INSIGHT

JULY 2023

CCS in Malaysia: unlocking the

potential of high-CO2 gas fields
CCS in Malaysia: unlocking the potential of high-CO2 gas fields

Executive summary
As a leading oil and gas producer in Southeast Asia, Malaysia is faced with its own energy trilemma: increase production while
reducing cost and carbon emissions. We estimate over 15 billion boe of oil and gas resources are remaining in Malaysia. This
includes 9 billion boe of undeveloped high-CO2 content gas, essential to meet domestic and international demand in energy.

Carbon capture, transport, and storage (CCS) provides an opportunity to unlock the potential from these resources, by
combining the removal of CO2 via natural gas processing with underground storage. Even though it may incur additional costs,
both Malaysia and its counterpart, Indonesia, are betting big on their CCS strategies, motivated by a growing gas demand from
emerging Asian economies and a stronger preference for clean, low-carbon gas from North Asian LNG buyers. Malaysia and
Indonesia are signatories to the Paris agreement and plan to become net-zero by 2050 and 2060 respectively.

Malaysia has an advantaged subsurface for CCS, but the largest fields by storage capacity might not always be the best
candidates for injectivity. Even if the country's ambition is to become a regional CCS hub, advancement is needed to establish
regulatory frameworks, and define subsurface rights, liability, and CO2 cross-border shipment.

Malaysia's long-lasting oil and gas legacy

Malaysia is the second-largest oil and gas producer in Southeast Asia, with remaining oil and gas resources estimated at over
15 billion boe. Between them, Malaysia and Indonesia account for almost 75% of the region’s remaining resources.

Initial resources by country

Source: Wood Mackenzie Lens Subsurface Discovery. Volumes represented are 2P recoverable reserves.

Malaysia has always been quite attractive to IOCs and independents looking to expand their portfolios. In recent years, local
players and Asian NOCs have strengthened their domestic presence. PETRONAS dominates the corporate landscape, with
ambitions to increase Malaysia’s hydrocarbon output using undeveloped high-CO2 resources, while at the same time
decarbonizing its operations. To achieve this, CCS has been identified as a critical enabling technology. PTTEP, KUFPEC,
Mubadala and PETROS, alongside a few majors and independents (ExxonMobil, Shell and ConocoPhillips) also have
significant portfolios.

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CCS in Malaysia: unlocking the potential of high-CO2 gas fields

CCS strategy: how Malaysia compares against Indonesia

Malaysia and Indonesia are confronted with the need to meet rising, domestic and international energy demand while fulfilling
their pledge to fight climate change. Both nations are poised to drive decarbonization strategies in the region. In 2021, Fossil
fuels (gas and coal) accounted for 75% of Malaysia’s primary energy mix and are expected to represent 45% by 2035. In
Indonesia, they represented 88% of the energy mix and are expected to drop to 77% by 2030.

Initial resources by field maturity in Malaysia and Indonesia

Source: Wood Mackenzie Lens Subsurface Discovery. Undeveloped category includes contingent, good technical and probable resources.
Volumes represented are 2P recoverable reserves.

Production from high-CO2 content fields involves the use of natural gas processing units to strip the sales gas from CO2, so it
can meet buyers standards. The process results in an almost pure CO2 stream (>98%), making it low-cost for carbon capture,
relative to other technologies. CCS provides a cleaner alternative to venting and the CO2 can be transported and permanently
stored in nearby depleted fields or saline aquifers.

In the case of Indonesia, gas production has helped the country maintain its leading position in the regional oil and gas sector.
However, CCS is seen as a key enabler for increasing hydrocarbon production through CO2-EOR/EGR (Enhanced Oil
Recovery/Enhanced Gas Recovery). Fifteen projects are part of Indonesia’s CCS roadmap. We are currently tracking nine of
them, at various stages of development, representing 9.1 Mtpa in project capacity. Among those, Tangguh, Sukowati, Gundih
and Jatirabang are designated as EOR/EGR.

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CCS in Malaysia: unlocking the potential of high-CO2 gas fields

Map of Indonesia’s current CO2-EOR/EGR CCS projects

Source: Wood Mackenzie Lens Subsurface and CCUS Discovery

Malaysia plans to rely heavily on CCS to develop future high-CO2 gas resources. We are currently tracking four projects in
Malaysia representing 9.6 Mtpa in project capacity, with a target start date in the mid 2020's.

PETRONAS’ Kasawari CCS project, located offshore Sarawak, is associated with the giant gas discovery of the same name.
Once operational, CO2 will be separated from the produced gas and transported 135 kilometres via an offshore pipeline for
injection into depleted reservoirs at the M1 field. With injection starting in 2025 or 2026, Kasawari aims to capture between 3.3
and 3.7 million tonnes of CO2 annually, for a total of 76 million tonnes stored over the project duration.

PTTEP’s Lang Lebah project is a sour gas development. Gas produced at Lang Lebah will flow to a new onshore processing
plant where the contaminants will be removed. CO2 will then be piped to a platform on the depleted Golok field for injection.
Lang Lebah has yet to be sanctioned, but if FID is achieved by the end of 2023, then the project should be operational by 2027.
It plans to capture and sequester 2.5 Mt of CO2 annually.

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CCS in Malaysia: unlocking the potential of high-CO2 gas fields

Map of Malaysia’s active high-CO2 gas CCS projects

Source: Wood Mackenzie Lens Subsurface and CCUS Discovery

Earlier this year, PETRONAS announced the development of the BIGST cluster (Bujang, Inas, Guling, Sepat, and Tujoh).
We estimate between 4-6 tcf of high-CO2 content gas can be produced from these previously classified non-viable fields .
PETRONAS indicated contaminant levels in the cluster vary between 20 and 80%, hence the need of CCS to eliminate venting.
Once operational, the BIGST cluster will offer a new source of gas supply for the densely populated Peninsular Malaysia and
open up the Malay basin for further CCS activities.

BIGST cluster location

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CCS in Malaysia: unlocking the potential of high-CO2 gas fields

Source: Wood Mackenzie Lens Subsurface and CCUS Discovery. BIGST fields are identified with a "drop". Nearby storage candidates from
PETRONAS Carigali’s portfolio are circled in blue.

Does the subsurface support Malaysia’s CCS ambitions?

CO2 can be stored in depleted oil and gas fields and saline aquifers. When screening for CO2 storage candidates, the emphasis
is placed on three primary metrics:

• storage capacity: the volume of CO2 that can be stored

• injectivity: the ability to inject the total volume captured from emitters through a defined number of injection wells and thirdly

• containment: how reliably the selected storage site can contain the injected CO2 for the entire project duration and
throughout the post-closure phase

Established oil and gas basins offer the most opportunities for CO2 storage. For Malaysia, we currently estimate 2.8 Gt of total
CO2 storage capacity from depleted oil and gas fields. These are primarily located in three core basins: the Sarawak, Malay and
Sabah basins.

Best storage capacity by basin

Source: Wood Mackenzie Lens Subsurface and CCUS Discovery. Potential storage capacity from saline aquifers is not included.

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CCS in Malaysia: unlocking the potential of high-CO2 gas fields

We selected 25 fields offshore Malaysia with a best estimated storage capacity of 25 Mt and above. We then evaluated their
performance against WoodMac’s screening criteria for CO2 storage, by analysing their reservoir pressure and temperature,
porosity, permeability and thickness.

Best storage capacity by depleted field

Source: Wood Mackenzie Lens CCUS. Top 25 depleted fields in Malaysia with at least 25 Mt of storage capacity. This storage capacity should
be suitable for projects designed to capture 1 Mtpa and operate for a minimum of 25 years. Please note WoodMac's definition of depleted fields
encompasses ceased, mature and mid-life fields, so that candidates for CO2-EOR/EGR can be considered in our analysis.

At the exception of the Duyong, Gumusut and F23 fields, most reservoirs in all three basins are encountered at depths suitable
for carbon capture and storage (>1,100 m). They also meet the pressure and temperature thresholds to allow CO2 injection in
the supercritical phase (pressure >1,100 psi and temperature > 31°C).

Pressure versus depth Temperature versus depth

Source: Wood Mackenzie Lens CCUS. Fields are bubble sized by Source: Wood Mackenzie Lens CCUS. Fields are bubble sized by
storage capacity (Mt). For most fields, pressure is above 1,100 psi. storage capacity (Mt). Reservoir temperature is above 31 degrees
Celsius in most fields.

Porosity, permeability, and thickness are also suitable for CO2 storage in most reservoirs: porosities are above 10%,
permeabilities are greater than 50 mD and thicknesses are at least 20 m.

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CCS in Malaysia: unlocking the potential of high-CO2 gas fields

Porosity versus depth Permeability versus depth

Source: Wood Mackenzie Lens CCUS. Fields are bubble sized by Source: Wood Mackenzie Lens CCUS. Fields are bubble sized by
storage capacity (Mt). Porosities are above 10% in all fields. storage capacity (Mt). Permeabilities are greater than 50 mD in most
fields.

Thickness versus depth

Source: Wood Mackenzie Lens CCUS. Fields are bubble sized by storage capacity (Mt). Reservoir thicknesses are 20 m and above in most
fields.

In 2015, Hoffmann et al., introduced the concept of injectivity as additional criteria for screening CO2 storage candidates. Using
a cross-plot of permeability versus thickness, Hoffmann et al. grouped CO2 storage projects into three categories based on the
injectivity of the associated reservoirs: TYPE 1, TYPE 2, and TYPE 3.

TYPE 1 reservoirs are linked to high injectivity projects (>100 darcy-metres). The injectivity per well is elevated. Therefore,
a smaller number of wells help achieve large storage capacity numbers of up to 1 Gt. Structural traps are preferred for such
projects due to extensive plume mobility and wide plume monitoring should be planned. Sleipner is a good example of a TYPE 1
project

TYPE 2 covers lower permeability reservoirs associated with moderate injectivity projects (10 – 100 darcy-metres). A
larger number of wells will be required to the achieve desired total storage capacity of 10 to 100 Mt. Often deviated wells may
need to be used to compensate for lower permeability values. Plume mobility is more moderate than TYPE 1 reservoirs,

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 CCS in Malaysia: unlocking the potential of high-CO2 gas fields

however, there is a higher risk of induced seismicity. Plans for pressure management and fluid disposal need to be in place.
According to Hoffman et al, most active projects fall in the TYPE 2 category.

TYPE 3 reservoirs are low permeability. Less than 10 darcy-metres of well injectivity can be achieved and such reservoirs will
typically require the use of long-reach horizontal wells with extensive completion intervals. There is a significant risk for high
localized overpressure because of extremely low plume mobility. These lead to an increase in project costs.

Table 1: Characteristics of carbon storage reservoirs by type

Attribute TYPE 1 TYPE 2 TYPE 3

Injectivity (k times h)
Permeability
Reservoir thickness
Individual well injection
capacity
Maximum project scale
> 100 darcy-metres 10-100 darcy-metres <10 darcy-metres
1 to many darcies 100 millidarcies to a few < 100 millidarcies
darcies
>100 m >10 m Not constrained
Up to 5 Mtpa for 7” completion ~ 1 Mtpa 100 ktpa or less
100 Mt to 1Gt 10-100 Mt < 10 Mt

Plume behavior Highly mobile (10 km in a few Moderately mobile (a few km in Almost immobile
decades) a century)
Injector geometry Simple vertical wells with 10- Deviated wells with 100 to 1000 Long-reach horizontal wells with
250 m completion m completion extensive completion intervals

Pressure response Wide regional dissipation with Semi-regional coupling at Significant local overpressure that
low values higher values may reach fracture limit

Key advantages High injectivity, small number
of wells, no pressure issues,
low project cost, suitable for
offshore storage
Adequate injectivity and well Plume immobility
number, good for onshore
storage and some offshore
storage as well, good balance
of plume visibility and extent

Key disadvantages
High plume mobility, wide
monitoring extent
Possible induced seismicity, Poor injectivity, geomechanical
need for pressure instability (fracturing, high
management, and fluid disposal magnitude induced seismicity), well
number and complexity, high
project cost

Source: Site characterization for carbon storage in the near shore Gippsland basin, Hoffmann et al. (2015)

TYPE 1 and TYPE 2 reservoirs should generally help achieve the desired storage capacity more easily due to their injectivity.
Projects associated with TYPE 3 reservoirs are also feasible but could be more complex to execute.

We used Hoffman’s thickness-permeability cross-plot to evaluate the injectivity of the 25 depleted fields selected for Malaysia.
The following nine fields meet the TYPE 1 and TYPE 2 criteria: Gumusut and F13 (TYPE 1), Helang, E11, B11, F6, M1, Serai,
and Kepong (TYPE 2).

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CCS in Malaysia: unlocking the potential of high-CO2 gas fields

Hoffmann's injectivity cross-plot Hoffmann's injectivity cross-plot applied to top CO2

storage candidates in Malaysia

Source: Wood Mackenzie Lens CCUS

Source: Site characterization for carbon storage in the near shore
Gippsland basin, Hoffmann et al. (2015)

We combined Wood Mackenzie’s CO2 screening criteria and Hoffmann’s injectivity study to help rank the 25 fields selected by
CO2 storage capacity. Although their subsurface properties are suitable for carbon storage, adding injectivity as a
metric demonstrates that fields with the highest capacity estimate may not always be the best fit for CCS projects.

Summary CO2 storage candidate screening table (top 25 depleted fields, Malaysia) - part A

Source: Wood Mackenzie Lens CCUS. WoodMac’s CO2 screening criteria and Hoffmann’s injectivity categories are combined. Green dots
indicate properties that fall within the screening interval. Amber or red dots indicate properties which fall outside the screening interval. Certain
fields don't have an assigned reservoir TYPE due to missing injectivity values.

Summary CO2 storage candidate screening table (top 25 depleted fields, Malaysia) - part B

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CCS in Malaysia: unlocking the potential of high-CO2 gas fields

Source: Wood Mackenzie Lens CCUS. WoodMac’s CO2 screening criteria and Hoffmann’s injectivity categories are combined. Green dots
indicate properties that fall within the screening interval. Amber or red dots indicate properties which fall outside the screening interval. Certain
fields don't have an assigned reservoir TYPE due to missing injectivity values.

Most fields with at least 50 Mt of estimated CO2 storage capacity fall in the TYPE 3 category. These may require the use of
horizontal wells with extensive completion intervals to compensate for the extremely low well injectivity. With the CO2 plume
being almost immobile, there are heightened risks of localized overpressure and of breaching the fracture pressure limit,
potentially causing reactivation of faults and/or fractures. As a result, F23, Jintan, E8, Jerneh, Lawit, Resak, Angsi, Baronia,
Bintang, and Erb West fields rank lower in the site screening process.

Gumusut and F13 are the only TYPE 1 fields that would achieve a higher rank. F6, M1, E11, B11, Helang, and Serai are
TYPE 2 fields, with moderate injectivity potential. Of note, M1 is the depleted field associated with the Kasawari CCS project.

There are some caveats to this classification since unforeseen operational issues could be encountered even with TYPE 1 and
TYPE 2 reservoirs. However, Hoffman's methodology can still act as a good first-pass analysis of the feasibility of projects.

Top 25 depleted fields in Malaysia by CO2 storage capacity

Source: Wood Mackenzie Lens CCUS. WoodMac’s CO2 screening criteria and Hoffmann’s injectivity categories are combined. Star indicates
highest ranked fields. Kasawari’s M1 meet all screening criteria.

Malaysia, as a regional CCS hub

There are still over 15 billion boe of remaining resources in Malaysia, including about 9 billion boe which are undeveloped and
high-CO2 content – a significant potential to be unlocked. Given the country's advantaged subsurface for CCS, Malaysia is in a
strong position to become one of the regional CCS hubs of Southeast Asia. Countries like Singapore, Japan, and South Korea
could benefit greatly from storage opportunities within Malaysia, especially if cross-border CO2 shipment is enabled.

However, more progress must be made for these ambitions to materialise. An advantaged subsurface is one part of the puzzle.
Even though Malaysia now has CCS tax incentives, the country must continue to work towards strong legislation, clear
regulations for CCS operations as well as adequate funding frameworks to help move projects from planned to operational . The
big test will be how successfully Kasawari gets implemented. If successful, others will follow.

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CCS in Malaysia: unlocking the potential of high-CO2 gas fields

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