An offshore rig in Malaysia. (Photo: iStock)
Malaysia is among the hubs in the Asia-Pacific region rapidly emerging as key players in the carbon capture and storage (CCS) sector, according to Rystad Energy.
In a statement on May 30, the Oslo-based consulting firm noted that Asian countries are intensifying their decarbonization efforts, despite challenges such as unsuitable geological conditions for carbon capture, utilization, and storage (CCUS) in several countries.
Rystad Energy's research highlights Australia, Malaysia, and Indonesia as emerging hubs in the APAC region, driven by the CO2 storage potential in their depleted oil and gas reservoirs and stricter environmental regulations, despite recent policy improvements.
The firm stated that recognizing the potential of these reservoirs, combined with the urgency to reduce emissions, positions the region to attract a substantial portion of the anticipated US$15 billion investment in CCUS across APAC over the next decade.
Fostering CCS value chain
Rystad Energy identified Southeast Asia as a promising contender, offering some of the most cost-effective CO2 storage options in the region.
This attractiveness has led countries like Japan and South Korea to forge alliances with counterparts in East Asia, Southeast Asia, and Australia. Notable collaborations include Malaysia’s Petronas, Indonesia’s Pertamina, and Australian companies such as Santos and Woodside Energy.
Regional collaboration is fueled by high population density and constrained domestic infrastructure in certain Asian nations, compelling them to explore storage solutions beyond their borders.
(Photo: Indonesia Center of Excellence for CCS/CCUS)
Rystad Energy said momentum is building on policies in Australia, Malaysia, and Indonesia to address regulatory gaps and pave the way for them to become key CO2 storage hubs in the region. The availability of depleted oil and gas fields, ample storage capacity, infrastructure viability, and supportive regulations further incentivize CO2 storage initiatives in these countries.
Rystad Energy senior analyst Sohini Chatterjee said that the race is on for CO2 mitigation leadership in APAC. “Policymakers are taking steps to close regulatory gaps to fully unlock the CCS value chain and create a friendly investment environment through project incentives. Ultimately, the region with the most cost-effective solutions and a clear path for CO2 storage will win. Strong government action, encompassing financing and establishing a standardized CCS framework, will also be vital,” said Chatterjee.
Malaysia’s tax incentive for CCS
According to the IEA, in 2023, the Malaysian Government proposed a tax incentive for CCS to limit CO2 emissions while ensuring the achievement of the Low Carbon Nation Aspiration by 2040.
The scheme includes two mechanisms: companies undertaking in-house CCS activities will receive an Investment Tax Allowance of 100% for 10 years, full import duty and sales tax exemption on CCS equipment from 2023 to 2027, and a tax deduction for pre-commencement expenses within 5 years from the start of operations.
Companies undertaking CCS services will receive an Investment Tax Allowance of 100% for 10 years, full import duty and sales tax exemption on CCS equipment from 2023 to 2027, and a tax exemption of 70% on statutory income for 10 years. Additionally, a tax deduction will be given for service fees incurred.
Source: The Edge, Rystad Energy, IEA
