Japan, South Korea, Singapore, Malaysia, Indonesia, Australia, and Brunei are shaping the future of CO2 shipping in APAC, but clear regulations and investment are critical to unlocking its potential, noted a recent report
The urgency to decarbonise heavy industries in the Asia-Pacific (APAC) region has placed carbon capture, utilisation, and storage (CCUS) as one of the emissions reduction strategy options. Yet, for countries with limited geological sequestration capacity, transporting CO2 across borders to suitable storage sites is essential. Shipping has emerged as the most viable solution to bridge this gap, offering a flexible and cost-effective alternative to pipelines when distances exceed 500 km and when transporting 5M tonnes per annum (mtpa) or less. However, realising a fully functional cross-border CO2 shipping network requires overcoming substantial economic, regulatory, and technical challenges, noted the Global Centre for Maritime Decarbonisation (GCMD) and Boston Consulting Group (BCG) in the study: Opportunities for Shipping to Enable Cross-Border CCUS Initiatives*.
By 2050, the APAC region is projected to transport up to 100M tonnes of CO2 annually across national borders, requiring an estimated 85 to 150 liquefied CO2 carriers of 50,000 tonnes capacity. The investment needed for these vessels alone is expected to reach between US$10Bn and US$25Bn. The scale of this endeavour underscores the importance of co-ordinated action among governments, industry stakeholders, and financial institutions to establish a robust value chain.
Japan, South Korea, and Singapore are set to become major CO2 exporters due to their limited domestic sequestration options. Meanwhile, Malaysia, Indonesia, Australia, and Brunei hold promise as key sequestration hubs, given their extensive depleted oil and gas fields and saline aquifers.
One of the foremost challenges in developing a cross-border CO2 shipping industry is the lack of a harmonised regulatory framework. Without clear and aligned standards on CO2 purity, liability transfer, and monitoring, the industry faces uncertainty that discourages investment.
Currently, regulations across APAC vary widely. Japan, for example, has made strides in defining CO2 purity standards and sequestration liability frameworks, while Singapore has signed Memoranda of Understandings (MoUs) with Australia and Indonesia to explore cross-border CO2 storage. Malaysia’s regulatory landscape remains fragmented, with Sarawak implementing its own rules under the Carbon Storage Act.
“One of the foremost challenges in developing a cross-border CO2 shipping industry is the lack of a harmonised regulatory framework”
For CO2 shipping to flourish, governments must establish consistent guidelines on captured CO2 purity, measurement, reporting, and verification. Impurities in CO2 impact infrastructure development, influencing the asset reliability of vessel tanks and the types of intermediate storage tanks required. Furthermore, the purification process to remove these impurities incurs significant operational costs.
Consequently, industry stakeholders have called for an approach similar to the Northern Lights project in Europe, where CO2 purity is standardised to ensure interoperability of shared infrastructure between emitters. Such standardisation would not only reduce operational complexities but also facilitate financing by providing clarity to investors.
For small emitters, standardisation is particularly critical as their CO2 is likely to be aggregated with that of multiple emitters. Conversely, the presence of large single emitters, common in Northeast Asia and requiring sequestration in Southeast Asia, reduces the need for aggregation and, consequently, the associated complexities.
Transporting CO2 by ship presents a unique set of technical challenges. While medium-pressure (MP) shipping has been the standard for early-stage projects, interest is growing in low-pressure (LP) and elevated-pressure (EP) systems. LP transport, for instance, allows for increased vessel capacity and lower capital expenditure but raises concerns about dry ice formation due to proximity to CO2’s triple point.
Furthermore, impurities in CO2 streams present a significant issue. High levels of contaminants, such as hydrogen sulphide and water, can cause corrosion and operational inefficiencies, necessitating expensive purification processes. The question of whether emitters or sequestration operators (or the / terminal operator which aggregates the CO2 or the overall transport provider) should bear the cost of purification remains unresolved. Some industry leaders argue that emitters should be responsible for purification to streamline downstream operations. Others contend that centralised purification facilities at ports would be more efficient for aggregating CO2 from multiple sources.
Economically, CO2 shipping remains an expensive proposition. The levelised cost of cross-border CO2 transport via shipping in APAC ranges from US$141 to US$174 per tonne for intra-Southeast Asian routes, while routes between Japan and Australia cost between US$167 and US$287 per tonne. Given that current carbon pricing in APAC is far below these levels, government incentives will be crucial to bridging the cost gap and enabling investment.
The nascent nature of CO2 shipping means that financial incentives and long-term contractual commitments are essential to unlock investment. Shipowners require minimum contract lengths of at least 10 years to justify capital expenditure on new vessels. Similarly, port and terminal operators need assurance of consistent throughput to support infrastructure development.
Governments can play a pivotal role by offering financial support, such as capital grants, tax incentives, and carbon pricing mechanisms that make CCUS projects financially viable. The private sector, in turn, must actively engage in partnerships to share investment risks and optimise resources. For instance, recent collaborations between MOL, MISC, and Petronas to develop LCO2 carriers illustrate the growing momentum towards shared investment in this sector.
The projected growth in CO2 shipping places immense pressure on the region’s shipbuilding industry. Current shipyard capacity may be insufficient to meet the anticipated demand for LCO2 carriers. Without long-term planning and investment, delays in vessel construction could slow the expansion of cross-border CCUS initiatives.
Additionally, the CCUS industry will require specialised roles in ship operations, port management, and regulatory compliance. Training and reskilling programmes must be developed to equip workers with the expertise needed to navigate this evolving sector. Seafarers, for example, will require training on handling liquefied CO2 and managing associated safety risks.
For cross-border CO2 shipping to become a reality in APAC, concerted efforts are needed from all stakeholders. Governments must move beyond MoUs and establish binding agreements that provide regulatory clarity. Standardising CO2 purity specifications, developing clear liability frameworks, and creating financial incentives will be critical in stimulating investment.
Industry players must also take proactive steps to develop shipping solutions that address technical and economic challenges. Investment in scalable, cost-effective vessel designs, alongside advancements in CO2 purification and storage technologies, will help improve the overall feasibility of cross-border CCUS.
* Opportunities for Shipping to Enable Cross-border CCUS Initiatives, a joint study by the Global Centre for Maritime Decarbonisation (GCMD) and Boston Consulting Group (BCG).
The report authors are: GCMD chief strategy officer Dr Sanjay C Kuttan, GCMD director, projects Eng Kiong Koh, BCG partner and associate director Carl Clayton, BCG managing director and partner Dave Sivaprasad, BCG managing director and senior partner Anand Veeraraghavan, BCG partner and director Sanjaya Mohottala, and BCG principal Calvin Khaing.
