Overview 

In alignment with its commitment to achieving net-zero emissions, Indonesia has set ambitious goals for the application of carbon capture technology. Indonesia is actively pursuing the development of Carbon Capture and Storage (CCS) technology with a vision of establishing Indonesia as a regional CCS hub. 

This initiative is not limited to domestic CO2 capture, but also seeks to foster international participation. Remarkably, the Indonesian government’s estimates suggest a substantial CO2 storage potential ranging from 400 to 600 gigatons within depleted reservoirs and saline aquifers. 

To fulfil these ambitious commitments, Indonesia has implemented specific regulations to promote CCS as well as carbon capture, utilisation and storage (CCUS), including its transportation. These pivotal regulations include:

• Minister of Energy and Mineral Resources (MEMR) Regulation No.2 of 2023, which addresses the organisation of CCS, as well as CCUS in Upstream Oil and Gas Business Activities (MEMR Reg 2): and
• President Regulation No. 14 of 2024 on the Implementation of Carbon Capture and Storage (PR 14)

It is essential to recognise that these regulations underscore Indonesia’s commitment to fulfilling its obligations under the Paris Agreement (adopted in 2015), reaffirming Indonesia’s commitment to combating climate change on a global scale. 

The implementation of CCS/CCUS in Indonesia 

Under MEMR Reg 2, the main implementing regulation for CCS/CCUS activities in the upstream oil and gas industry includes the following elements:

According to a recent press release from the Ministry of Energy and Mineral Resources, Indonesia is actively pursuing 16 CCS/CCUS projects that are currently in the study and preparation phase.  All of these projects are anticipated to be operational by 2030. Among these projects, the construction of BP’s highly advanced Tangguh CCUS project in West Papua was inaugurated on 24 November 2023, with its first carbon injection expected to take place in 2026. 

Pertamina is a key player in many of the CCUS and CCS projects, owing to its various partnerships with JGC Corporation, Japan Nus Co. Ltd., Mitsui & Co. Ltd., Chiyoda Corporation, Mitsubishi, and Chevron. Alongside Pertamina, Inpex Masela Ltd. and PetroChina International Jabung Ltd. are also actively working on their respective CCUS projects. 

Recently released PR 14 provides comprehensive guidance for the implementation of CCS in Indonesia. It contemplates the capture of carbon emissions not only from the upstream oil and gas sector but also from power generation plants, refineries, steel and cement production facilities, together with manufacturing and other industrial activities that produce carbon emissions, both domestically and internationally.  

Article 29 of PR 14 explicitly defines “carbon capture” quite broadly to include methods such as capturing emissions after combustion, capturing emissions before ignition, oxy-fuel combustion capture, and other future techniques. 

PR 14 also addresses the following key aspects: 

1. Type of activities and required licences 

PR 14 sets out the following activities related to CCS: 

Type/Licences	Scope of activities	Period
Storage Operation Licence	Injecting and storing carbon emissions in a target injection zone (TIZ).	30-year maximum, extendable for a maximum 20 years for each extension.
TIZ Exploration Licence	Exploration for a TIZ within a “Carbon Storage Licence Area” which includes: data collection, drilling, subsurface and risk mitigation studies (including assessment of the potential carbon leakage).	6 years, extendable for another 4 years.
Carbon Transportation Licence	Transportation of captured carbon to the TIZ by pipeline.	Maximum 20 years, extendable for a maximum 10 years for each extension.
	Transportation of captured carbon to the TIZ by truck, ship or other method in accordance with scientific and technological developments.	Maximum 10 years, extendable for a maximum 10 years for each extension.

PR 14 acknowledges that carbon capture goes beyond capturing carbon emissions from oil and gas upstream activities, now specifying that CCS implementation is permitted for business entities and permanent establishments that hold a Storage Operating Licence (to carry out carbon injection and storage activities in permitted “Carbon Storage Licence Areas”).  However, before a Storage Operating Licence can be granted, the business entity/permanent establishment must have:  

• Obtained a TIZ Exploration Licence (within a permitted Carbon Storage Licence Area – please see below for further details); and  
• Prepared a TIZ development and operation plan that has been approved by the Minister of Energy and Mineral Resources (on the basis that the ZTI Exploration activities prove to have potential commercial carbon storage capacity).     

As mentioned above, PR 14 appears to permit CCS activities only after a Storage Operating Licence has been obtained. However, the definition of a Storage Operating Licence is limited to injection and storage activities only, while a TIZ Exploration Licence (also required) is exclusively for identifying a potential TIZ. As a result, there does not appear to be any clear licence or licensing conditions for business entities/permanent establishments that will only conduct carbon emissions capture activities without storing and injecting. 

2. Work Area

CCS activities can be implemented within a “Carbon Storage License Area” (Wilayah Izin Penyimpanan Karbon) which consists of: 

• “Open Areas”; 
• Mining licence areas, which refers to the area granted to the holder of a mining business license (i.e. minerals and coal) or rock mining business license; and/or 
• “Working Areas”, which refer to specific regions outlined in the Indonesian mining regulations. In the context of upstream oil and gas activities, the contractor is permitted to carry out CCS operations within its existing Working Area without the need for a distinct Carbon Storage License Area. However, it is essential for the contractor to revise its cooperation contract to explicitly incorporate CCS activities if they are not already included. 

Carbon Storage License Areas are determined by MEMR and/or based on recommendations from Business Entities/Permanent Establishments. MEMR can also allocate areas to Business Entities/Permanent Establishments through a selection or auction process by considering their technical and financial capabilities.    

Carbon monetization and carbon cross-border transportation  

PR 14 also permits the monetization of CCS activities through storage fees. In particular, holders of Storage Operating Licences are obligated to pay royalties to the Government. PR 14 and MEMR Reg 2 also enable the issuance of carbon credits or SPE GRK (Sertifikat Pengurangan Emisi Gas Rumah Kaca) in accordance with the regulations governing carbon economic value. 

It’s important to note that Indonesia’s carbon storage capacity will be primarily allocated to domestic carbon producers. CCS project owners are required to reserve 70% of the total carbon storage capacity for domestic carbon storage purposes. Only the remaining 30% can be allocated to store carbon from countries outside of Indonesia. However, the 30% is only available to offshore carbon producers that have invested in Indonesia or “are affiliated with investments in Indonesia”.  Unfortunately, there is no clarity in PR 14 as to scope of such offshore investment or affiliation. Any proposed variation to the 70%:30% allocations would be subject to Presidential approval.  Bilateral cooperation agreements between Indonesia and the relevant countries are also required to facilitate the cross-border implementation of CCS. However, PR 14 contemplates that further implementing regulations on bilateral cooperation agreements will be issued. 

Conclusion 

PR 14 is a significant development in the realisation of CCS in Indonesia, not only providing detailed technical information, standardisation and requirements for CCS businesses, but also emphasising the importance of environmental sustainability and carbon reduction efforts.  PR 14 now complements MEMR Reg 2, which regulates CCS and CCUS activities for the upstream oil and gas business sector.  

The comprehensive approach of PR 14 and MEMR Reg 2 aims to ensure that CCS and CCUS projects in Indonesia are carried out in a responsible and efficient manner.  This is a growing and dynamic field with great promise in Indonesia, as the 16 current CCS/CCUS projects eventually become operational, and Indonesia positions itself to be a future regional carbon hub. 

The CCS/CCUS regulations do not end with MEMR Reg 2 and PR 14. The Minister of Minerals and Energy is required to issue many additional supplementary regulations, with no set timeframes for their issuance. Among the areas to be further regulated are carbon storage capacity, the procedures for determining Carbon Storage Licence Areas and granting TIZ Exploration Permits, as well as the carbon storage fees and the proposed bilateral cooperation agreements for countries outside Indonesia wishing to export carbon to Indonesia.

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We will keep a close eye on any new developments in the CCS/CCUS space and will write more updates on this topic as more information becomes available. We are committed to keeping you informed and providing valuable insights on the evolving CCS/CCUS landscape in Indonesia. 

_{*This section is provided in collaboration with Soemadipradja&Taher. Download full article by clicking the link here.}