The Government of Indonesia has just recently enacted the Presidential Regulation (“PR”) No. 14 of 2024 on the Implementation of Carbon Capture Storage Activities of (“PR 14/2024”) on 30 January 2024 and came into effect the day it was enacted. PR 14/2024 aims to achieve Net Zero Emission by 2060 or earlier and to provide legal certainty for emission reduction through carbon capture and storage activities. The general overview of the PR are as follows:
Under PR 14/2024, implementation of Carbon Capture and Storage (“CCS”) through Cooperation Agreement is permitted to be conducted at Working Area (covers certain area in Indonesia’s mining area). PR 14/2024 provides several types of Cooperation Agreement on CCS, including (1) production sharing agreement with a mechanism for returning operating costs; (2) gross profit-sharing agreement; or (3) other cooperation agreement. Such a Cooperation Agreement must include provisions on CCS and responsibilities of the Contractor in organizing CCS.
In conducting CCS at the Working Area, contractor has to submit CCS implementation plan to the Minister of Energy and Mineral Resources (“MEMR”) through SKK Migas or BPMA[1] as part of request approval for (1) the initial field development or (2) subsequent field development plan, including the amendment of the approved subsequent field development plan[2]. Such implementation plan submitted by contractor must be equipped with a Carbon Storage capacity certificate which will be further stipulated in minister regulation.[3]
The MEMR, based on recommendation from SKK Migas, can approve or reject such implementation plan under point (1) while SKK Migas can approve or reject the implementation plan under point (2) above[4]. For Working Area in Aceh, approval or rejection from MEMR is determined after coordination with the Governor of Aceh and BPMA. MEMR Approval for CCS implementation under point (2) shall be complemented by amendment of the cooperation agreement, and shall include clause regarding contractor’s responsibilities on CCS implementation.[5]
Contractor is also permitted to utilize depleted reservoir or saline aquifer within the Working Area for implementing CCS in case the CCS scope in the Construction Agreement has not yet been determined by amending the Construction Agreement.[6]
Apart from CCS implementation through Cooperation Agreement, PR 14/2024 also open the possibility for CCS implementation through obtaining permits, i.e., Exploration Permit and Storage Operational Permit. Please note, CCS implementation through the abovementioned permits is only permitted at Carbon Storage Permit Area, including (1) open areas, (2) mining concession areas and/or (3) Working Area. Such Permit Area is prepared by the MEMR by considering recommendations from Legal Entities or Permanent Businesses through limited selections or bidding based on the right to match when the Legal Entities or Permanent Business are deemed to have sufficient technical and financial ability.
Exploration Permit is intended Legal Entities or Permanent Businesses (business entities established outside Indonesia operating in Indonesia) [7] to carry Injection Target Zone (ITZ) exploration involving data acquisition, drilling, subsurface study and risk mitigation activities.[8] The Permit is valid for six years (subject to a four-year extension)[9] and will be granted by MEMR after the determined Legal Entities or Permanent Business fulfilled the prerequisite requirements.[10]
Meanwhile, the Storage Operational Permit is only intended for Legal Entities to conduct injection and carbon storage activities in Carbon Storage Permit Area. The Permit is valid for 30 years (subject to a twenty- year extension) and will be granted by MEMR after the determined Legal Entities fulfilled the pre prerequisite.[11]
PR 14/2024 also stipulates Carbon Transportation Permit to transport carbon to the injection site given to Legal Entities or holder of Storage Operational.[12] Transportation of carbon under PR 14/2024 can be conducted through several means, including (i) pipes, (ii) trucks, (iii) ships), and/or (iv) other procedures in line with technology development. However, requirement to obtain Carbon Transportation Permit is waived if the carbon transportation activities is a part of the Contractor’s CCS implementation plan and if the transport is conducted (i) within Working Area, or (ii) from one Working Area to another Working Area.
PR 14/2024 provides that implementation of CCS through Cooperation Agreement and Storage Operation Permit can be monetized through storage fee and/or other forms subject to taxation and royalties.[13] Please note, PR 14/2024 does not regulate further on the provisions of storage fee and shall be regulated in detail in ministerial regulations.
In addition, Contractor and holder of the abovementioned permits may receive tax and non-tax incentives to accelerate CCS implementation. Please note, PR 14/2024 does not elaborate the forms of such incentives and therefore, monitoring other regulations regarding tax and non-taxes incentives are necessary in this matter.
Further, it is important to highlight that any goods and equipment purchased by the contractor for CCS operations under a cooperation agreement will become the property of the State. On the other hand, goods and equipment purchased by storage operation license holders remain their property.
In facilitating the cross-border transportation of CCS, it must be conducted based on bilateral cooperation agreements between States, which agreement must refer to the international organization on the cooperation of mitigating climate change.[14] Such an agreement will become the basis of the issuance of recommendations or licenses that are necessary in organizing the cross-border transportation of CCS.[15]
Further, PR 14/2024 regulates that carbon that is transported into Indonesia’s custom territory must be registered by the importer at least 1 (one) time when first imported. Any leakages during the cross-border transportation of carbon in Indonesia does not add Indonesia’s greenhouse gas inventory.
If you have any questions, please do reach out to us.
[1] Article 5(1) of PR 14/2024.
[2] Article 5(2) of PR 14/2024.
[3] Article 5(7) of PR 14/2024.
[4] Article 5(4) and (5) of PR 14/2024.
[5] Article 5(6) of PR 14/2024.
[6] Point 1.8 Section III of PTK SKK Migas 70/2024.
[7] Article 9(3) of PR 14/2024.
[8] Article 17(1) and Article 1(5) of PR 14/2024.
[9] Article 17(1) of PR 14/2024.
[10] Article 16(2) of PR 14/2024.
[11] Article 24(1) and Article 25(1) of PR 14/2024.
[12] Article 30(4) of PR 14/2024.
[13] Article 42(1) and (2) of PR 14/2024.
[14] Article 45(1) of PR 14/2024.
[15] Article 45(2) of PR 14/2024.
