When it comes to fossil fuel companies, Malaysia’s Petroliam Nasional isn’t the worst of the worst. but it has a weight mid-table position among domestic oil and gas producers ranked in terms of historical CO2-equivalent emissions, surpassing Norway’s Statoil, India’s Oil & Gas Corporation and Qatar Petroleum. Now, swept up in the “race to zero,” Petronas says she wants to change. Normally, the carbon reduction promises of the big fossil fuel companies are closely scrutinized, but not so for the more opaque state-owned producers. So here is an attempt to assess the probability of Petronas reaching net zero.
Petronas has always been reliable, almost predictable. In the 48 years since its founding, she has generously given to the Malaysian government, its sole shareholder, in both good times and bad, her contributions during that time totaling approximately 1.2 trillion ringgit ($268 billion). Endowed with exclusive control of all of the country’s oil and gas reserves, it is the largest and most successful state-owned company, single-handedly contributing 20 percent of Malaysia’s annual GDP.
However, given the volatility in energy markets, the need to reduce Malaysia’s dependence on oil money has been apparent for some time. By right, Petronas should play the leading role in this task. But the pace of change has not been close enough to deal with the realities of the energy transition.
In November 2021, Petronas announced its “aspiration” to achieve net zero carbon emissions by 2050, and has since launched a large-scale program public relations offensive To that end. The form has been relatively slow to play its sustainability game, with some oil majors declaring emission reduction targets years earlier. Even so, Petronas does not seem to have benefited from the extension, because its decarbonization plan is very similar in substance, or rather in the lack of it.
Like its peers, Petronas has not committed to cutting production, meaning it will continue to drill as normal or with more vigor. Instead, it states that increased efficiency will help reduce direct and indirect emissions from operations, while other mechanisms will be used to capture or cancel emissions.
Petronas’ plan to keep growing conventionally is in complete opposition to the urgent calls of climate scientists to end all exploration for fossil fuels. This is the case for many others state oil and gas companieswhich also appear to be doubling production, perversely due to planned cuts by the private sector.
There is a disclaimer: the medium-term cap on emissions from Malaysian operations (49.5 MtCO2e by 2024) should preclude any increase in absolute emissions. But this actually gives the company quite a bit of leeway considering its emissions last year were 43.8 MtCO2e despite its higher production levels. Fixation of emissions”at a high level” while continuing to develop assets indefinitely is a new trick on the books for the fossil fuel giants (Petronas included, of course) that ends up doing more overall damage to the climate.
Reducing emissions is, of course, an expensive proposition, and with resources pulled in different directions between government payments, new upstream production, and investments in non-fossil fuels, money is tight. Petronas is budgeting 20 percent of its capital expenditures for “new energy,” as it calls projects that involve hydrogen and renewables; the rest are engaged in business as usual, the dirty core business. But the company has it backwards: to align with a 1.5 degree path, at least 77 percent of capital spending should be invested in low-carbon technology.
More critically, however, the company is betting too much on carbon capture, use and storage (CCUS), a technology with limited capability and capacity. questionable efficacy. Only several dozen CCUS projects are active worldwide, and none exist in Southeast Asia except for some studies in Indonesia. It is true that the International Energy Agency has backed CCUS, but mostly for hard-to-reduce sectors like cement and steel production, and only secondarily for the little fossil fuel that should remain in use by 2050.
Petronas, as it happens, not only needs CCUS to reduce emissions, but also to develop its abundant gas resources with high CO2 content. It is setting up the region’s first CCUS in Sarawak to start in late 2025. However, the development costs of this project alone will set the company and consequently the government back. over $1.2 billion in net present value. And herein lies a key problem with Petronas’ obsession with CCUS: Without significant political will, it’s simply not commercially viable.
To mature, CCUS must be supported by policy incentives and regulatory frameworks, in the form of carbon pricing mechanisms, which are currently absent in the region except for Singapore. Although Malaysia mentioned a carbon tax and emissions trading scheme in its latest five-year economic plan, there are valid fears that these it can not be doneOr he didn’t realize it fast enough.
The point is that carbon removal is more of a delaying tactic than anything else, based on the idea of a “gradual transition,” rather than the rapid transition that climate science is increasingly emphasizing. The net zero effort of Petronas and other big carbon companies, as they try to appear to be part of the solution rather than part of the problem, is a matter of “institutional survival” in the low-carbon economy of the future.
Your deception is not working. Industry has to effectively commit to ceasing all exploration, cutting extraction faster rather than slower, and spending on low-carbon technologies like there is no tomorrow. Currently, there is not a single major fossil fuel company that is fully aligned with paris. Still, private companies are constantly in the public eye, while national companies, despite having two-thirds of the world’s remaining discovered oil and gas reserves, manage to avoid most of the pressure and scrutiny.
While Petronas may be as a whole ahead of state-owned companies when it comes to written sustainability promises, it is not an excuse to fill your climate manifesto with the usual placebos as a substitute for taking the difficult but necessary steps.