an ideal environment for CO2 storage. Government-cited data indicates that the country’s depleted oil and gas fields, along with saline aquifers, have a combined carbon storage potential of 153 billion tons. The sector is expected to generate USD 200 to 250 billion in economic output over the next 30 years and create 150,000 to 250,000 job opportunities.
Malaysia’s vast CO2 storage potential is positioning the country as a regional hub for cross-border decarbonization efforts. Countries such as Singapore, Japan, and South Korea have signed MoU with Malaysia to transport and storage CO2 across borders in Malaysia’s depleted oil and gas fields as part of their efforts to cut emissions and address climate change.
Paul Everingham, CEO at the Asia Natural Gas and Energy Association (ANGEA), said at a forum that Malaysia holds three key advantages for developing cross-border CCS: abundant storage capacity, advanced oil and gas industry expertise, and strong government support.
Malaysia is positioning CCUS as a key tool to reduce decarbonization costs for emissions-intensive sectors. According to the country’s Ministry of Economy, using CCUS could save the manufacturing, power generation and transportation sectors an estimated USD 120 to 130 billion in decarbonization costs, significantly more cost effective than achieving similar carbon reduction through fuel switching alone.
CCS capacity climbs, yet technical gaps and public skepticism linger
According to data from the International Energy Agency, global CO2 capacity is projected to reach 670 million tons by 2030, a 10% increase compared to the previous estimate. With abundant energy resources and favorable geological conditions, Malaysia is well-positioned to rise this momentum. If it can move beyond storage and into carbon reuse, the country could unlock a new wave of growth in the circular carbon economy.
Despite its vast potential, Malaysia faces challenges in scaling up carbon storage. Regulatory inconsistencies between Peninsular Malaysia and East Malaysia have led to fragmented policy approaches, while the true costs of CO2 storage remain unclear. The lack of a carbon pricing mechanism also weakens incentive for businesses to adopt CCUS.
Critics also raise concerns that CCUS may serve as a lifeline for the oil and gas industry, fueling accusations of “carbon colonialism,” along with doubts over long-term storage reliability and risks of CO2 leakage.
If Malaysia hopes to establish itself as a key player in carbon capture and storage, the government must accelerate regulatory integration, implement comprehensive policy frameworks, and lower adoption barriers for businesses to unlock the full potential of CCUS.
Source: MyCCUS, IEA, The Egde Malaysia
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