Understanding carbon capture and storage in Malaysia

Market overview

Policy overview and targets

Malaysia, where fossil fuels make up 96.6 percent of the country’s energy supply and whereby 2022 emissions reached 291 million tons of carbon dioxide, are working to play its part in the global fight against climate change and in the world’s sustainability endeavours and net zero ambitions. It submitted its Nationally Determined Contribution (NDC) in July 2021, with a commitment to reduce its carbon intensity by 45 percent against GDP by 2030 as compared to 2050 levels. Along with its NDC commitment, it also has key policy frameworks such as the 12th Malaysia Plan (2021 to 2025), the National Energy Policy (NEP) 2022-2040, the New Industrial Master Plan 2030 (NIMP) and the National Energy Transition Roadmap (NETR) which highlight its sustainability ambitions and the government planning considered in achieving its targets.  Malaysia has also set a net zero target by 2050 and is looking into carbon capture and storage (CCS) and carbon capture, utilisation and storage (CCUS) technologies as an important avenue to allow it to achieve its net zero targets, especially in hard-to-abate sectors. In relation to the development of CCUS hubs, Malaysia has also set out a target to develop a total of seven hubs.¹

An overview of the various key policy frameworks mentioned are above and the focus on CCS / CCUS technologies are further elaborated below:²

• 12th Malaysia Plan (2021 to 2025)
  • The plan reinforces the country’s climate commitment by outlining a pathway toward long-term carbon neutrality, which is aligned with Malaysia’s vision of a low-carbon Malaysia by 2040 and promotes enabling instruments such as carbon pricing to attract investment in green technologies, including CCS / CCUS.
• National Energy Policy (NEP) 2022-2040
  • The policy recognises the pivotal role of CCS / CCUS in Malaysia’s transition towards a low-carbon economy, underscoring this as a key technology for reducing greenhouse gas emissions, particularly from the oil and gas sector, which is essential for meeting the growing demand for sustainable energy production. The advancement of CCUS technologies in the oil and gas sector is seen as crucial in the Malaysian economy as it allows for the achievement of economic and environmental sustainability.
• New Industrial Master Plan (NIMP) 2030
  • The plan outlined decarbonisation of its manufacturing sector as a key mission and recognises CCS / CCUS as a potential solution for carbon abatement, particularly for the hard-to-abate sectors. Further, CCS / CCUS is also regarded as a new growth sector which will bring about high economic benefits.
• National Energy Transition Roadmap (NETR)
  • The roadmap, which provides a comprehensive framework for achieving Malaysia’s ambitious climate targets, identifies CCS / CCUS as one of six critical energy transition levers. It has also designated the development of CCS / CCUS technologies for industries as a flagship project with the ability to drive job creation, GDP growth and enhance industrial competitiveness. The targets set are also ambitious, which includes the development of three hubs by 2030 (two in Peninsular Malaysia and one in Sarawak), with a combined storage capacity of up to 15 Million Tonnes Per Annum (mtpa) and which is expected to expand to 40–80 Mtpa across three major hubs by 2050.

Regulatory framework overview

There have been a number of applicable regulatory instruments enacted by the Malaysian government, both in Peninsular Malaysia and East Malaysia.

Carbon Capture, Utilization and Storage Act 2025 (the CCUS Act 2025) enacted on 1 August 2025 (this expressly applies to Peninsular Malaysia and the Federal Territory of Labuan only, and does not extend to the East Malaysian states of Sabah and Sarawak):³

• The CCUS Act 2025 provides a first national level legal framework governing the capture, transportation and permanent storage of carbon dioxide.
• Malaysia has also established a dedicated Malaysia CCUS Agency to support implementation of the CCUS Act 2025, with responsibilities such as overseeing, regulating, and promoting CCUS activities across the value chain, issuing permits, managing resources and funding mechanisms, advising the government, and ensuring compliance with the CCUS Act 2025.
• As an overview of the CCUS Act 2025, it permits the transportation or importing for permanent storage at designated offshore or onshore sites in Malaysia of carbon dioxide captured both within and outside of Malaysia. At each stage of the CCUS value chain (which includes capture, transport/import, storage assessment, and permanent storage), compliance is required with prescribed technical and environmental standards, and relevant certificates and permits from the Malaysia CCUS Agency must be obtained.
• Operators (those who hold an onshore or offshore storage licence and who are carrying out the operation of a storage site, controlling the storage site or controlling the operation of the storage site)⁴ are also required to pay fees to obtain: (1) import permits; (2) storage assessment (for both offshore and onshore storages); and (3) storing licences (for both offshore and onshore storages), apart from the submission of documentation. Operators are also required to pay a rate-based injection levy to the government for each tonne of carbon dioxide injected into offshore storage.
• A Post Closure Stewardship Fund has also been established and will also be managed by the Malaysia CCUS Agency.
  • The fund primarily serves to cover post closure monitoring and remediation costs of the carbon dioxide storage sites and is financed through government allocations, injection levies collected from offshore storage operators, and earnings from investments, including interest income.
  • Apart from the above use, the returns from the fund’s investments could also be used to support the broader development of Malaysia’s CCUS industry.
• The two tables below provide an overview of: (1) the directions on CCUS activities; and (2) prudent CCUS practices, stream acceptance criteria and obligation for storage operator.

2022 Land Code (Carbon Storage) Rules (the 2022 Rules) (applies to Sarawak, East Malaysia):⁵

• The 2022 Rules establishes guidelines for developing and managing carbon storage sites in both onshore and offshore areas, with a particular focus on storage licences and permits. The 2022 Rules are complemented by the 2023 Environment (Reduction of Greenhouse Gases Emission) Ordinance which seeks to protect the environment in Sarawak by reduction or abatement of emission of greenhouse gases into the atmosphere, adopt strategies towards net zero carbon emissions, promote low carbon solutions (which includes carbon storage) and facilitate the transition towards clean renewable energy.⁶
• The 2022 Rules provide regulations in relation to the following areas: (1) setting out the parties to which the regulations apply to; (2) setting out designated sites for the storage of the “scheduled gases” (such as atmospheric carbon dioxide and other greenhouse gases); (3) setting out the procedures to obtain the storage licences and permits; (4) responsibilities and obligations of the operators who have obtained the storage licences and permits and when eventually closing the storage sites.⁷
  • Parties to which the regulations apply: (1) Petroleum operators; (2) Industrial companies; and (3) Non-residents who wish to store those greenhouse gases.
  • Specific land areas to be used for storing “scheduled gases” – Specific land areas include: (1) Abandoned petroleum sites (locations where petroleum production has ceased for more than 12 months, and no economically viable petroleum remains, either onshore or offshore); (2) Deep saline aquifers (underground layers of salty water suitable for safely holding greenhouse gases); (3) Coal seams (layers of coal that may be used for gas storage) and (4) Other areas (additional onshore or offshore sites deemed suitable and safe for gas storage, as determined by the relevant authority).
  • Procedures to obtain the storage licences and permits – Operators will be required to first apply for a storage licence (which is essential for engaging in carbon storage activities). Thereafter, operators will be required to apply for the storage permit which would allow for the storage of “scheduled gases” on the specific onshore or offshore land. For both the storage licences and storage permits processes, the operators would have to go through the general broad processes (albeit with differing detailed requirements) of completing an application form and providing the relevant required documentation, going through the verification process, having the authority review the application and having an opportunity to appeal should the application be rejected.
  • Responsibilities and obligations of the operators who have obtained storage licences and permits and when eventually closing the storage sites – The responsibilities and obligations of storage operators include monitoring, maintenance, ensuring safety of the storage sites, reporting damages and incidents to the authority and taking any corrective actions mandated, ensuring compliance with all laws and licence conditions by all parties, being liable for damages caused by failures or negligence of associated parties, providing regular reports on the storage site’s condition, gas quantities and incidents (if any).  Operators will also need to comply with the terms and conditions of the storage permits, which will specify the location, nature and quantity of gases, operational requirements, monitoring plans, reporting obligations, closure conditions and financial security provisions. Storage licences and permits have expiry dates and could also be revoked if there are any breaches. When the storage sites are closed, operators are also required to follow established post-closure plans which include ongoing monitoring and corrective measures until the storage permit is terminated.

Environment (Reduction of Greenhouse Gases Emission) Ordinance 2023 (the 2023 Ordinance) (applies to Sarawak, East Malaysia):⁸

• The 2023 Ordinance, which is to be read in conjunction with the 2022 Land Code (Carbon Storage) Rules, seeks to protect the environment in Sarawak by reduction or abatement of emission of greenhouse gases into the atmosphere, adopt strategies towards net zero carbon emissions, promote low carbon solutions and facilitate the transition towards clean renewable energy.⁹ It also seeks to manage cross-sectoral carbon emissions in a variety of scheduled economic sectors (oil and gas, energy and other sectors designated by the relevant authorities) and includes carbon capture and storage as one of the carbon emissions reduction efforts.
• Its inclusion of CCS as one of the carbon emissions reduction efforts is clear as can be seen from: (1) Article 6 which requires the carbon emission report (to be submitted by any person undertaking any of the economic activities on land, water and forest areas in the Sarawak State which belong to any of the scheduled economic sectors) to contain, among other information, if greenhouse gases have been captured and stored and the volume of greenhouse gases captured and stored; and (2) Article 9 which states that the capture and storage of greenhouse gases is a measure to reduce carbon emission for any facility, which is not listed in the scheduled economic sectors but whose process or activity results in carbon emission, for the purposes of applying for issuance of Carbon Credit Units under the 2023 Ordinance.¹⁰

Projects

Kasawari CCS Project (Offshore – 200km off the northern coast of Bintulu, Sarawak) – The project, installed at a water-depth of 108 meters, is operated by PETRONAS Carigali, is one of the largest offshore CCS projects in the world and Malaysia’s first offshore carbon capture initiative, aims to capture up to 3.3 million tonnes of carbon dioxide annually from natural gas production and is tentatively scheduled to have the first carbon dioxide injection by the end of 2029 or early 2030.  The project deploys energy-efficient gas turbines and PETRONAS's proprietary membrane technology to minimise emissions and also involves key contractors such as Malaysia Marine and Heavy Engineering (MMHE) (leading the engineering, procurement, construction, installation and commissioning services), the National Petroleum Construction Company (NPCC), Baker Hughes (who will provide the carbon dioxide compression equipment) and McDermott (who will handle the offshore installation of the pipeline and platform jacket).¹¹

Lang Lebah CCS Project (Offshore – 90km off the northern coast of Miri, Sarawak) – The project, developed by PTT Exploration and Production Public Company Limited (PTTEP; Thailand’s national oil company), in partnership with PETRONAS Carigali and Kuwait Foreign Petroleum Exploration Company (KUFPEC), serves to manage the high levels of carbon dioxide and hydrogen sulphide present in the gas to be produced by the Lang Lebah gasfield (a gas field which holds an estimated 5 trillion cubic feet of gas with production expected to begin by 2027 and with a goal of producing 1 billion cubic feet of gas per day) by storing the captured carbon dioxide in the depleted Golok Field which is expected to begin in 2028.  The project is part of the Sarawak Integrated Sour Gas Evacuation System (SISGES), aimed at monetising high-contaminant gas fields.¹²

BIGST CCS Project (Offshore – off the east coast of Peninsular Malaysia) – The project looks to develop the offshore Bujang, Inas, Guling, Sepat and Tujoh gas fields which hold around 4 trillion standard cubic feet of gas, but have been challenging to develop due to high carbon dioxide concentrations, and aims to develop these fields using carbon capture and storage technology, separating carbon dioxide from natural gas and injecting it into depleted reservoirs nearby.  It is a collaboration between JX Nippon Oil & Gas Exploration Corporation (now known as ENEOS Xplora Inc.) and its subsidiary, JX Nippon Oil and Gas Exploration (BIGST) Sdn. Bhd., under a Production Sharing Contract (PSC) with PETRONAS and PETRONAS Carigali Sdn. Bhd.¹³

The above Malaysian projects aim to support Malaysia’s carbon neutrality goals while increasing also domestic gas supply, achieving the outcomes of economic gains, energy security and fulfilment of sustainability goals.

Development and support regime

Key clusters for CCS development have been identified – Through collaborative studies including those led by PETRONAS, key clusters for CCS development have been identified. The proposed clusters which are designed to efficiently capture, process, and store carbon dioxide from various industrial sources, including both domestic and foreign emissions are:¹⁴

• Northern Cluster (Peninsular Malaysia):
  • Centred around Kerteh, a prominent industrial area known for its petrochemical industries. This cluster will capture industrial carbon dioxide emissions at the Kerteh Hub. The carbon dioxide will be transported to the Kerteh Terminal, which will also receive carbon dioxide from international sources via liquefied carbon dioxide (LCO2) carrier ships. All captured carbon dioxide, both domestic and foreign, will then be transported by pipeline to an offshore storage site.
• Southern Cluster (Peninsular Malaysia):
  • Based in Kuantan, a major port city and logistics hub. This cluster will manage carbon dioxide from industrial emitters sent to the Kuantan Terminal. Similar to the Northern Cluster, this terminal will also accept foreign carbon dioxide via LCO2 carrier ships, and the carbon dioxide will be transported by pipeline to an offshore storage site.
• Eastern Cluster (Sarawak):
  • Located in Bintulu, a significant centre for the energy sector, particularly in natural gas production. This cluster will capture and process carbon dioxide at the Bintulu Hub. The carbon dioxide will be sent to the Bintulu Terminal, which will accommodate both domestic and foreign carbon dioxide from LCO2 carrier ships. The carbon dioxide will then be transported via pipeline to an offshore storage site. Additionally, the Kasawari CCS Project might be part of this cluster.

Research and Development in Carbon Capture and Storage Technologies: (1) Membrane Contactor (MBC) technology: PETRONAS’ MBC technology is a notable innovation in Malaysia’s CCS landscape and excels in carbon dioxide capture, achieving a capture efficiency of over 95 percent. Additionally, it has also integrated cost-effective design enhancements; and (2) Malaysia’s Ministry of Investment, Trade and Industry is also implementing the National Carbon Capture Project which looks to use the MBC technology to develop a carbon capture pilot plant for high-emitting industries as part of building a domestic carbon capture, utilisation and storage ecosystem.  The innovative technology developed and the utilisation of these technologies in Malaysia’s carbon capture projects thus facilitate and accelerate Malaysia’s net zero goals.¹⁵

Collaboration between entities – State owned entities often play an active role in the CCS projects and collaborate with private and other entities through memoranda of understanding. The cross collaboration ensures that projects have a balance in relation to state and private interests and allows for cross sharing of CCS knowledge, thus enhancing the projects and benefiting Malaysia’s CCS ecosystem.¹⁶

Opportunities and challenges

Opportunities

Lowering the cost of capturing carbon by monetising captured carbon dioxide and converting them to commercially valuable products – The International Energy Agency has classified six application uses of carbon dioxide in the areas of construction materials (carbonated aggregates/concrete); synthetic fuels (e-fuels, methanol); chemicals (carbon monoxide, syngas, formic acid); polymers; carbon additives (e.g., nanotubes, carbon black); and ingredients (e.g., single-cell proteins, lipids).  In relation to this, Malaysia is looking to utilise the captured carbon and focusing on commercialising it in the field of bio-based materials, carbon dioxide-enriched agriculture, and synthetic fuels.¹⁷

Challenges

Compliance with international maritime regulations in relation to cross border carbon dioxide transport to store carbon dioxide from foreign sources – Malaysia is not a signatory to the London Protocol (which evolved from the 1972 London Convention which prohibited marine dumping except for waste on the “reverse list”)¹⁸, which adopted an amendment in 2009 to allow the export of carbon dioxide streams for sequestration of carbon dioxide in sub-seabed geological formations provided that an agreement or arrangement has been entered into by the countries concerned.^19. This will need to be an area of consideration for Malaysia given that it would need to comply with the high standards and regulation of the London Protocol when dealing with countries who have ratified the London Protocol in carbon dioxide imports to be stored in Malaysia.

Regulatory harmonisation to ensure a unified national carbon capture, utilisation and storage policy – Malaysia can be broadly divided into Peninsular Malaysia and East Malaysia (consisting of the states of Sabah and Sarawak that have a history of expressing a certain amount of autonomy). As mentioned above, the CCUS Act 2025 applies to Peninsular Malaysia and the Federal Territory of Labuan (an island located near Sabah) only, and does not extend to the East Malaysian states of Sabah and Sarawak, and the 2022 Land Code and the 2023 Ordinance applies only to Sarawak. The disharmonised application of the CCUS Act 2025 might be attributed to a particular history of political differences and governance concerns by Sabah and Sarawak in relation to resource management and decision making authority.²⁰ Improvement in harmonisation between the states of Malaysia on a federal level is likely to assist Malaysia in projecting a harmonised front when entering into bilateral agreements with other countries in its pursuit of positioning itself as a regional CCS hub.

Hot topics / Areas of focus

Avenues for utilisation and commercialisation of captured carbon would encourage and provide more impetus to companies and the Malaysian government to invest in CCS / CCUS projects. In relation to this, the national power generation and distribution company, Tenaga Nasional Berhad (TNB), is looking to apply biological and hydrogenation processes to transform captured carbon dioxide into high-value products (see illustration below on the possible product developed from captured carbon dioxide).²¹

Two of TNB’s key initiatives since 2011 are Project Bloom and Project Dragon:²²

• Project Bloom – This is a microalgae bio-carbon capture and utilisation pilot project, which demonstrates the direct capture and utilisation of carbon dioxide from actual flue gas into outdoor algae photobioreactor systems. The algae photobioreactor systems then use local marine microalgae strains which absorb carbon dioxide, perform photosynthesis and through a process of carbon fixation, generate biomass for high-value products such as proteins, lipids, pigments, and specialty chemicals. While the project ran from October 2022 and ended in September 2024, the technologies and concepts developed are ready for commercialisation which could be tapped on for future similar projects.
• Project Dragon – The project was initiated in June 2024 at the Jimah East Power coal-fired power plant and uses innovative amine solvent-based technology to capture up to 5,000 kg of carbon dioxide annually. The captured carbon dioxide is then utilised through multiple pathways: carbon dioxide-enriched agriculture (including high-value crops like dragon fruit and chillies in greenhouse trials); microalgae cultivation to support the High Growth High Value (HGHV) agriculture industry; and potential hydrogenation to produce e-fuels such as methane and methanol.

Developments of more of these and advancements in the technologies utilised in these carbon utilisation projects would not only ensure that carbon is captured and stored, preventing worsening global warming effects, but also add value to society by providing a commercially viable product, truly demonstrating the idea of a circular economy in the form of “recycling” carbon dioxide.