State of Play – Malaysia

Moving to Malaysia for the next in his series of decarbonisation overviews, Mark Williams finds that the country is making headway in its energy transition.

Malaysia is a country of around 880 islands, many of which remain uninhabited, as most people live in peninsular Malaysia or the provinces of Sabah and Sarawak, which form East Malaysia, 650 kilometres away on the island of Borneo. The population of around 23 million is about 40% urbanised. 

One could argue that Malaysia has been a trailblazer for decarbonisation.  Well before the Paris Agreement was ratified, back in 2009, in a speech at the United Nations Framework Convention on Climate Change in Copenhagen, the then Malaysian Prime Minister Najib Razak committed Malaysia to a 40% reduction in its carbon emission intensity (compared to 2005 levels) by 2020, if the developed world could provide the technology and finance.

That might have seemed like a put-your-money-where-your-mouth-is offer and it is no surprise that, by and large, neither the finance nor the technology was forthcoming. Nonetheless, Malaysia did achieve a 33% cut in carbon intensity (i.e. carbon emissions per unit of GDP) by 2011.  Much of this was achieved by ‘gazetting’ forests, that is permanently listing them as conservation areas rather than as productive farmland or plantations.

In 2010, a buildings energy audit department was restructured into the Malaysian Green Technology Corporation (GreenTech Malaysia), since renamed the Malaysian Green Technology and Climate Change Centre.  In its own words, ‘this is the government agency under the purview of Ministry of Environment & Water, mandated to lead the nation in the areas of Green Growth, Climate Change Mitigation and Climate Resilience and Adaptation.’ This happens through policy research, national reporting, and national environmental programmes co-ordination.

The Low Carbon Cities Framework and Assessment System was instituted in 2011, while the RM 3.5 billion (around $1.2 billion) Green Technology Financial Scheme began operating in 2013. The scheme was extended in 2015 to RM 5.0 billion.  It offers a 60% government guarantee on financing for environmentally-beneficial energy, water, residential, transport, waste, and manufacturing projects.

Under the Transport sector, eligible projects include biofuel, hydrogen and electric charging stations for road vehicles, biofuel from crops and waste cooking oil, electric and hybrid road vehicles, plus their manufacturing materials, fuel cells, motor fuels, and trains. For the moment, the port and shipping industries are not eligible for the Green Technology Financing Scheme.

Still, the government has such confidence in its Nationally Determined Contribution to the Paris Agreement, it aims to reduce its emissions intensity by 45% by 2030 compared to 2005, with 10% of this goal still contingent on international assistance.

But reducing the carbon intensity of GDP does not reduce the amount of CO2 emitted in Malaysia. So the government continues to work on reducing actual CO2 output as well as carbon intensity. The establishment of the Sustainable Energy Development Authority promotes the use of renewables for power generation via practices such as a feed-in tariff, while The Green Technology Master Plan 2017-2030 outlines efforts to reduce GHG emissions by 45% by 2030.  

There is some way to go: natural gas was the energy source for 43% of 2019 installed electricity generation capacity, followed by 40 million tonnes of thermal coal accounting for 30%, and hydropower with 17%. Other renewables make up only 4%, less than oil which still powers 6% of Malaysia’s electricity generation. The state energy company Petronas, which made a $5 billion loss for the April-June quarter this year, has only in 2020 established a team to investigate how it can expand into solar and wind for power generation.

In the transport sector, the National Land Public Transport Master Plan promotes mass transit rather than private vehicle ownership (though anyone stuck in the Kuala Lumpur traffic might wonder how). There is a target that 40% of all journeys should be by public transport by 2030 and that all newly registered cars should be pure electric or electric hybrid by then. In the meantime, biodiesel is increasingly in use as fossil fuel subsidies are removed from transport fuel retail.  

There is some research going on into hydrogen fuel cells. The province of Sarawak Deputy Chief Minister, Datuk Amar Awang Tengah Ali Hasan, announced on 18 September 2020 that, ‘Sarawak is pioneering into the development of hydrogen fuel for vehicles as part of our effort to develop Green Economy. Thus, we would also like to suggest to the federal government to give tax exemption for vehicles using hydrogen fuel to encourage the adoption of this clean fuel.’ He also expressed hope that the federal government would invest in associated port infrastructure. UK fuel cell manufacturer Intelligent Energy is supplying two fuel cells for prototype microgrid power supplies in two rural Malaysian villages in partnership with Labuan-based energy company MBR Global Limited.

A leading rubber, timber, coffee and cocoa exporter, Malaysia remains one of the two biggest palm oil producers and exporters alongside its neighbour Indonesia, though most cargoes are sold FOB and the domestic shipping industry has little control over or influence on environmental policy.  Malaysia is the fourth-biggest LNG exporter and a significant owner of LNG and oil tankers including FPSOs and FSOs for offshore work.

The Malaysian flag fleet numbers around 2,200 ships. The majority of its gross tonnage is in gas and oil tankers. The main shipowner is the now-privatised MISC Berhad, which is group owner of a number of other shipping, shipbuilding and port brands such as AET (formerly American Eagle Tankers), ship manager EagleStar, port and assurance services company MISC Maritime Services, and offshore construction specialist Malaysia Marine and Heavy Engineering. Having sold its bulk carrier and container fleet in the 2000s and 2010s, the company is now focused on energy shipping. In recent years, it has become a leading exponent of non-hydrocarbon fuels for ships.

In early 2019, AET took delivery of two LNG dual-fuel Aframax tankers, Eagle Brasilia and Eagle Bintulu, built at Samsung Heavy Industries’ Geoje shipyard in South Korea. The ships were placed on time charter to Shell International Trading and Shipping.  In February and March 2020, AET received two dynamic positioning shuttle tankers, also built at SHI, namely Eagle Blane and Eagle Balder. These ships are on charter to Equinor, the Norwegian energy company.

The clean-burning engines on these ships emit up to 48% less CO2 than an equivalent ship built with a fuel-oil engine in 2008. Therefore, the ships already meet the IMO’s 2030 target of cutting CO2 emissions by 40%. They also meet the IMO’s other emission regulations, with exhaust gas containing 85% less SOx, 98% less NOx, 98% less particulate matter and 93% less black carbon.

More recently, AET has a two-ship charter deal with Total SA of France which covers two newbuilding VLCCs to be fitted with dual-fuel engines. When powered by LNG they will emit an estimated 20% less CO2 than conventional VLCCs with fuel oil engines. The ships are due for delivery from SHI in early 2022.

AET has placed environmental policies at the centre of its business strategy. In its 2109 annual report it wrote, ‘We intend to rejuvenate our fleet through eco-solution assets, particularly in the VLCC segment. This will help us differentiate as well as build sustainability in the fleet portfolio and will position us to capture the growing potential in eco-solution vessels with key clients.’

In a further recent development, MISC has worked with MAN Energy Solutions to design and build a pair of ammonia-fuelled Aframax sized oil tankers. As we have reported, in September 2020 the ships were granted approval in principal by class society Lloyd’s Register for construction at SHI. The shipyard is now working on a fuel gas supply system and detailed ship design and hopes to deliver the ships in 2024.

As we also reported this week, Petronas LNG has this month taken a three-year time charter of the 7,500 cubic metre Avenir Advantage LNG bunker and supply vessel. Built at Keppel Offshore & Marine’s Nantong shipyard in Jiangsu Province, China, the vessel will supply LNG bunkers to ships operating in South East Asia and also deliver LNG to Petronas’ small-scale customers. It is the first of a series of six being built for Avenir LNG Ltd. 

Also in October 2020, Petronas has signed an LNG supply contract with Godell Gas International (GGI), under which Petronas Dagangan Bhd will supply LNG to GGI’s upcoming 12,000 cubic metre LNG bunker vessels via the Regasification Terminal in Pengarang, Johor.

We might reasonably expect that Petronas, MISC and AET will continue to be early adopters of both LNG and non-fossil-fuel technology to power their energy shipping fleet and third-party customers. And where they go, others will surely follow.  The mantra for many parties involved in shipping’s decarbonisation process is ‘Dream Big, Start Small.’  In building and operating dual-fuel LNG and ammonia-powered ships, MISC and AET are making dreams reality.

Lesley Bankes-Hughes

Lesley Bankes-Hughes