Southeast Asia continues to lag advanced economies in deploying carbon capture, utilisation and storage (CCUS) technologies due to a lack of meaningful incentives or penalties, according to a new report by CGS.
While proponents argue that CCUS remains a critical tool in cutting carbon emissions—particularly for extending the lifespan of younger fossil-fuel power plants and decarbonising hard-to-abate sectors such as cement and steel—the economics remain challenging. The report notes that CCUS is still too costly to implement in these industries, resulting in most projects being confined to natural gas processing, where CO₂ separation is already mandatory.
Citing data from consultancy DNV, the report highlights that as of mid-2025, natural gas processing accounted for 85% of all CCUS projects globally, with a similar share of captured CO₂ channelled toward enhanced oil and gas recovery (EOR/EGR). This approach makes economic sense, as it allows operators to monetise captured carbon while meeting gas quality specifications.
In contrast, the US and Europe have seen more diverse deployment, supported by robust policy frameworks. The US offers generous 45Q tax credits, while Europe employs a mix of incentives and disincentives—including carbon pricing, direct capex support, operating subsidies, and mandatory CO₂ storage targets.
Across the Middle East, China and Southeast Asia, however, such “carrots and sticks” are far weaker. As a result, national oil companies and state-owned enterprises have become the primary drivers of CCUS activity, mainly centred on EOR/EGR or sour gas processing. The latter, the report cautions, imposes substantial financial burdens on companies such as Petronas and PTTEP.
CGS notes that Hibiscus Petroleum is likely to pass through CCS-related costs at the PM3 CAA field to Petronas, resulting in a neutral financial impact for the company.
CO₂ Import and Storage: A Potential New Growth Engine
Despite the sluggish pace of domestic adoption, Southeast Asia may soon play a central role in the international CO₂ storage market. Malaysia, Indonesia and potentially Thailand are positioning themselves to store imported CO₂ shipped from industrial facilities in Japan, South Korea and Singapore.
Developing this emerging value chain will require specialised liquefied CO₂ carriers, export and import terminals, subsea pipelines and offshore injection facilities.
Malaysia’s MISC is already planning to own and operate LCO₂ shipping vessels and may leverage subsidiary MMHE to provide offshore injection assets. Petronas Gas (PetGas) could, by 2030, own and operate Malaysia’s CO₂ terminals under long-term contracts with Petronas, which is spearheading offshore storage initiatives.
Malaysian firms are also making inroads in Europe’s fast-growing CCS sector. Yinson holds a 40% stake in Norway’s Havstjerne project, which aims to deliver maritime CO₂ transport and injection solutions by 2027. Meanwhile, Bumi Armada is pursuing European opportunities for its floating storage and injection unit (FSIU) technology.
CGS concludes that while structural barriers still impede widespread CCS deployment in Southeast Asia, the region’s geological advantages and growing interest in CO₂ imports could unlock significant new business opportunities by the end of the decade.
