The Malaysian state of Sarawak aims to become the first hydrogen-driven economy in Southeast Asia. The state has a competitive advantage due to its affordable hydropower and ample water supply, essential for green hydrogen production. Sarawak also has an attractive track record for project developers due to decades of experience serving the energy and petrochemical sectors, with Bintulu Port being Malaysia’s sole liquified natural gas (LNG) export gateway.
In recent years, the Malaysian federal government and Sarawak have been pushing the green hydrogen agenda. Malaysia’s National Energy Policy (2022-2040) noted hydrogen as having new economic value, that it can be used to reduce carbon emissions, and that Sarawak can be turned into a hydrogen export hub to generate income. Malaysia’s National Energy Transition Road (NETR) designated hydrogen as one of the six energy transition levers and set a 2050 target to phase out the highly pollutive grey hydrogen, produce 2.5 million tonnes of green hydrogen annually and establish three low-carbon hydrogen hubs.
The country’s Hydrogen Economy and Technology Roadmap, launched in October 2023, projected a revenue of up to RM12.1 billion (US$2.7 billion) in 2030 and listed an ambitious target to make Malaysia a leading hydrogen economy by 2050 where it will become a major hydrogen exporter in the Asia-Pacific, be able to generate over RM400 billion (US$87.8 billion), create 200,000 jobs while enabling the country to achieve up to 15 per cent reduction in greenhouse gases emissions.
Sarawak’s interest in green hydrogen is twofold. First, Sarawak Premier Abang Johari strongly believes that hydrogen’s versatility gives it the potential to decarbonise various local economic sectors. Second, its export strategy is important to achieving the state’s goal of High Income Status by 2030. The state has advanced this agenda in recent months. In early June, Sarawak launched Southeast Asia’s first electrolyser assembly-distribution facility (SEA-DF). These are electrolysis systems using electricity to split water into hydrogen and water and the company will start exports by year-end.
Days later, at a green hydrogen conference in the state capital Kuching, Sarawak announced updates on two major green hydrogen production projects in the Bintulu Petchem Industrial Park in collaboration with South Korea and Japan. Project H2biscus is a collaboration between Sarawak’s SEDC Energy and South Korea, with the participation of Samsung Engineering, Lotte Chemical and Korea National Oil Corporation. It will have an annual capacity of 150,000 tonnes and a green ammonia conversion plant with a capacity of 850,000 tonnes destined for South Korea. Final project approval, formally referred to as the Final Investment Decision (FID) stage, is scheduled at the end of this year, with commercial operations to commence in 2028 if approved.
Project H2ornbill is a collaboration between SEDC Energy and Japanese counterparts Sumitomo Corporation and ENEOS. It will generate 90,000 tonnes of green hydrogen annually for export to Japan, including 2,000 tonnes for Sarawak’s consumption. The decision for final approval is scheduled for 2026, with commercial operations starting in 2029 if approved.
The reality is that demand for clean hydrogen remains low due to techno-economic challenges and stricter regulations surrounding emissions standards for defining clean hydrogen.
Assuming both projects gain approval within the next two years, they will collectively produce 240,000 tonnes of green hydrogen annually. This will exceed Saudi Arabia’s US$8.4 billion NEOM green hydrogen plant, touted in 2023 as the world’s largest approved green hydrogen facility, which can produce up to 600 tonnes a day, which translates to 219,000 tonnes annually when operational in 2026.
The second announcement was the launch of the Sarawak H2 Hub, a joint venture between Sarawak’s SEDC Energy and Gentari, the clean energy subsidiary of Petronas. The new company will be the sole vehicle to develop and operate this facility, with operations starting in 2028. It will support the H2ornbill and H2biscus plants and be the sole supplier of green hydrogen for downstream facilities in the Bintulu area to produce green hydrogen-dependent fuels such as e-methanol and sustainable aviation fuel.
Finally, SEDC Energy’s plans to develop a hydrogen production plant and refueling station for the Rembus Depot were showcased. Sarawak is the first in Southeast Asia to have a hydrogen-powered public bus and metro system through its Kuching Urban Transport Systems (KUTS) under Sarawak Metro. The refueling station is part of KUTS and can produce about 1,900 tonnes of hydrogen when it is completed next year.
Sarawak’s ambition to be a green hydrogen economy needs to be understood in the context of global clean hydrogen developments. Clean hydrogen includes both blue and green hydrogen. Blue hydrogen is produced using fossil fuels with carbon capture, while green hydrogen uses renewable energy and electrolysis, which does not produce carbon dioxide emissions. Green hydrogen is environmentally friendlier but costs two to three times more than blue hydrogen, making such projects prohibitive. Many planned clean hydrogen projects worldwide fail, especially green ones.
The International Energy Agency’s updated 2023 Net Zero Emissions by 2050 Scenario estimates that total global hydrogen demand will reach 150 million tonnes by 2030, up from 95 million tonnes in 2022. Clean hydrogen production projects that had been announced up until 2023 — even if realised — will reach only 70 million tonnes or 55 per cent of total demand. The reality is that demand for clean hydrogen remains low due to techno-economic challenges and stricter regulations surrounding emissions standards for defining clean hydrogen. The drop in production cost will be a crucial global game-changer, but this will depend on falling renewable energy costs and improved electrolyser technologies.
In this regard, it is not certain that H2biscus and H2ornbill can get FID approval, while their success will be no mean feat. Much depends on the developers’ ability to secure South Korean and Japanese buyers willing to pay a premium for green hydrogen, and prevailing global economic conditions. Failure will give cause for Sarawak’s Southeast Asian neighbours to reflect on their own strategies and explore other renewable options.
Conversely, the approval of H2biscus and H2ornbill will have implications beyond direct stakeholders. If it succeeds, Sarawak will achieve international recognition and possibly play an influential role in driving global clean hydrogen developments. Lessons from its role as producer, exporter and utiliser will feed into this nascent industry, ranging from new regulations and standards, to the forging of new value chains, the development of green hydrogen industrial zones and new collaborative project development models.
Sarawak’s success (or failure) will also have a similar regional impact, offering lessons for other Southeast Asian players. It could provide momentum for Asean to prioritise establishing a regional market with harmonised regulations and standards, relevant green financing models and coordinated regional infrastructure works.
Sarawak’s success — if achieved in the next two years — will bolster Malaysia’s hydrogen economy goals, mark a major milestone for the global green hydrogen industry, and serve as important first steps towards clean hydrogen development and utilisation within Southeast Asia.
Dr Christopher Len is a visiting senior fellow with the Climate Change for Southeast Asia Programme, ISEAS – Yusof Ishak Institute.
This article was first published in Fulcrum, ISEAS – Yusof Ishak Institute’s blogsite.
