Indonesia’s Carbon Capture and Storage (CCS) Regulatory Overview: Steps to become Asia-Pacific Hub?

Countries and companies are setting aggressive net-zero emission targets, and Indonesia is in top gear in ensuring that carbon capture, and storage (“CCS”) is available as one of the necessary tools to reach its domestic net-zero target in 2060. In less than one year span, the Indonesian government has enacted three CCS-related regulations, namely:

1. Minister of Energy and Mineral Resources (“MEMR”) Regulation No. 2 of 2023 on the Implementation of Carbon Capture and Storage and Carbon Capture, Utilisation and Storage for Upstream Oil and Gas Business Activities;
2. SKK Migas Working Guideline No. PTK-070/SKKIA0000/2024/S9; and
3. Presidential Regulation No. 14 of 2024 on the Implementation of Carbon Capture and Storage (“Presidential Regulation 14/2024”).

As a foreword, CCS is not a new technology. In fact, it is a half-century old upstream oil and gas technology that is traditionally used to enhance oil and gas recovery or reduce emissions deriving from oil and gas operations. Because it derives from the upstream business, the regulatory process replicates and builds on the existing processes and processes in the upstream business.

The latest regulation, Presidential Regulation 14/2024, is intended to bridge all the regulatory gaps and cover all possible scenarios, areas of concern, and monetisation. This client update will provide an overview of the current regulatory framework:

1. How and where to do CCS operations in Indonesia;
2. Tax incentives;
3. CCS business process;
4. Monetisation and carbon credit;
5. Post operations and limitation of liability;
6. Foreign investment restrictions;
7. Potential sanctions.

Based on this overview, we will then examine whether the industry have everything they need from regulatory perspective to underpin investment decisions in building a CCS hub envisioned by the government.