The Ministry of Energy and Mineral Resources said that the government is targeting Indonesia to become a center for carbon storage technology in Southeast Asia. This is reflected in President Joko ‘Jokowi’ Widodo’s plans to expand the development of storage technology beyond the upstream oil and gas (oil and gas) sector. However, there are problems that also need to be addressed.
One of the state-owned companies, such as PT Pertamina, is encouraging the implementation of technology in an effort to reduce carbon emissions through carbon capture, utilization and storage or Carbon Capture Storage (CCS)/Carbon Capture Utilization and Storage (CCUS).
CCS/CCUS is a carbon storage method used to reduce CO2 emissions and prevent CO2 from touching the atmosphere for climate change and being stored underground. Its use can also increase oil recovery in depleted oil and gas fields, and CO2 can be recycled. repeated to produce products of economic value.
Currently, Indonesia has many industrial sources of CO2 such as coal-fired power plants, natural gas processing, oil refineries and various chemical factories. Other studies are currently underway, considering that there are still many large geological storage resources that have potential as CCS/CCUS locations in Java, Sumatra and Kalimantan.
Enhanced oil recovery (EOR) is a method of increasing petroleum production by injecting external energy sources. Meanwhile, enhanced gas recovery (EGR) is the practice of injecting CO2 gas into the field to increase oil and gas production in fields whose reservoirs are starting to run low.
The potential economic benefits of CCS/CCUS are very diverse, ranging from creating jobs, reducing operational costs for providing electricity, extending the life of existing infrastructure, to providing knowledge that can support innovation-based economic growth.
Therefore, the successful development of this project will be a historical milestone for Indonesia and will potentially be followed by several commercial scale implementations thereafter, since CCS/CCUS technology is already available and successfully applied in various oil fields globally.
ESDM targets Indonesia to become carbon storage center
Tutuka Ariadji, Director General of Oil and Gas at the Indonesian Ministry of Energy and Mineral Resources, has revealed that the Indonesian government is in the process of drafting a presidential regulation (Perpres) to expand the implementation of Carbon Capture and Storage (CCS) technology. This regulation will allow the use of CCS technology beyond the upstream oil and gas sector, encompassing other industrial sectors.
The aim of this Perpres is to support efforts to reduce carbon emissions in Indonesia. Additionally, the government hopes that with this regulation in place, Indonesia can become a hub for CCS technology in the Southeast Asian region.
The potential for carbon storage in Indonesia’s oil and gas sector is estimated to be around 4.31 gigatons of CO2. This substantial storage capacity can be utilized to bolster carbon emissions reduction efforts in Indonesia.
With regulations supporting CCS across various sectors, including beyond upstream oil and gas, it is expected that Indonesia can more effectively reduce carbon emissions and play an active role in global efforts to address climate change.
Transfer of knowledge from abroad
Indonesia is currently examining the carbon capture and storage (CCS) regulations of countries such as the United States, the United Kingdom, and Australia to improve its own CCS framework. These nations are renowned for their robust CCS policies and offer substantial incentives for private sector investment in CCS, contributing to the advancement and maturity of CCS activities.
According to Tutuka, learning from these countries will enrich Indonesia’s CCS regulatory enhancements. Developing policies and regulations for CCS is a complex task, and drawing insights from countries with comprehensive knowledge of CCS implementation is crucial.
International partnerships and cooperation are deemed vital in the development of CCS policies, as Tutuka emphasizes.
There are currently 15 CCS/CCUS feasibility projects in the oil and gas sector, with some in the pilot study phase and one in the testing phase, scattered across Indonesia from Aceh to Papua. Most of these projects aim to be onstream by 2030, with an estimated potential CO2 injection ranging from 25 to 68 million tons between 2030 and 2035.
Both CCS/CCUS technologies play a pivotal role in Indonesia’s upstream oil and gas industry. Their adoption is essential as Indonesia transitions to a new energy landscape.
To support CCS/CCUS development, the Indonesian government has introduced regulations through Ministerial Regulation No. 2 of 2023 on Carbon Capture and Storage Operations, as well as Carbon Capture, Utilization, and Storage in Upstream Oil and Gas Business Activities. Article 6 of this regulation allows for carbon capture from industries outside the upstream oil and gas sector in the execution of CCUS.
Inviting investors to develop CCS/CCUS
Luhut Binsar Pandjaitan, the Coordinating Minister for Maritime Affairs and Investment, is eyeing its significant potential for carbon storage, estimated at 400 gigatons of CO2. This substantial carbon storage capacity presents promising business and investment opportunities.
Minister Luhut encourages investors to consider deploying capital in Indonesia to develop CCS technologies, which can help mitigate carbon emissions and contribute to achieving the country’s net-zero emissions target by 2060 or sooner.
Indonesia views CCS as a rapidly evolving sector that offers investors the chance to lead and reap long-term financial rewards while fulfilling their responsibility to invest in global industries aiming for net-zero emissions.
Furthermore, Indonesia’s development as a CCS hub holds enormous potential due to its abundant CO2 storage resources and proximity to industrial areas. Global CCS investments have already reached around US$ 6.4 billion, with Asia contributing US$ 1.2 billion. Indonesia aims to become a significant player in this technology investment landscape.
Minister Luhut emphasizes that ASEAN countries, with their growing economies and populations, can play a crucial role in the global carbon footprint. The management of emissions is a priority in the region, with carbon capture and storage recognized as a promising technology implemented in various parts of the world.
Additionally, regional carbon taxation measures offer economic incentives for CCS/CCUS projects. Indonesia’s oil and gas facilities, spanning from Aceh to northern Java, Kalimantan, and Papua, are technically feasible locations for CCS operations.
By fostering collaboration and knowledge sharing, Minister Luhut believes that Southeast Asia can fully unlock the potential of CCS, contributing to a sustainable future for the region.
Indonesia prepares for carbon gas import
Indonesia is exploring the possibility of allowing other countries to store their carbon emissions within its borders, effectively importing carbon emissions. Unlike traditional imports, Indonesia would receive payment for carbon importation from nations seeking to store their carbon emissions within Indonesia.
Tutuka, revealed that the government is planning to permit other countries to store their carbon emissions through carbon capture and storage (CCS) technology in Indonesia. Importing carbon emissions in this manner would involve the issuance of carbon reduction certificates, which can be traded like carbon credits. Indonesia is also in the process of launching a carbon exchange.
Tutuka provided an example of Singapore, a nation without significant oil and gas reserves, which could potentially become a customer for storing CO2 emissions in Indonesia. Singapore currently levies a carbon tax of US$ 5 per ton of CO2 equivalent (CO2e), which is set to increase to US$ 25 per ton CO2e in 2024, with a target range of US$ 50-80 per ton CO2e by 2030.
Entities interested in utilizing Indonesia’s storage facilities would be required to pay for the service, transforming it into a revenue-generating business. However, Tutuka clarified that the cost of injecting CO2 into storage is not regulated by the upcoming presidential decree. Instead, it would be a matter negotiated through business-to-business (B2B) contracts.
Tutuka also emphasized that despite plans for carbon imports, the domestic industry’s needs would remain a priority. Indonesia intends to prioritize domestic carbon storage requirements while understanding the potential for significant storage capacity.
Based on preliminary research, the estimated potential carbon storage capacity in the oil and gas sector alone is approximately 4.31 gigatons of CO2. This substantial storage capacity can contribute to more rapid emissions reduction efforts.
Cooperation with Malaysia
Indonesia and Malaysia have reached an agreement to implement CCS/CCUS technologies, particularly focusing on carbon storage from the oil and gas sector. The goal of this agreement is to reduce greenhouse gas emissions.
According to Tutuka, both Indonesia and Malaysia have taken steps to develop carbon storage technologies. Based on research, the estimated potential for carbon storage in the oil and gas sectors of Indonesia and Malaysia is approximately 4.31 gigatons of CO2. This substantial potential can be used to support emissions reduction efforts more rapidly.
In addition to Indonesia and Malaysia, Thailand is also planning to develop carbon storage technology and is currently in the process of creating regulations for its implementation. Tutuka hopes that in the future, other Asia-Pacific countries will join in developing this technology as well.
Challenges in CCS/CCUS development
According to Tutuka, implementing CCS/CCUS technology is certainly not easy and there are a number of challenges. First, in terms of environmental impact risks. According to him, the transportation of CO2 (carbon dioxide) can have a clear impact on environmental risks.
“Therefore, we need cross-country collaboration to clarify who is responsible for environmental risks from the implementation of CCS/CCUS,” said Tutuka.
He said the second challenge was technical, where it was necessary to ensure that there were no carbon leaks after injection. The reason is, CO2 is in contact with water, which gradually causes corrosiveness, causing leaks.
“This will later become an environmental problem. We have to ensure that according to existing regulations, there is no leak after injection,” said Tutuka.
Next, he mentioned the third challenge, namely related to economics or costs. Tutuka said that the costs incurred to build CCS/CCUS in Indonesia were quite large. For this reason, the government is currently aggressively looking for investors both from abroad and within the country.
Based on the Economic Study for ASEAN and East Asia (ERIA), the cost of carbon capture is around US$ 45.92, while the cost of carbon storage is around US$ 15.93. Tutuka points out that carbon capture is the most expensive thing in terms of CO2 capture costs.
To answer all the challenges of CCS/CCUS development, Mirza Mahendra, Director of Engineering and Environment for Oil and Gas at the Ministry of Energy and Mineral Resources, said the government is currently drafting a Presidential Regulation on CCS to expand CCS implementation.
This includes CCS Hub, cross-border CCS, CO2 from industry, and its use in non-oil and gas working areas. There are at least three main points that underlie the need for this Presidential Regulation.
First, a legal basis is needed to support the development of safe and effective CCS, as well as provide legal certainty for investors. Second, to accommodate the implementation of integrated CCS activities from all sectors and cross-border CO2 transportation. Then the third is utilizing the potential of Indonesia’s geological deposits as a CCS Hub.
