In terms of fossil fuel companies, Malaysia’s Petroleum National is not the worst. But it occupies an important position in the middle of the table among ranked national oil and gas producers in terms of historical CO2 equivalent emissions, coming above the likes of Norway’s Statoil, Indian Oil and Gas and Qatar Petroleum. Now, swept up in the “race to zero,” Petronas says she wants a change. Usually, carbon-reducing pledges for fossil fuel companies are closely scrutinized, but not so for the more opaque state-owned producers. So this is an attempt to assess the probability of Petronas going to net zero.
Petronas has always been reliable and almost predictable. In the 48 years since its founding, it has generously given the Malaysian government, its sole shareholder, both through thick and thin, and its contributions during that time totaling around 1.2 trillion ringgit ($268 billion). It has exclusive control over all of the country’s oil and gas reserves and is the most important and successful state-owned company, alone contributing 20 percent of Malaysia’s annual GDP.
However, due to the volatile energy markets, the need to reduce Malaysia’s dependence on oil money has been clear for some time now. By right, Petronas should play the leading role in this mission. But the pace of change was not close enough to meet 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 PR campaign to that end. The model has been relatively late in playing the role of sustainability, seeing as some major oil companies have announced emissions reduction targets years ago. However, Petronas does not appear to have benefited from the extra time, as its decarbonization plan is broadly similar in substance, or rather the lack thereof.
Like its peers, Petronas has not committed to cutting production, which means it will continue drilling as usual or more aggressively. Instead, it claims that increased efficiencies will help reduce direct and indirect emissions from operations, while other mechanisms will be used to capture or eliminate emissions.
Petronas’ plan to continue to grow conventionally goes against urgent calls by climate scientists to end all fossil fuel exploration. This is the case with many other state oil and gas companies, which also appear to be doubling production, in contrast to what is happening due to planned cuts by the private sector.
There is one disclaimer: the mid-term cap on emissions from Malaysian operations – 49.5 million tons of carbon dioxide equivalent by 2024 – should prevent any increase in absolute emissions. But this actually gives the company a great deal of freedom given that last year its emissions were 43.8 million tons of CO2-eq despite high production levels. determination of emissions”at a high level“As the assets continue to develop indefinitely, a new hoax in the books of the fossil fuel giants (obviously involving Petronas) ends up doing more and more complete damage to the climate.
Reducing emissions is, of course, a costly proposition, and with resources pulled in different directions between payments to the government, new upstream production, and investments in non-fossil fuels, money is tight. Petronas allocates 20 percent of its capital expenditures to “new energy,” as it calls projects involving hydrogen and renewables. The rest goes to business as usual, dirty basic business. But the company is falling behind: To align with the 1.5-degree path, at least 77 percent of capital spending must be invested in low-carbon technology.
More importantly, the company is betting a lot on carbon capture, use and storage (CCUS), a technology of limited capacity and questionable efficacy. Only several dozen CCUS projects are active worldwide, and none of them are in Southeast Asia, with the exception of some studies in Indonesia. True, the IEA has endorsed CCUS, but primarily for hard-to-dilute sectors like cement and steel production, and second only for what small fossil fuels should still be in use by 2050.
As it happens, PETRONAS not only needs CCUS technology to reduce emissions, but also to develop its abundant carbon dioxide resources. It is in the process of constructing the region’s first CCUS in Sarawak to begin by the end of 2025. However, development costs for this project alone would set the company and thus the government back in excess of $1.2 billion in net present value. And herein lies a major problem with Petronas’ obsession with CCUS: without much political will, it is simply not commercially viable.
In order to mature, CCUS technology needs to be supported by policy incentives and regulatory frameworks, in the form of carbon pricing mechanisms, which are currently absent in the region, with the exception of Singapore. Although Malaysia has already mentioned a carbon tax and emissions trading scheme in its latest five-year economic plan, there are real concerns that these may not be realized, or not achieved fast enough.
The point is that decarbonization is more of a delay tactic than anything else, and is grounded in 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 major carbon companies, while trying 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.
Their tricks don’t work. The industry has to commit to virtually halting all exploration, filtering extraction faster rather than slower, and spending on low-carbon technologies like there is no tomorrow. At the moment, there is no single major fossil fuel specialty that is completely standardized for Paris. Nevertheless, private companies remain in the public eye constantly, while national companies, despite owning two-thirds of the remaining reserves of oil and gas discovered globally, have been able to avoid most of the pressure and scrutiny.
While Petronas may be generally ahead of state companies in terms of written sustainability pledges, it’s not an excuse to fill its climate manifesto with the usual placebos as an alternative to tough but necessary action.