Indonesia has issued a new regulation encouraging the integration of carbon capture and storage (CCS) and carbon capture, utilization and storage (CCUS) schemes within exploration and production activities in a move to support the decarbonization of the country’s upstream industry, global oil and gas news source Upstream reported.
According to the Ministry of Energy and Mineral Resources, the MEMR 2/2023 regulation, which was drafted in August 2021 and received presidential approval earlier this year, is a step towards Indonesia’s target of achieving net zero emissions by 2060.
There are currently a total of 15 CCS/CCUS projects in Indonesia which are in the study and preparatory stages, with a projected start date by 2030 for most of them.
“Although the regulation does provide some much needed clarity around the scope and requirements of CCS/CCUS activities, there are a number of issues that remain to be addressed, including leakage risk, allocation of title and risk in the context of commingled carbon and ensuring quality specifications,” Paul Greening and Jooyoung Song of lawyers and advisers Akin Gump commented on their Akin Insights Blog.
Another point that was left unclear was to what extent Indonesia will offer financial incentives to attract investment across the CCS/CCUS value chain, for example through tax breaks and credits like the USA, the UK and Europe, they added.
According to the ministry’s director of oil and gas, Tutuka Ariadji, both operators active in Indonesia and academics were included in the process of drafting the regulation.
With MEMR 2/2023, development plans submitted for approval to the country’s upstream regulator, SKK Migas, can now include schemes for capturing and storing related CO2 emissions, and if CCUS is used to boost production via enhanced oil or gas recovery initiatives, cost recovery could also be applicable within the production sharing contract, the ministry said.
According to Greening and Song, it would be particularly interesting to see whether Malaysia, given its well-established oil and gas industry, will quickly follow Indonesia’s footsteps with its own regulations.
The experts also consider that Indonesia’s MEMR 2/2023 could serve as a stepping stone towards discussion around regional co-operation, which is crucial for unlocking the region’s vast carbon-capture potential.