Carbon Capture Storage (CCS) Monetization Scheme in Indonesia

The Ministry of Energy and Mineral Resources (ESDM) in Indonesia has revealed two potential monetization schemes for carbon capture storage (CCS) projects currently in development. Indonesia is seen as having the potential to become a CCS hub in the region due to its estimated capacity to store up to 400 gigatons of CO2. Currently, there are 15 projects in the planning phase expected to store approximately 4.31 gigatons of CO2.

Noor Arifin Muhammad, who leads the Upstream Oil and Gas Business Development at the Directorate General of Oil and Gas in the Ministry of ESDM, explained that the government is still in the process of designing monetization schemes for carbon storage projects. Two options are being considered: storage fees and carbon trading.

The storage fee scheme would require those wishing to store carbon to pay a specified fee. However, the amount of the fee and the entity responsible for determining it are still under discussion, whether it will be the government or the companies holding Work Areas (WAs).

This approach would follow the Production Sharing Contract (PSC), which may imply royalty payments to the state or a profit-sharing contract system. However, this is still in the planning stage.

One reference point for this approach is the use of CCS in Europe, which saw increased interest when countries imposed high carbon taxes. This encouraged businesses to opt for carbon storage rather than paying high taxes.

Nanang Abdul Manaf, Deputy Head of the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas), explained that one of the primary efforts in decarbonization currently is the adoption of CCS/CCUS. One of the first projects expected to become a CCS Hub in Indonesia is the BP Tangguh LNG EGR/CCUS project, involving parties from Japan and Indonesia.

SKK Migas is in the process of developing operational guidelines for the integrated implementation of CCS/CCUS with oil and gas fields, Plan of Development (PoD), and carbon management. With many aging oil and gas fields in Indonesia, there is significant potential for them to serve as carbon storage locations.

In this endeavor, collaboration among various stakeholders in the oil and gas industry will be crucial. The significant potential to support carbon emissions reduction and effectively manage carbon in Indonesia demands strong cooperation and support from all relevant parties.