Legal Aspects of Carbon Capture Storage (CCS) Facility in Malaysia

Carbon capture and storage (“CCS”) involves capturing, transporting and storing carbon dioxide from fossil fuel power stations, energy intensive industries, and gas fields by injecting the captured greenhouse gases into underground geological formations.¹

How Does CCS Work?

There are 4 steps to a CCS process and they are²:

1. 1. Capture of CO₂ – a variety of technologies may be utilized to enable the separation of CO₂ from gases produced during industrial processes. These technologies typically use different methods falling within the following categories:
      1. Pre-combustion capture (i.e., extracting CO₂ from hydrocarbons before combustion takes place).
      2. Post-combustion capture (i.e., capturing CO₂ following combustion of hydrocarbons).
      3. Oxy-fuel combustion (i.e., combusting hydrocarbons in an almost pure oxygen environment, as opposed to air).
      4. Direct air capture (i.e., capturing CO₂ directly from the atmosphere using a series of chemical reactions).
   2. Transport of CO₂ – the captured CO₂ is then transported by pipeline, or ship (as a pressurized cryogenic liquid), to be safely stored, thereby avoiding release into the atmosphere.
   3. CO₂ storage – the CO₂ can then be stored in designated sequestration sites, typically located several kilometers below the surface of the earth, where it cannot have a detrimental environmental impact.
   4. CO₂ utilization – as an alternative to storage, CO₂ can also be used as a feedstock in a range of products and services, with the potential applications including direct use (i.e., where the CO₂ is not chemically altered) and the transformation of CO₂ into useful products through chemical and biological processes.

Benefits of CCS³

1. Generate additional power: CO₂-based steam cycles, during which CO₂ is pressurized into a supercritical fluid, could transfer heat more readily and take less energy to compress steam, helping power generation turbines run more efficiently. Additionally, geologically stored CO₂ could be used to extract geothermal heat from the same locations in which it’s injected, producing renewable geothermal energy.
2. Create more fuel: Technically, it’s possible to convert CO₂ into a fuel. There are multiple ways to accomplish this, but they’re difficult in terms of cost and process.
3. Enriched concrete: Captured CO₂ could be used to strengthen concrete, leading to increased infrastructure durability.
4. Bolster manufacturing operations: CO₂ could be used to make chemicals and plastics, such as polyurethanes that are used to create soft foams like those used in mattresses.
5. Create new jobs: If more CCS operations were implemented, more skilled technicians would be needed to manage them.

Malaysian CCS Projects

In the third quarter of 2021, it was announced that Malaysia’s very first offshore CCS project (known as the Kasawari CCS project), a collaborative project between PETRONAS and global energy consultancy Xodus, was under development. The Kasawari CCS project, which is located off the coast of Sarawak, aims to capture and process CO₂ from a sour gas field development, which will subsequently be injected into a depleted gas field. Recently, several key-industry players have reflected their commitments on CCS projects which would gear up the development CCS projects in Malaysia. On 9 November 2021, PETRONAS signed a Memorandum of Understanding with ExxonMobil to collaborate and explore the potential CCS projects and technologies in Southeast Asia including Malaysia.⁴ On 17 December 2021, PETRONAS also signed another Memorandum of Understanding with POSCO International Corporation and POSCO Engineering & Construction to collaborate and explore opportunities in CCS technologies and CO₂ storage solutions in Malaysia.⁵

Legal Aspects of CCS in Malaysia

For now, there has yet to be any laws that govern carbon capture, storage, or injection in Malaysia. However, acknowledging the critical importance of CCS in delivering significant emission cuts in fossil fuel–based emissions, the Malaysian Government, led by the Ministry of Energy and Natural Resources has partnered with the Global CCS Institute to develop and implement the Malaysian CCS Capacity Development Program. The aim of this partnership is to help Malaysian stakeholders develop awareness, understanding, knowledge and, ultimately, skills around different aspects of CCS to ensure Malaysia is well positioned to leverage on the technology in the future.⁶ However, it is our understanding that all CCS projects will currently be regulated using the existing national legislation. For instance: the Environmental Quality Act 1974; the Street, Drainage and Building Act 1971; the Petroleum Development Act 1974; the Petroleum Regulations 1974; the Environmental Quality (Control of Solid Waste Transfer Stations and Landfill) Regulations 2009; and the Occupational Safety and Health Act 1994.

In conclusion, CCS is currently the best option to substantially reduce global carbon emissions from large-scale emissions-intensive industries. The development of the first Malaysian CCS offshore project, the Kasawari CCS project, bodes well for the country as it will likely be the largest offshore CCS project to date and will be a key pioneering project in the global transition towards net-zero carbon emissions.⁷

[1] https://www.climatecouncil.org.au/resources/what-is-carbon-capture-and-storage./#:~:text=Carbon%20capture%20and%20storage%20(CCS,gases%20back%20into%20the%20ground.
[2] https://www.mondaq.com/oil-gas-electricity/1089262/carbon-capture-utilization-and-storage-what-is-the-big-deal.
[3] https://solutions.borderstates.com/benefits-of-carbon-capture-and-storage/.
[4] https://waste-management-world.com/a/exxonmobil-and-petronas-to-study-carbon-capture-and-storage-in-malaysia.
[5] https://www.offshore-energy.biz/petronas-and-posco-team-up-to-unlock-carbon-capture-and-storage-potential-in-malaysia/.
[6] https://www.globalccsinstitute.com/archive/hub/publications/109316/malaysian-ccs-legal-and-regulatory-workshop-report.pdf.
[7] https://www.petronas.com/sites/default/files/PAO/PETRONAS-Activity-Outlook-2021-2023.pdf.

Written by:

Dhanya Laxmi Sivanantham
dhanya@azmilaw.com

Alfred Tan Hsiong Vei
alfred.tan@azmilaw.com

Corporate Communications
Azmi & Associates
28 January 2022