Petronas to work with POSCO for CCS technology enhancement
POSCO seeking more Malaysian upstream partnership, equity share
South Korean refiners looking for more carbon-neutral crude suppliers
Malaysia’s state-run upstream company Petronas is looking to enhance its carbon capture and storage capability through a close partnership with South Korea’s POSCO Engineering & construction, raising the prospect South Korean refiners could source carbon-neutral crude from the Southeast Asian producer in the future.
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Petronas and POSCO will assess opportunities to unlock CCS potential and identify suitable technology within the scope of carbon capture, transportation of CO2 and storage for potential application, the Malaysian upstream and refining firm said in a statement.
Petronas indicated that the company is taking deliberate steps to build a resilient and sustainable portfolio to support the transition toward lower carbon energy sources, including evaluating the application of technology toward lowering emissions across the value chain which will encompass carbon capture, transport and storage.
“Given the multiple business adjacencies between Petronas and POSCO, we are delighted to collaborate in unlocking the opportunities and potential of CCS. This is one of the many efforts to establish Malaysia as a leading CCS solutions hub in the region,” said Petronas’ Chief Executive Officer of Upstream Adif Zulkifli.
“POSCO is the largest steel manufacturer in Korea and this collaboration will allow Petronas to leverage on POSCO’s experience, especially in carbon capture and transportation,” he added.
South Korea’s major refiners and petrochemical companies cheered the latest partnership between the two firms amid hopes Malaysia could become one of their major sources of carbon-neutral crude and gas condensate within the next decade or two.
South Korea has been importing less than 500,000 barrels/month of crude and condensate on average from Malaysia over the past few years, with refiners and petrochemical companies picking up just a few odd cargoes of light sweet crudes and condensate including Muda, Cakerawala, Kidurong and Labuan from time to time.
However, many refiners would be keen to procure Malaysian cargoes on a more regular basis if the Southeast Asian producer could rapidly build its foundation to drastically reduce net emissions during production phases of each barrels or metric tons of oil and gas, through a high quality carbon capture technology, according to a market research analyst at Korea Petroleum Association.
South Korean refiners and petrochemical makers including SK Innovation, Hyundai Oilbank, GS Caltex and Hanwha Total are aiming to fill a certain portion of their monthly feedstock baskets with crude and condensate certified as carbon neutral in ongoing efforts to enhance and incorporate their ESG considerations.
The number of carbon-neutral crude suppliers for the refiners remains limited so far, with Norway and Australia among the very few options available, with the companies importing carbon-neutral certified Johan Sverdrup crude and low carbon Ichthys condensate from the two producers, respectively.
New upstream investor in Malaysia
POSCO recently emerged as an active new player in the Malaysian upstream oil and gas industry.
In November, the South Korean steel giant signed a production sharing contract, or PSC, with Petronas for its equity share in Block PM524 located in the prolific area of the Malay Basin, surrounded by several key producing fields including Tangga Barat.
Malaysia is fast becoming an attractive destination for companies seeking to grow their energy portfolio and thrive in energy transition, said Petronas’ Senior Vice President of Malaysia Petroleum Management Mohamed Firouz Asnan.
“Under our right asset, right player strategy, supported by a progressive fiscal regime, we hope to fully maximize the long-term value of the hydrocarbon resources in Malaysia, especially in Peninsular Malaysia where the demand is expected to increase,”
Malaysia is pursuing more zero continuous flaring and venting of hydrocarbons to reduce emissions, which is aligned with its aspiration to achieve net zero carbon emissions by 2050.
Read More: Malaysia-South Korea CCS collaboration may open low carbon crude trade opportunity