Sarawak hydrogen projects scaled down on weak signals

KUCHING (April 8): Sarawak’s flagship hydrogen projects, H2biscus and H2ornbill, have been scaled down following weak demand signals, according to the Energy Industries Council (EIC).

In its April 2026 APAC Hydrogen Insight Report, the council said both projects have reduced their planned production capacity in 2025, reflecting broader uncertainty in securing offtake agreements.

EIC said the adjustment comes despite Sarawak maintaining a leading position in Malaysia’s hydrogen development.

“Through strong government support and strategic collaborations with Japan and South Korea in developing its flagship hydrogen projects, Sarawak is currently the most advanced state in terms of project implementation and development.

“Its abundance of hydropower allows competitive renewable energy prices for green hydrogen production.

“However, some headwinds were identified in 2025 such as Sarawak’s H2biscus and H2ornbill projects, in collaboration with South Korea and Japan, were scaled down to lower production capacities due to lack of demand signals,” EIC said in its report.

EIC, established in 1943, is the world’s largest energy-agnostic trade association. The not-for-profit organisation brings together over 950 companies from the energy supply chain sector across all industries to provide global market intelligence.

Earlier this year, EIC organised the CONNECT Energy Borneo 2025 Conference in Kuching with focus on energy shift including here in the state.

Currently, Sarawak has five green hydrogen projects in the construction and engineering phases, with operational capacity expected by 2029.

The H2ornbill Project, led by SEDC Energy with Japan’s ENEOS and Sumitomo Corp, will build two hydrogen plants targeting 90,000 metric tonnes of clean hydrogen annually by 2030.

Meanwhile, the H2biscus Project partnering South Korea’s Samsung Engineering, Posco, and Lotte Chemical, aims to develop hydrogen derivative facilities with 150,000 metric tonnes per year capacity.

Earlier reports noted that commercial production could begin earliest by 2028, should final investment decisions (FID) go through. The state is also aiming to export green hydrogen by 2030.

The Borneo Post has reached out to the Sarawak Economic Development Corporation (SEDC) for comments on the matter.

At the national level, Malaysia’s hydrogen pipeline has progressed at a measured pace, with only four out of 16 identified projects reaching FID.

EIC’s project tracking platform, EICDataStream, is tracking 13 hydrogen production projects in Malaysia through 2031, with a combined capital expenditure (capex) of US$7.52 billion.

Across Asia Pacific, the council flagged growing concern over the pace of renewables and clean technology development as most projects are still struggling to reach FID.

The report revealed that many large export-scale projects and hydrogen hubs stall at the feasibility stage because of weak offtake certainty, infrastructure gaps, slow permitting and supply-chain constraints.

A total of 221 hydrogen projects are being tracked in the region, representing about US$407 billion in potential capex. However, only 6.46 gigawatts (GW) out of the 56.35 GW pipeline is currently under construction.

Projects in the engineering design phase could add a further 22.62 GW if completed, underscoring the importance of execution and sustained investment.

Contracting activity has also weakened, with awarded contracts falling to 27 in 2025 from 54 in 2024, largely due to constrained financing and regulatory delays.

“Like other regions, Asia Pacific doesn’t have a problem with developing hydrogen projects on paper, but rather with building them.

“The projects moving forward are the ones with credible buyers, realistic economics, infrastructure in place and, most importantly, a clear policy direction,” EIC global head of external affairs Rebecca Groundwater said in a statement accompanying the report.

Despite the slowdown, EIC expects a gradual recovery in 2026 as developers and governments adopt a more disciplined investment approach, prioritising projects with secured demand, clear end-use pathways, and stronger commercial viability.

“This more cautious capital allocation strategy is likely to support sustainable growth in the region’s hydrogen market over the medium term,” it said.

Regionally, Australia remains the largest hydrogen market on paper, with 63 projects and around US$240 billion in projected capex, followed by India with 60 projects valued at about US$105 billion.

While a handful of large-scale Australian projects have been delayed, downsized or cancelled, India is showing stronger execution, supported by policy-backed ammonia demand helping developers secure buyers earlier and ongoing construction of major production hubs.

Japan and South Korea are emerging primarily as demand and import centres, while markets such as Vietnam, Thailand and Indonesia remain at an earlier stage of development, facing policy, infrastructure and cost constraints.

Globally, EIC’s data shows 1,175 hydrogen projects worth an estimated US$1.423 trillion, but only 109 projects valued at about US$49 billion are expected to reach FID.

This represents just 9.28 per cent of total projects and 3.44 per cent of total projected value.

The report also highlighted structural challenges facing the hydrogen sector across Asia Pacific.

Major energy players such as BP, Origin Energy and ENEOS have scaled back hydrogen diversification efforts to refocus on core businesses due to project complexity and cost pressures.

In many markets, it said that green hydrogen is being overshadowed by lower-risk alternatives, including fossil fuel-based hydrogen, or grey hydrogen.

Other challenges identified include insufficient demand and limited offtake agreements, high renewable energy costs in several markets due to grid limitations and land constraints, and the lack of cost competitiveness against conventional hydrogen.

Supply chain issues also pose a bottleneck, particularly the limited availability of rare earth materials required for electrolysers and fuel cells.

Furthermore, heavy reliance on imported equipment exposes projects to price volatility, logistical disruptions and geopolitical risks, while the absence of localised supply chains continues to increase costs and delay deployment timelines.

“Without significant reductions in renewable energy costs, green hydrogen will struggle to compete with blue hydrogen and fossil-based alternatives and delays large-scale deployments.

“This does not apply to countries such as India and Australia, which have more mature hydrogen sector and a high share of renewable energy in their energy mix,” it said.

Energy Industries Council H2biscus H2ornbill Sarawak Economic Development Corporation Sarawak hydrogen SEDC Energy