Carbon colonialism? Malaysia and Indonesia plan storage hubs for Asian emissions

Japan and South Korea have signed deals to export CO2 captured at their power and manufacturing plants to Southeast Asia

After decades of producing planet-heating fuels, depleted oil and gas fields in Malaysia and Indonesia may have a new purpose: putting carbon dioxide from some of Asia’s top emitters back underground, in a big but risky bet by state oil giants and governments. 

Malaysia’s oil company Petronas has signed at least 24 memoranda of understanding with nine countries – among them Japan and South Korea – to store their excess CO2 emissions in exploited fossil fuel sites off the coast of peninsular Malaysia and Borneo island, in the gas-producing region of Sarawak.

These plans have sparked accusations of “carbon colonialism” from climate activists, who see exporting emissions for storage in another country as a “get out of jail free” card for continued fossil fuel use.

While large carbon capture and storage (CCS) facilities exist all over the globe, with many new ones under development, the scale of Petronas’ ambition is untested in the region. 

The state-run company is looking to develop three CCS hubs and two flagship projects across Malaysia, for a total storage capacity of 15 million tonnes of CO2 per annum (mtpa) by 2030 – equivalent to Senegal’s emissions in a year. All the world’s CCS plants combined can currently hold about 51 mtpa.

Petronas plans to put 20% of its capital expenditure into decarbonisation projects between 2022 and 2026, with CCS making up a significant portion of the billions of dollars it wants to invest. 

These projects are part of Malaysia’s broader energy transition strategy and its bid to become a carbon capture and storage hub for Asia, a goal shared by neighbouring Indonesia. 

Some of Asia’s top emitters are set to become key clients, as Japan’s Ministry of Economy, Trade and Industry, which oversees energy policy, deemed CCS “indispensable” for reducing power-sector emissions. Out of nine projects Japan has selected to test the viability of CCS, four aim to export carbon overseas, including to Malaysia and Indonesia.

While the International Energy Agency says a small amount of carbon capture will be needed in sectors where emissions are hard to reduce, like cement production, campaigners criticised Indonesia, Malaysia and Japan’s bet on carbon capture as a bid to prolong the lifespan of fossil fuel infrastructure.

Exporting emissions

Some experts consider both Indonesia and Malaysia as favourable locations to store captured CO2 because of their abundance of depleted oil reservoirs and saline aquifers, which could in principle hold the gas below ground.

Under the proposed deals, big industrial emitters in Asia would capture CO2 released when burning fossil fuels in their plants and factories, turn it into a liquid form, and ship it to Southeast Asia for storage.

Last September, Petronas agreed with eight Japanese companies and the Japan Organization for Metals and Energy Security, a government body, to design a project to capture and ship CO2 from Japan, then store it in a compressed “supercritical state” in a depleted gas field off the Sarawak coast. 

The Japanese entities will be responsible for capturing and liquefying the carbon emitted from power plants and industrial facilities, including steelworks and chemical plants, in Japan’s Setouchi region. Together with Petronas, they will also design the transport, injection and storage stages.  

Meanwhile in Indonesia, Japanese utility Chubu Electric Power has expanded its CCS collaboration with energy giant BP to connect Japan’s Nagoya port with the BP-owned Tangguh gas field in West Papua.

Through initiatives like the Asia Zero Emission Community, Japan has pushed fossil fuel developments in Southeast Asia, including exporting and storing overseas the equivalent of up to one-tenth of its current emissions by 2050, according to a report by Japan’s Research Institute of Innovative Technology for the Earth. 

In shifting their climate burden and responsibilities to tackle it onto lower-income nations, Japan and other developed countries are engaging in “carbon colonialism”, campaigners say – mimicking a pattern seen in the export of plastic waste from the Global North to the Global South. 

“Wealthy, high-emitting countries get to keep burning fossil fuels while offloading their carbon onto nations that have done far less to cause the crisis,” said Sisilia Nurmala Dewi, 350.org Indonesia team lead. 

Risky business

Oil and gas giants like Petronas, BP and Indonesian state oil firm Pertamina, as well as the Malaysian and Indonesian governments, have proposed projects worth billions of dollars, anticipating growing demand for CO2 storage. But analysts are more cautious, citing high uncertainties in the CCS market and technical difficulties in keeping the carbon below ground.

Given its high cost, CCS is largely unfeasible in Malaysia and Indonesia without the existence of cross-border projects, said I Gusti Suarnaya Sidemen, CCUS research fellow at the Jakarta-based Economic Research Institute for ASEAN and East Asia (ERIA), which founded the Asia CCUS Network together with the Japanese government. These are the kind of projects Japan and South Korea are keen to develop.

By financing projects in Indonesia, Japan is creating a strong incentive for Jakarta to pursue these ventures, said Dwi Sawung of WALHI Indonesia, an environmental NGO. “It’s really Japan who will pay.”

On the back of that, both Kuala Lumpur and Jakarta are providing incentives for developers – with the Indonesian government even bearing some of the expense of enhanced gas recovery, a method that uses the captured CO2 to extract more fossil fuels, said ERIA research associate Ryan Wiratama Bhaskara.

Grant Hauber, strategic energy finance advisor for Asia at the Institute for Energy Economics and Financial Analysis (IEEFA), a US-based think tank, said there is a “dangerous lack of knowledge in decision-makers worldwide” about the capabilities, risks and costs of CCS.

Hauber said even widely cited success stories, such as the Sleipner and Snøhvit projects in Norway, have struggled with the unpredictable nature of CO2 storage. The captured carbon has been found to leak and is difficult to measure. Gas giant Equinor’s Sleipner project, for example, overreported its carbon savings by 28% from 2017 to 2021, due to defective monitoring equipment, according to DeSmog.

Injecting carbon into depleted oil and gas fields, where there are many potential paths for leakage or failures, is particularly tricky, Hauber noted, adding that geologies change across regions, making it more complex. “The chemistry is different. The conditions are different. Storage sites will perform differently. It’s what makes it so expensive,” he said.

To date, the vast majority of captured carbon has been used for a process known as enhanced oil recovery, which uses the CO2 to squeeze out hard-to-get oil in depleted fields. But 78% of new projects planned globally are destined for CO2 storage, according to the Global CCS Institute.

The risk of these high-cost abatement schemes, experts say, is that they divert funds away from proven climate solutions, prolong the burning of fossil fuels and, ultimately, cause more emissions. “The real solution isn’t to bury carbon; it’s to stop digging up more,” said 350.org’s Dewi.

Tool for meeting climate goals?

Malaysia and Indonesia, however, view CCS as essential to meeting their net zero goals while they remain dependent on fossil fuels. For example, by mid-century, Indonesia plans to fit 76% of its coal-fired power plants with CCS technology. 

According to ERIA’s estimates, Malaysia has the highest storage potential – around 130 billion tonnes of CO2 – out of all assessed Southeast Asian countries, followed by Indonesia with 51 billion tonnes of CO2. 

Both countries are building up their legal frameworks in preparation. Last year, Indonesia adopted regulation that allocates 30% of storage capacity for imported CO2. Malaysia’s parliament approved its first CCS bill this month. In both cases, critics point to a lack of clarity around who is responsible for ensuring CO2 storage in the long run, and whether companies would be liable for damages.

Some projects have already moved forward. The Kasawari gas field off the Sarawak coast is set to become the world’s biggest offshore CCS facility potentially as early as this year and Malaysia’s first large-scale project of its kind. 

Kasawari’s gas reserves contain high levels of CO2 and Petronas, the plant’s owner, aims to remove the carbon and inject it under the sea in a depleted gas field to cut the emissions of its extractive activities.

Yet, even if the facility meets its target of storing 3.3 mtpa of CO2, this would amount to only a 1% reduction in Petronas’ current emissions, says a group of Malaysia-based NGOs.

The projects have also received criticism for their lack of transparency. “The environmental impact assessment for Kasawari was approved with absolutely no consultation,” said Meenakshi Raman, president of environmental justice non-profit Sahabat Alam Malaysia. Pollution threats to fishing communities are among the concerns.

Raman also cited a 2023 report pointing to a “huge gap” between the optimistic goal of CCS plants capturing 90% of emissions and real-world results, which show capture rates of around 50% on average. 

The report by policy institute Climate Analytics warned that under-performing plants could become a source of increased emissions for many countries, Raman said, making CCS a “false solution” to the climate crisis.

Cover photo:  Activists at COP27 demonstrate against carbon capture and storage in Southeast Asia. (Photo: 350.org)