Carbon capture efforts to fuel oil and gas sector

PETALING JAYA: Carbon capture and storage (CCS) and carbon capture, utilisation, and storage (CCUS) technologies have become essential for Malaysia’s oil and gas industry to achieve sustainability and maintain competitiveness in the evolving energy landscape.

With supportive policies, strategic partnerships and a clear vision, the nation is well-positioned to lead in carbon-management technologies, potentially driving economic growth while meeting environmental goals.

CCS is a process in which carbon dioxide from industrial installations is separated before it is released into the atmosphere, then transported to a long-term storage location.

In the utilisation portion of the equation, captured carbon dioxide can be injected into partially-depleted oil reservoirs in order to extract more oil or used as feedstock for making products such as fertiliser, fuels, and plastics.

TA Research in its latest report, highlighted the critical role of the advancements, stating: “CCS and CCUS technologies are no longer optional for Malaysia’s oil and gas sector; they are essential for achieving sustainability and maintaining competitiveness in a rapidly evolving energy landscape.”

The research house maintained an “overweight” stance on the sector, citing CCUS initiatives as a catalyst for industry growth.

It noted that Petroliam Nasional Bhd (PETRONAS) was recognised for its significant strides in the CCUS domain, having secured four approvals in principle for liquefied carbon dioxide carriers and advancing the front-end engineering design phase for a 62,000 cubic m long-haul carrier project.

These milestones underscored Malaysia’s growing ecosystem of CCUS stakeholders.

Among the beneficiaries, MISC Bhd, Pantech Group Holdings Bhd, and Wasco Energy Bhd were noted as well-positioned to capitalise on emerging opportunities.

MISC, in collaboration with Mitsui OSK Lines, has been at the forefront of developing advanced liquefied carbon dioxide shipping carriers.

TA Research said the carriers are “critical to the CCUS value chain, ensuring efficient and reliable transport of captured carbon”.

As for Pantech, the the research house noted the group’s expertise in supplying high-quality piping systems and components positioned it to support the robust supply chain required for CCS projects, while Wasco’s pipe-coating technology, designed to handle high pressures and carbon dioxide’s properties, is essential for the durability and efficiency of carbon-transport infrastructure.

“By embracing these opportunities, the nation can align economic growth with environmental stewardship, paving the way for a sustainable and prosperous future,” TA Research said.

Meanwhile, Maybank Investment Bank Research (Maybank IB Research) reiterated its “positive” stance on the oil and gas sector, favouring defensive midstream companies that are unlikely to be affected by potentially lower PETRONAS capital expenditure (capex), as well as floating, production, storage, and offloading players poised to benefit from global deepwater and ultra-deepwater investments.

The research house’s top picks for the sector are Dialog Group Bhd and Bumi Armada Bhd.

“Petroleum Sarawak Bhd (Petros) has been officially appointed as the sole gas aggregator for the state of Sarawak – marking a significant shift in the control of Sarawak’s natural gas resources away from PETRONAS.

“The transition of gas trading responsibilities could impact PETRONAS’ revenue stream and free cash flow although we are unable to quantify the impact yet,” Maybank IB Research said.

“We believe that a PETRONAS capex deferral is a possibility as a significant portion of its trading revenues will be lost.

“Consequently, further exploration and production (E&P) work and developing projects may be deferred until a resolution is mutually achieved between both parties,” the research house added.

It noted that under a PETRONAS capex deferral scenario, oil and gas, services and equipment names with exposure in the E&P sub-segments – mainly offshore service vessels, offshore fabrication, drilling rigs and hook-up and commissioning – would be most impacted.

Maybank IB Research added that it expects crude oil prices to be volatile and weaken to an average of US$70 per barrel this year, compared with around US$80 per barrel in 2024, as oil markets may shift into a supply surplus due to the Organization of Oil Exporting Countries (Opec) potentially unwinding its production cuts.

Phillip Capital Research was optimistic that Brent crude prices would stay supported at US$80 per barrel this year on the back of disciplined Opec supply cuts, geopolitical uncertainty, and steady global demand.

The research house said while PETRONAS may reduce its planned annual capex of RM60bil, this would be cushioned by Petros’ RM40bil capex commitment over the next five years.

“The industry’s earnings upcycle remains intact, supported by a flurry of contract awards driving record-high order books for some service providers,” Phillip Capital Research said.

It maintained its “overweight” stance on the sector, with Dayang Enterprise Holdings Bhd and Uzma Bhd as its top picks.