General Overview On The Implementation Of Carbon Capture And Storage Activity

Background

Indonesia recently issued Presidential Regulation No. 14 of 2024 on the Implementation of Carbon Capture and Storage Activity ("CCS") ("PR 14/2024"), as a part of the central government's effort to achieve net zero emission target.

PR 14/2024 stipulates the technical guidelines for the implementation of CCS activity in Indonesia. Under this regulation, CCS is defined as a business activity with two main focuses, carbon capturing and transportation of the captured carbon to a designated space, known as the Injection Target Zone (Zona Target Injeksi or "ZTI"), which is a rock system in the geological formation used for storing carbon (Article 1 (4) and (12) of PR 14/2024).

To provide a general overview of the contents of PR 14/2024, we provide in this article, the summary of various aspects of the implementation of CCS activity, which includes (i) the implementation of CCS, (ii) Exploration License (iii) Operational Storage License, and (iv) Applicable Sanctions.

Implementation of CCS

The implementation of CCS under PR 14/2024 is divided into two categories, which are (i) CCS activities based on a cooperation agreement, and (ii) those under a specific license (i.e., Exploration or Operational Storage License).

a.    Implementation of CCS based on Cooperation Agreement

The implementation of CCS based on a cooperation agreement could be in the form of:

i.   Profit sharing contract;
ii.  Gross split profit sharing contract; or
iii. Other cooperation contract.

(Article 4 (2) of PR 14/2024)

Pursuant to Article 5 of PR 14/2024, several steps need to be carried out by a contractor to be eligible for implementing CCS based on a cooperation agreement. A contractor must first submit their CCS implementation plan to the Special Task Force for Upstream Oil and Gas Business Activity (Satuan Kerja Khusus Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi  or "SKK Migas"), or Aceh Oil and Gas Management (Badan Pengelola Migas Aceh  or "BPMA"), if the contractor operates in Aceh province.

The submission to the SKK Migas and BPMA shall be accompanied by certification of carbon storage activity, which will be further regulated by the Ministry of Energy and Mineral Resources ("MoEMR") (Article 5 (7) of PR 14/2024).

b.    Implementation of CCS based on a Specific License

Holders of Exploration and Operational Storage Licenses are eligible to conduct CCS activities in the carbon storage area that include (i) specific open areas, (ii) mining business license areas, and/or (iii) work areas of mining business activities further determined by MoEMR ("Carbon Storage Area") (Article 9 (5) and 10 (1) of PR 14/2024).

Furthermore, the implementation of CCS activity pursuant to an Exploration License can be carried out by a limited liability company or Permanent Establishment (Bentuk Usaha Tetap). However, such implementation based on an Operational Storage License must only be carried out by a limited liability company (Article 9 of PR 14/2024)

To obtain the Exploration License, the company must participate in the limited selection or bidding process conducted by MoEMR, which offers the Carbon Storage Area. Upon completion of the tendering process, limited selection, or bidding process, the relevant participant can apply for the Exploration License to MoEMR via the Online Single Submission, a licensing electronic-based, managed by the government of Indonesia.

Exploration License

The Exploration License shall be granted by MoEMR after the business actor has fulfilled the administrative, technical, environmental, and financial requirements. Please note that the exploration license is valid for six years and is subject to a 1 (one) time extension for 4 (four) years. In total, such exploration license shall be valid for 10 years after its issuance by MoEM (Article 16 and 17 of PR 14/2024)

For your ease of reading, we provide the tables below regarding the specific requirements for each category.

Upon completing the exploration, the holder of the exploration license must apply for the plan for development and operation to MoEMR, to be able to do the CCS activities. The plan should include a thorough assessment covering various aspects related to the exploration result, and the technical provisions of CCS implementation.

Operational Storage License

CCS activities conducted under an Operational Storage License must be carried out by a limited liability company. Similarly, a business actor planning to obtain the Operational Storage License has to fulfil several requirements under Article 24 of PR 14/2024.

Applicable Sanctions

Non-compliance or violation of, particularly, the licensing provisions, or CCS requirements is subject to administrative sanctions in the form of:

1. Written warning;
2. Temporary suspension of business activity in ZTI exploration, carbon storage operation, or carbon transportation; and/or
3. Revocation of license.

Concluding Remarks

The issuance of PR 14/2024 marks a significant step forward in Indonesia's efforts to achieve net zero emission through the implementation of CCS activity. PR 14/2024 establishes the procedures for obtaining the necessary license for a business actor implementing CSS activities. Businesses need to comply with all the technical, administrative, environmental, as well as financial requirements. The comprehensive approach taken by the Indonesian government through PR 14/2024 outlines the government's effort to balance the economic growth with the environmental sustainability by providing comprehensive cooperation of various contributing stakeholders to effectively reduce carbon emissions and mitigate global climate-change.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.