The evolving story of carbon capture, utilisation and sequestration (CCUS) in the Asia Pacific (Apac) region is complex. This opportunity is positioned at a strategic nexus between the industrialised, emission-heavy nations of Northeast Asia and Southeast Asia’s abundant sequestration capacity.
Northeast Asia is home to high-emitting countries like Japan and South Korea, which face significant challenges in accessing feasible sites for large-scale CO2 sequestration. Japan and South Korea are among the top 15 global greenhouse gas (GHG) emitters due to their energy-intensive sectors in manufacturing, steel and petrochemicals. While renewable energy usage is increasing, fossil fuels continue to dominate their energy mix. Southeast Asian nation Singapore — despite significantly lower emission volumes — has also signalled an interest in cross-border CCUS.
Meanwhile, Southeast Asian nations such as Indonesia and Malaysia are home to an abundance of depleted oil and gas fields (DOGF) or sinks — natural geological formations well-suited for long-term CO2 sequestration — making them uniquely positioned to meet regional needs. In the wider Apac region, Australia is also home to sizeable DOGF capacities.
CCUS in an evolving landscape
Southeast Asia countries have already signed various memoranda of understanding (MoU) and letters of intent (LOI), signalling interest in CCUS projects. For example, Malaysian sink owners have signed MoUs with Japanese entities to sequester CO2 from Japan in Malaysian DOGFs. The Singapore Government has also appointed a private sector consortium to study the viability of cross-border carbon capture and sequestration (CCS). Singapore and Indonesia have also signed an LOI for cooperation in the field of cross-border CCS.
Unlocking this cross-border CCUS potential hinges on one critical component — effective and efficient CO2 transport. Shipping plays a pivotal role in achieving this goal, offering the most viable solution for transporting large volumes of CO2 from Northeast to Southeast Asia. The average levelised cost for shipping per project for the Northeast Asia-Southeast Asia route is US$25 ($33.75) to US$50 per tonne of CO2 (tCO2) and is estimated to require one to three liquefied CO2 (LCO2) vessels (size: 30–50 ktCO2) operating between 270 and 340 days per year.
Unlike pipelines, which are constrained by fixed assets and are economically disadvantaged for long-distance transport over sea, shipping allows for flexible, large-scale CO2 movement across significant distances. According to the joint study Opportunities for shipping to enable cross-border CCUS initiatives by the Global Centre for Maritime Decarbonisation (GCMD) and Boston Consulting Group (BCG), at annual CO2 volumes of five million tonnes or less, shipping tends to be more economical than offshore pipelines above distance of 500km — a threshold typically exceeded by routes between Northeast Asia and Southeast Asia.
Opportunity at stake
By 2050, cross-border CCUS volumes across Apac could reach an estimated 100 million tonnes of CO2 per year, creating a demand for 85 to 150 dedicated 50kt LCO2 carriers. Realising this scale would require an investment of around US$10 to US$25 billion in vessels alone, underscoring the crucial role that shipping infrastructure will play in enabling CCUS in Apac.
If Southeast Asia wants to realise its CCUS vision, it will require a foundation of aligned support and cooperation across Southeast Asian and Northeast Asian nations. This will require three critical components adapted to the unique contexts of each market and opportunity.
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First, cross-border agreements between governments are necessary to address the regulatory complexities of transporting CO2 across national boundaries. These agreements must clarify the roles and responsibilities of stakeholders along the CO2 value chain, from emission source to sequestration site, and establish guidelines for CO2 handling, transport and sequestration and associated liabilities. This is particularly critical in Southeast Asia due to the heterogeneity of national policies and regulations.
Second, government backing is essential to bridge the economic viability gap of cross-border CCUS projects. The study estimates that the end-to-end levelised cost of cross-border CCUS today would be US$141 to US$271 per tonne of CO2 for potential routes within Southeast Asia and between Northeast Asia and Southeast Asia.
This figure is significantly higher than the current carbon prices in the region, which range from US$2 to US$18 per tCO2e in Japan, Korea and Singapore — the Apac countries most likely to export their captured CO2 for sequestration in Southeast Asia to meet their national decarbonisation ambitions. Furthermore, for intra-Southeast Asia routes — aside from Singapore and Indonesia, which have introduced carbon pricing at US$18 and US$1 per tCO2e, respectively — other Southeast Asia nations have yet to establish any carbon pricing.
Government support can take the form of financial incentives, including capital support (e.g., direct investments or grants, tax credits) and other business support (e.g., contract for difference mechanisms or regulatory asset-based models). These measures can subsidise CCUS costs and provide more financial certainty to CCUS service or infrastructure providers, including LCO2 vessel owners and operators. In addition to improving financial viability, these measures also de-risk cross-border CCUS and CO2 shipping projects, which can help attract funding from financiers.
Third, harmonising standards for CO2 pressure, temperature and purity specifications is key to creating a streamlined value chain where CO2 can be captured, transported and stored without disruption. Variances in these technical aspects could lead to operational incompatibilities or increased costs.
Therefore, it is essential for players to align on standards that support interoperability across the CCUS ecosystem, or at the least at the project level, and where infrastructure is shared between projects. That being said, given the presence of large single emitters within Northeast Asia, which may require sequestration in Southeast Asia, sufficiently large volumes from a single source at a project level could reduce the need for or complexity in harmonisation. In such a scenario, project-specific standards can be employed with a single emitter per project.
With these components in place — cross-border government agreements, economic support and technical alignment — Southeast Asia nations such as Indonesia and Malaysia can effectively position themselves as central hubs for CO2 sequestration, capitalising on their unique geological resources. This alignment of interests and resources can position these Southeast Asia nations as major players in CCUS, demonstrating the region’s commitment to shared climate goals and innovative approaches to carbon management.
Dr Sanjay C Kuttan is chief strategy officer of Global Centre for Maritime Decarbonisation. Calvin Khaing is a principal at BCG’s Singapore office
