Promoting Carbon Capture and Storage Initiatives: Government Prepares Tax Incentives

The government will provide tax and non-tax incentives to contractors that organize Carbon Capture and Storage (CSS) activities. The aim is to support the implementation of CSS activities.

Incentives are given if CSS activities are carried out in the working area of exploration and exploitation activities, upstream oil and gas business activities (Oil and Gas) as well as exploration permit holders, carbon transport, or storage operation permit holders.

This is as stated in the Presidential Regulation (Perpres) of the Republic of Indonesia Number 14 of 2024 concerning the implementation of carbon capture and storage activities.

The regulation explains that the provision of incentives will be coordinated by the Coordination Ministry of Maritime and Investment. However, the regulation, which has been in effect since it was enacted on 30 January 2024, does not specify the types of tax incentives the government will provide.

Scope of the regulation

The regulation stipulates that the implementation of CSS can be conducted in the working area where exploration and exploitation activities are carried out or in a special area for CSS implementation activities done by contractors based on cooperation contracts.

What is meant by cooperation contracts include production sharing contracts with operating cost recovery mechanisms, gross split production sharing contracts or other cooperation contracts. 

Meanwhile, to be able to carry out CSS, the contractor who owns the cooperation contract must submit a CSS implementation plan through the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) or the Aceh Oil and Gas Management Agency (BPMA).

The CSS implementation plan can be submitted as part of the first field development application or an amendment to an approved first field development plan. It can also be submitted as part of a subsequent field development plan or an amendment to an approved subsequent field development plan.

Regarding CSS plans submitted as part of a field development application or amendment to an approved field development plan, it is the authority of the Minister of Energy and Mineral Resources (ESDM) to decide whether to accept or reject it.

Meanwhile, related to CSS plans submitted as part of the subsequent field development plan or amendment to the approved field development plan, it is the authority of the Minister of Energy and Mineral Resources (ESDM) to decide whether to accept or reject it.

Meanwhile, the CSS plan submitted as part of the subsequent field development plan or changes to the approved subsequent field development plan is the authority of SKK Migas or BPMA for approval or rejection.

Scope of CSS Implementation

CSS implementation activities include carbon capture, carbon transport, and carbon injection and storage. 

Carbon capture activities are carried out through carbon separation at oil and gas production facilities, combustion carbon capture, pre-ignition capture, oxyfuel combustion capture, or other methods in accordance with the development of science and technology.

In addition to these methods, carbon capture can also be done by capturing carbon in the form of carbon dioxide from the atmosphere using direct air capture technology.

Once captured, the carbon will be further processed and refined to meet certain specifications so that it can be safely transferred and injected. These specifications must meet national standards and/or international standards recognized by the Ministry of Energy and Mineral Resources.

Carbon Transport

Carbon transport must be carried out under a carbon transport permit in coordination with the Ministry of Environment and Forestry (MoEF). There are several ways to transport carbon, namely using pipes, trucks, ships, or other methods under the development of science and technology.

It is important to note that carbon transport activities must consider technical, safety, security, and environmental aspects. 

Parties carrying out carbon transport can be business entities or holders of operating licenses that have received permission from the Ministry of Transportation.

Carbon Transport

Carbon transport must be carried out under a carbon transport permit in coordination with the Ministry of Environment and Forestry (KLHK). There are several ways to transport carbon, namely using pipes, trucks, ships or other methods according to the development of science and technology.

It is important to note that carbon transport activities must consider technical, safety, security, and environmental aspects. 

Parties carrying out carbon transport can be business entities or holders of operating licenses that have received permission from the Ministry of Transportation.

Carbon Injection and Storage

Furthermore, carbon can be injected and stored in the Zone of Target Injection (ZTI), which is a rock system in geological formations including storage zone layers, buffer zone layers, impermeable zone layers, and geological traps that can accommodate injected carbon, safely and permanently and meet environmental safety standards.

Carbon injection and storage must be conducted according to international or national standards, and good engineering practices. This activity is only carried out by the holder of a storage operation license. (ASP/KEN)