Indonesia is aggressively pursuing net-zero emission targets, with a focus on carbon capture and storage ("CCS") as a crucial tool to achieve its domestic net-zero target by 2060. Through a series of recent regulations, including Presidential Regulation 14/2024 on the Implementation of Carbon Capture and Storage, the country has laid out a comprehensive framework for CCS operations. This framework delineates two main avenues for CCS implementation: (i) within existing production sharing contract ("PSC") blocks; and (ii) in designated CCS areas. Within PSC blocks, CCS projects will integrate with petroleum operations, while designated areas will undergo a tender process, exploration, and development phases. The regulations provide clarity on various aspects such as taxation incentives, business processes, liability, and potential sanctions, although some gaps remain, particularly in defining royalty amounts, bilateral cooperation requirements, and post-monitoring liability.
While the regulatory framework marks a significant step towards CCS development in Indonesia, additional clarifications and implementations are necessary to fully underpin investment decisions and establish a successful CCS hub. Key areas requiring further elaboration include (i) defining royalty structures; (ii) outlining requirements for bilateral cooperation; (iii) specifying liability limitations in the post-monitoring period; and (iv) providing tax incentives. Beyond regulations, the success of CCS ventures will hinge on finding suitable injection target zones, fostering multilateral policies, and encouraging regional cooperation to establish a robust value chain. Additionally, financial considerations and international collaboration will play pivotal roles in assessing the economic viability of CCS projects and ensuring their long-term sustainability in mitigating greenhouse gas emissions while meeting global energy demands.
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