In September 2023, Japan and Malaysia signed an agreement to send CO₂ from CCS projects in Japan to Malaysia, where it will be stored underground in depleted oil and gas fields. The plan is to start exporting CO₂ by 2028, with the plans seen as essential to hit climate targets not only in both countries but in the region as a whole. Meanwhile, neighbouring Indonesia has set up a Carbon Capture and Storage Centre, part of a larger goal of, as an official told the media in May, “making Indonesia a CCS hub in the region”.
According to the Indonesian Government, 15 CCS projects are in the study and preparatory stages in Indonesia, and most are due to be operational by 2030. The country has signed CCS deals with Japan Petroleum Exploration, Japan Organization for Metals and Energy Security and South Korea’s POSCO International.
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“CCS is an emerging technology solution that may enable energy authorities to continue the use of fossil, especially coal, in energy supply,” said Herman Darnel Ibrahim at Indonesia’s National Energy Council, a governmental agency. “What we need is development of CCS that, affordably, effectively and safely captures and stores carbon emissions.”
According to its proponents, CCS can both make fossil fuel exploration cleaner by keeping excess CO₂ underground, and reduce emissions from industry and coal-fired power plants. Moreover, organisations like the Asia CCUS Network – whose primary members are national energy ministries from countries like Indonesia, Japan and Malaysia – see a role for an international CO₂ trade from CCS projects in countries like Japan, South Korea and Singapore, which lack storage capacity. Environmentalists and some energy analysts, however, are concerned that the push for CCS is coming from oil and gas companies, which see an opportunity to promote the continued use and development of fossil fuels.
“In several of the agreements, it is for enhanced oil and gas recovery using CO₂,” says Grant Hauber, strategic energy finance advisor for Asia at the US-based Institute for Energy Economics and Financial Analysis (IEEFA), a think tank. “It is an excuse to continue pumping oil and gas in a more carbon-aware world.”
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Ambitious plans for CCS in Indonesia and Malaysia
CCS is central to the decarbonisation and net-zero plans of several countries in South East Asia. For Indonesia and Malaysia, it is primarily part of national plans to reduce emissions from oil, gas and coal.
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By GlobalDataFor Sisilia Dewi, a campaigner with the non-profit 350.org Indonesia, the attention on CCS is a symptom of a larger problem: the political influence of the fossil fuel industry.
“Indonesia is so fossil fuel dependent, that there is a lot of lobbying coming from the industry, making sure that they can continue business as usual,” says Sisilia. “They divert the conversation from actually reducing emissions to capturing and storing them somewhere. To us, that is greenwashing.”
However, for South Korea, Japan and Singapore, CCS plays a different role; they see Indonesia and Malaysia as potential recipients of CO₂ exports, with that CO₂ coming at least in part from hydrogen production in South East Asia. Hydrogen co-firing, through ammonia, is a key part of Japan and South Korea’s power-sector decarbonisation plans. Much of that hydrogen would be made from fossil fuels, with CCS to capture the resulting CO₂, or ‘blue hydrogen‘.
Japan, in particular, has been a major proponent and supporter of hydrogen globally. “Japan’s green transition is basically founded on hydrogen,” says Hauber. “That has a spillover effect on the investment plans of regional partners in South East Asia, where they are trying to get accomplices to feed this value chain.”
Projects under way to link CCS to hydrogen production include a partnership between ExxonMobil and Pertamina, which aims to use CCS to produce blue hydrogen at oil and gas fields in the South Sumatra, East Kalimantan and West Java provinces of Indonesia. Another project is between Japan’s ENEOS and Osaka Gas with Petronas in Malaysia. Recent analysis, however, raises concerns whether blue hydrogen can even be climate friendly.
CCS for oil and gas in Indonesia and Malaysia
The region’s flagship project is around the Kasawari gas field off the coast of Borneo in east Malaysia. This is the largest offshore CCS project in the world, aiming to capture 3.3 million tonnes of CO₂ a year, and is scheduled to commence operations by the end of 2025 . It is being framed by companies and the Indonesian Government as a model CCS project that will have strong benefits for climate change, but in Petronas’s financial statements and documents, the plans are framed quite differently, focused on recovering gas from a difficult deposit.
According to Hauber, the Kasawari gas field is “sour,” meaning “it has a high CO₂ content”. He sees the real focus of the plan as using CO₂ for enhanced gas recovery. “You have to question whether that is really meant for decarbonisation.”
In fact, many of South East Asia’s plans for CCS seem to be focused on existing oil and gas projects including the Japan-supported CCS pilot at the Gundih oil field in Java and the BP-supported CCS project at the Tangguh gas field in West Papua, Indonesia.
Keep up with Energy Monitor: Subscribe to our weekly newsletterOne exception is the Carbon Aceh project, which is looking to turn a nearly totally depleted oil field, the Arun field in Western Indonesia, into a CO₂ storage centre, potentially for CO₂ captured at coal plants – in Indonesia or abroad, says David Lim, Carbon Aceh’s CEO.
“We would be the first commercial CCS business in Asia offering open access storage for CO₂,” says Lim, “We will be reducing the carbon footprint from industrial sources and power plants.”
However, under current financial conditions, the business case for pure CO₂ storage does not exist. That is because in Asia, there is little carbon pricing. Carbon Aceh even acknowledges that, initially, the most business will come from storing CO₂ from enhanced gas recovery projects from nearby undeveloped gas fields.
“It is going to cost $25–40 a tonne to store, and then you have to work back up the value chain. How much is it going to cost to capture it? Transport it?” says Lim. “Singapore has an aspirational carbon price of $60 a tonne in 2030, but even that’s not going to cut it.”
Hauber agrees. “In Asia, the nominal price for carbon, it is not enough to move the needle,” he says. “If you wanted to achieve decarbonisation within reasonable time frames, it would be appropriate to have some type of price on CO₂, ideally increasing over time.”
That means the burden of paying for CCS will fall on governments and ultimately consumers, through taxes or higher energy prices. For Sisilia, all the attention being given to CCS is distracting from other ways that Indonesia and other countries like Malaysia and Japan could decarbonise.
“CCS technology itself is not proven, especially in terms of how it would reduce emissions,” says Sisilia, noting how many high-profile projects have failed around the world.
“Why do we spend so much money for a technology that is risky and could prolong the life of fossil fuels? It is better to use that money to leapfrog to renewables, which are cheaper.”
