Sarawak’s Green Hydrogen Push

• Advantage: cheap, firm hydropower (3.5 GW now, 10 GW by 2030) and Bintulu’s LNG-grade port anchor Sarawak’s green hydrogen exports toward Japan and Korea.
• Downscaled: flagships H2biscus and H2ornbill, planned at 240,000 tonnes yearly for US$4.2 billion, shrink; H2biscus may pivot to methanol, H2ornbill cut toward 50,000 tonnes.
• Headwinds: green hydrogen costs US$4.5 to US$12 per kilogram versus US$1 to US$3 fossil; only 6 percent of global capacity reached final investment decision.
• Demand: Japan committed about US$20 billion in price support, Korea plans 14.6 GW hydrogen-fired capacity by 2036, and shipping rules price emissions from 2028.
• Outlook: phased exports of 50,000 to 150,000 tonnes plausible by mid-2030s, potentially one million long-term; treat headline figures as ceilings, a rational bet.

Sarawak Powers Asia’s Hydrogen Future

Sarawak has spent the past few years building a name for itself in the world of clean energy, and the centrepiece of that effort is green hydrogen, a fuel produced by using renewable electricity, in Sarawak’s case mostly hydropower, to split water into hydrogen and oxygen. Unlike hydrogen made from natural gas or coal, which still supplies more than 95 percent of the roughly 100 million tonnes of hydrogen the world consumes each year, this version produces very little carbon pollution. Sarawak’s leaders believe this puts the state in a strong position to become a major supplier of clean fuel to energy hungry neighbours such as Japan and South Korea, both of which are under pressure to cut emissions but still need reliable fuel for their factories, ships and power stations. The ambition is anchored in two flagship projects, H2biscus and H2ornbill, originally designed to produce around 240,000 tonnes of green hydrogen a year at a combined cost of about US$4.2 billion, volumes that would place Sarawak among the larger producers in the world and in the same conversation as the mega projects of the Middle East. Yet the past two years have delivered a global reality check, with project cancellations in Europe, a sharp policy reversal in the United States and slower than expected buyer commitment, and Sarawak has not been immune. This analysis sets the state’s plans against the most recent Malaysian, regional and global data to weigh what the green hydrogen bet is really worth over the next ten to thirty years.

Why the World Came to Sarawak

The starting point is fundamentals, because they explain why international partners came to Sarawak in the first place. The state operates an installed hydropower fleet of roughly 3.5 gigawatts built around three dams: Batang Ai at 108 megawatts, commissioned in 1985; Bakun at 2,400 megawatts, still among the largest in the region when it came online in 2011; and Murum at 944 megawatts, completed in 2015. A fourth, the 1,285-megawatt Baleh dam, is under construction with completion expected around 2028, and state planning targets roughly 10 gigawatts of total generation capacity by 2030, with official documents under the Sarawak Corridor of Renewable Energy pointing to a hydro resource that some estimates put in the region of 20,000 megawatts over the long run. Around two thirds of Sarawak’s electricity is already renewable, and large industrial users in the state enjoy some of the cheapest power in Asia, commonly quoted at or below five US cents per kilowatt hour. This matters enormously, because electricity is the single biggest cost in making green hydrogen, typically accounting for anywhere from half to two thirds of production cost, so a surplus of low cost, low carbon power gives Sarawak an edge that almost no other tropical location can match. There is also a proven record of converting that power into industry. The Samalaju Industrial Park, developed under the renewable energy corridor, attracted energy intensive investors including Press Metal’s aluminium smelters, OM Holdings’ ferroalloy operations and Tokuyama’s polycrystalline silicon plant, demonstrating that Sarawak can deliver power, land and logistics at industrial scale. Bintulu hosts one of the world’s largest liquefied natural gas complexes, where Petronas operates on the order of 30 million tonnes a year of liquefaction capacity, meaning the port, the cryogenic expertise and the safety culture needed to ship ammonia and methanol already exist. For a state of about 2.5 million people, with a gross state product of roughly RM170 billion in 2024 and growth of around 5 percent in recent years, hydrogen is framed as the next chapter of industrialisation, central to the Post COVID-19 Development Strategy goal of lifting the state economy to RM282 billion by 2030.

A Hard Industry to Bank

The global backdrop explains both why the opportunity looked so large and why it has proved so hard to bank. The International Energy Agency’s Global Hydrogen Review put worldwide hydrogen demand at about 97 million tonnes in 2023, since nudged past 100 million tonnes, yet less than 1 percent of that is produced with low emissions; the rest comes from unabated natural gas and coal, mostly serving oil refining and fertiliser and chemical plants. Cost is the core problem. Renewable hydrogen has been estimated at roughly US$4.5 to US$12 per kilogram to produce, against US$1 to US$3 for unabated fossil hydrogen, and the agency expects the renewable range only to compress to roughly US$2 to US$9 per kilogram by 2030. If every announced project worldwide were built, low emission supply could reach about 49 million tonnes a year by 2030, but only around 6 percent of that capacity had reached final investment decision at the last count, and installed electrolyser capacity worldwide stood at just 1.4 gigawatts at the end of 2023, with perhaps 5 gigawatts achievable once subsequent projects are counted. The Hydrogen Council and McKinsey have tracked announced clean hydrogen investment of roughly US$570 billion to US$680 billion through 2030 across recent editions of their Hydrogen Insights series, of which only about US$75 billion had actually been committed. China complicates the picture further, accounting for the majority of global electrolyser manufacturing and deployment, with alkaline systems quoted at a fraction of Western prices, which is cutting equipment costs globally while concentrating supply chains. The United States, meanwhile, moved in legislation passed in mid-2025 to terminate its hydrogen production tax credit of up to US$3 per kilogram for projects starting construction after 30 September 2025 and to require operations to begin by 2028, chilling what had been one of the world’s most promising pipelines. Europe has kept subsidies flowing, with the European Hydrogen Bank clearing a 720-million-euro pilot auction in 2024 at support levels of just 0.37 to 0.48 euro per kilogram and following with a roughly 1 billion euro round in 2025, though Brussels also moved in mid-2025 to soften several binding 2030 renewable hydrogen quotas. In short, the industry’s difficulties are global, and Sarawak’s troubles are a symptom rather than an exception.

The Demand Side

The demand side, however, is moving in Sarawak’s favour, which is why the state has not walked away. Japan, its target customer, consumes about 2 million tonnes of hydrogen today, nearly all for refining and chemicals, and its revised Basic Hydrogen Strategy targets 3 million tonnes by 2030, 12 million tonnes by 2040 and an implied trajectory of roughly 20 million tonnes by 2050. To close the price gap, Tokyo passed the Hydrogen Society Promotion Act in May 2024, committing about 3 trillion yen, roughly US$20 billion, over fifteen years to contract for difference style support, and the first auctions under the scheme ran in 2025. Practical demand is appearing at the same time: JERA, Japan’s largest power generator, began trial co-firing of 20 percent ammonia at its Hekinan coal plant in 2024, the world’s first large scale demonstration of its kind. South Korea has moved in parallel, running its first Clean Hydrogen Portfolio Standard auction for power producers in 2024, which awarded contracts to more than a dozen clean hydrogen and ammonia supply projects, and confirming a long-term electricity plan in early 2025 that calls for roughly 14.6 gigawatts of hydrogen and ammonia fired capacity by 2036, with clean hydrogen expected to supply on the order of 7 percent of generation by that year. Carbon pricing across Asia will quietly help: Singapore’s carbon tax, already the region’s highest, is legislated to rise to between S$50 and S$80 per tonne by 2030, Japan will levy a carbon price on fossil fuel importers from 2028, and Korea already operates a functioning emissions trading market. Shipping adds a third leg of demand, because the International Maritime Organization approved the outline of a net-zero framework in April 2025 that is designed to price greenhouse gas emissions from ships from around 2028, while European aviation rules require 2 percent sustainable fuel from 2025, rising to 6 percent by 2030 and 70 percent by 2050, with sub-quotas for synthetic fuels. Even the existing ammonia market, about 185 million tonnes a year and almost entirely fossil based, offers a familiar replacement opportunity of roughly 20 million tonnes that already moves by sea. The question is not whether Northeast Asia will buy clean molecules, but from whom, at what price and how quickly, and that is where the twelve member Asia Zero Emission Community, championed by Japan and backed by Japanese public finance, becomes strategically important for Sarawak.

Policy Tailwinds and Competing Electrons

At the national level, Malaysia has given the state effort a policy tailwind. The National Energy Transition Roadmap published in 2023 lists hydrogen among its key levers on the path to net zero by 2050, and the Hydrogen Economy and Technology Roadmap launched in October 2023 projects that hydrogen related activities could generate as much as RM12.1 billion in revenue by 2030, with Sarawak expected to provide a large share of that output, while sketching a potential opportunity worth several hundred billion ringgit by 2050 in its most optimistic scenarios, alongside tens of thousands of jobs. Petronas, through its clean energy arm Gentari, has positioned hydrogen as a core business line and signed an agreement with SEDC Energy in 2023 to jointly study a green hydrogen and ammonia facility in Bintulu. The wider investment climate has been strong, with Malaysia approving a record of roughly RM380 billion in investments in 2024, up from about RM330 billion the year before, reflecting the kind of capital appetite that large energy projects need. There is, however, a twist worth flagging for investors, because Sarawak’s electrons now have plenty of suitors beyond hydrogen. Johor’s data centre boom has shown how the artificial intelligence economy rewards cheap power, Sarawak has its own digital economy ambitions, the state has exported electricity to Indonesian West Kalimantan since 2016, and Singapore’s energy market authority granted conditional approval in late 2024 for imports of up to about a gigawatt of Sarawak hydropower via subsea cable in the early 2030s. Hydrogen must therefore compete internally for power, capital and engineering talent, which is healthy discipline, but it also means the state is not dependent on hydrogen alone, a point that matters when assessing sovereign and counterparty risk.

The Flagship Projects

Against this backdrop sit the two flagship projects. H2biscus is a partnership between state owned SEDC Energy and a Korean consortium led by Samsung Engineering together with Lotte Chemical and the Korea National Oil Corporation, designed in early versions to convert green hydrogen into on the order of 850,000 tonnes of ammonia a year for Korean power producers and industry, since ammonia is far easier to ship by vessel than hydrogen itself. H2ornbill pairs SEDC Energy with two Japanese firms, ENEOS and Sumitomo Corporation, to produce hydrogen aimed at the Japanese market, in earlier plans on the order of 90,000 tonnes a year, using ENEOS technology that binds hydrogen into methylcyclohexane, an ambient temperature liquid carrier, with around 2,000 tonnes of output set aside for use within Sarawak itself, supporting local industry rather than only overseas buyers. Together the projects were planned at roughly 240,000 tonnes of hydrogen a year, with a combined price tag put at about US$4.2 billion, and if those numbers had held, they would have placed Sarawak among the world’s larger producers, close to the scale of headline projects in the Middle East. Around them sit supporting arrangements that show how much groundwork has been done. Sarawak Energy signed a heads of agreement with Japan’s IHI in 2022 covering up to 220,000 tonnes a year of green ammonia supply, ENEOS has trialled its methylcyclohexane supply chain in the region, and the state has deliberately seeded domestic demand by opening South East Asia’s first integrated hydrogen production and refuelling station in Kuching in early 2019, running a small fleet of hydrogen buses since around 2020, and taking delivery of hydrogen powered autonomous rapid transit vehicles for the Kuching Urban Transportation System from late 2023, with the first line slated to enter service around the middle of this decade. The government has spoken consistently of creating skilled, well-paid jobs in engineering, plant operations and logistics, and of anchoring downstream clusters in green ammonia, e-methanol and sustainable aviation fuel so that more value and more employment stay in the state rather than leaving as a raw commodity.

Downscaling and Reluctant Buyers

Here is where a fair analysis needs to slow down, because the picture on the ground has become more complicated than the early announcements suggested. Through 2025 and into 2026, both H2biscus and H2ornbill have been scaled back. Industry reports, including one from the Energy Industries Council, noted that both projects reduced their planned production capacity due to weak demand signals and difficulty locking in firm buyers willing to pay a premium for green hydrogen. Sarawak’s own Premier has acknowledged that H2biscus may be redesigned to produce low carbon methanol instead of ammonia, and that H2ornbill’s hydrogen output could be cut to around 50,000 tonnes a year, well below the original target. In mid-2026 a deputy state minister publicly admitted that the projects would need to be downscaled further because of financial constraints affecting the wider global hydrogen sector. None of this is unique to Sarawak. Saudi Arabia’s NEOM project, an US$8.4 billion venture with 2.2 gigawatts of electrolysers targeting roughly 1.2 million tonnes of green ammonia a year, has seen its start-up timing slip and its ownership reworked. European developers shelved multiple large projects in 2024 and 2025, citing costs and the absence of bankable offtake, and Australia refocused part of its flagship hydrogen funding toward green iron. Buyers in Japan and South Korea have their own budget pressures and are weighing multiple suppliers, including projects in Oman, Saudi Arabia and Australia that may offer lower costs. Clean ammonia has generally been offered at premiums of several hundred US dollars per tonne over conventional product, which has traded anywhere from roughly US$300 to US$600 a tonne depending on gas prices, and utilities will not underwrite that premium without regulatory compulsion or subsidy. There is also currency and interest rate risk on multiyear, multibillion dollar undertakings financed partly through foreign partners in a world where capital costs remain well above the levels of the 2010s, and the efficiency penalty of converting hydrogen into ammonia or methanol, shipping it and then using it means more primary electricity is required for every unit of delivered energy than the headline numbers imply.

The Cost Arithmetic

Running the cost arithmetic shows both the promise and the problem. At an electricity price of roughly three to five US cents per kilowatt hour, and an electricity intensity of about 50 to 55 kilowatt hours per kilogram of hydrogen, power alone contributes roughly US$1.50 to US$2.75 per kilogram in Sarawak, which is why state officials argue the state can eventually approach the US$2 per kilogram threshold that many analysts treat as the border of broad commercial competitiveness. Some forecasters, including BloombergNEF, expect optimal locations worldwide to reach US$2 to US$3 per kilogram by 2030, driven by cheap renewables and cheaper electrolysers, and Sarawak’s firm, around the clock hydropower delivers high electrolyser utilisation, a critical and often underestimated cost variable, unlike solar and wind-based projects that must overbuild generation or accept low load factors. But add electrolyser capital, water treatment, compression, conversion to ammonia or methanol, shipping and reconversion, and the delivered cost of a clean molecule in Tokyo Bay or Ulsan still lands well above its fossil equivalent without subsidy or carbon pricing. The pivot toward methanol has a certain logic, since methanol is a liquid at ambient temperature that ports already handle, the marine fuel market is developing faster than most expected, and Sarawak has biogenic carbon dioxide sources, including palm industry residues, that could support certified green methanol. Certification is in fact the quiet battleground, because European rules on renewable fuels, Japanese and Korean standards, and mutual recognition arrangements being pursued through the Asia Zero Emission Community will together determine whether Sarawak’s molecules earn a green premium or a discount.

Recalibrating, Not Cancelling: What Investors Should Watch

None of this means the project is doomed, and it would be equally unfair to write it off. Sarawak still holds real structural advantages: cheap and firm renewable power, existing port and petrochemical infrastructure, a decade of political consistency that has not wavered even as financial targets have been adjusted, and a state government with its own fiscal strength. Leaders have been open about recalibrating rather than cancelling, and they are actively pursuing frameworks such as the Asia Zero Emission Community to secure long term buyers directly rather than waiting for a wider regional market to mature. Tokyo’s contract for difference scheme and Seoul’s clean hydrogen auctions give Sarawak contractual routes into both markets that simply did not exist when the projects were first conceived. For investors and businesses considering involvement, the sensible approach is to treat the original headline figures, the 240,000 tonnes, the US$4.2 billion, the RM12.1 billion national revenue target, as an ambitious ceiling rather than a guaranteed outcome. The realistic near term picture is a smaller, phased build out, with final investment decisions and actual construction likely slipping past earlier target dates into 2028 or 2029, and first exports most plausibly in the early 2030s. Anyone with a stake in the outcome, whether a supplier, a jobseeker or a policymaker, would do well to watch a short list of markers over the next year or two: whether firm, signed offtake agreements with Japanese and Korean buyers actually materialise, whether Sarawak can bring construction costs down enough to make the economics work without leaning too heavily on subsidy, whether the methanol redesign of H2biscus survives feasibility, and whether the Baleh dam and the Singapore cable stay on schedule, since both would materially strengthen the state’s hand.

The Ten-Year View

Looking ten years out, to around 2036, the base case is modest but real: first exports of perhaps 50,000 to 150,000 tonnes of hydrogen equivalent a year, most likely as methanol or ammonia, with Baleh’s 1,285 megawatts adding headroom from around 2028 and the Singapore cable absorbing another tranche of clean power in the early 2030s. Korea’s electricity plan calls for roughly 14.6 gigawatts of hydrogen and ammonia fired capacity by 2036, and Japan’s demand is legislated to climb toward 12 million tonnes by 2040, which means Northeast Asia’s import needs for clean hydrogen and derivatives could plausibly reach on the order of 5 to 10 million tonnes a year in the late 2030s. If Sarawak captured even a tenth of that, it would imply 500,000 to 1 million tonnes of annual hydrogen production, two to four times the original flagship plan, and cumulative investment on the order of US$10 billion to US$20 billion, a level consistent with the state’s long-standing power build out ambitions.

The Thirty-Year View

Looking thirty years out, to the 2050s, the scenario range widens dramatically. Net zero scenarios from bodies such as the International Renewable Energy Agency and the Hydrogen Council generally see hydrogen meeting roughly 10 to 14 percent of global final energy demand by 2050, a market of somewhere between 400 and 660 million tonnes a year, compared with about 100 million tonnes today, almost all of it grey. Shipping, required by the International Maritime Organization’s 2050 net zero goal to abandon conventional fuels, green steel made through hydrogen direct reduction, aviation e-fuels and clean fertiliser would be the anchor markets, and banks such as Goldman Sachs have floated a multi-trillion-dollar addressable market for green hydrogen by mid-century. Sarawak’s particular endowments, firm tropical hydropower, a deepwater export port, LNG heritage and proximity to the world’s largest prospective importers, position it as plausibly one of a small handful of tropical exporters, and the state’s own net zero by 2050 pledge is built on that vision. But honest caveats apply in both directions. Direct electrification and batteries will claim some of the demand that hydrogen scenarios assume, the LNG industry’s history suggests boom and bust cycles and gluts are entirely possible in a commoditised clean molecule trade, competition from the Gulf, Australia, Oman and eventually Africa and Latin America will only intensify, and technology risk, from electrolyser costs to ammonia cracking economics, persists.

A Rational Bet, not a Promise

Sarawak’s green hydrogen ambitions remain one of South East Asia’s most serious attempts to build a genuine clean fuel export industry, backed by real natural advantages rather than just aspiration. The recent scaling back of both flagship projects is a useful reminder that big numbers announced early in a project’s life often shrink once the hard work of financing, contracting and construction begins. The honest takeaway is that Sarawak has a credible long-term opportunity, likely larger in 2040 than in 2030, but the timeline has stretched, the scale has shrunk, and the eventual payoff will depend heavily on decisions made in Tokyo and Seoul boardrooms as much as in Kuching. For a state that turned cheap hydropower into aluminium, silicon and LNG supply chains within a single generation, hydrogen is a rational bet, provided investors price it as a bet rather than a promise.

A Note on the Data

The statistics above are drawn from the most recent publicly available editions of the IEA Global Hydrogen Review, the Hydrogen Council and McKinsey Hydrogen Insights series, Malaysia’s National Energy Transition Roadmap and Hydrogen Economy and Technology Roadmap, Japan’s Basic Hydrogen Strategy and 2024 hydrogen legislation, Korea’s clean hydrogen power auction results and long term electricity plan, Singapore’s legislated carbon tax schedule, official Malaysian and Sarawak statistics on investment, output and energy, and project announcements by SEDC Energy, Sarawak Energy, Petronas and their partners. Several of these figures, particularly project capacities, timelines, global pipeline values and state level economic data, are revised frequently, so they should be re-verified against the latest releases from the IEA, the Hydrogen Council, MIDA, the Department of Statistics Malaysia and the Sarawak government before formal publication.