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Freshfields Sustainability

| 5 minutes read

Part 1: Indonesia further paves the way for CCUS

What has happened?

The Indonesian Government has pledged to achieve net-zero by 2060 and, with an estimated 400 to 600 gigatons of carbon dioxide (CO2) storage capacity, has publicly stated its vision of becoming a leading provider of CO2 storage services in the region, which could play an important role in achieving the country’s and the region's decarbonisation goals. Already, there are 16 carbon capture and storage (CCS) / carbon capture, utilisation, and storage (CCUS) projects under development (or being studied for development) in Indonesia including bp’s proposed CCUS project at the Tangguh field in Eastern Indonesia, which began construction in November 2023. Pertamina has also signed memoranda of understanding with ExxonMobil and Chevron to invest in CCS / CCUS initiatives and projects in the country. With clear momentum and growing interest in this sector, the Indonesia Government has moved swiftly to develop a more comprehensive legal framework to support the country’s CCS / CCUS industry, in a largely collaborative manner with key stakeholders.

As a promising first step, the Government issued Minister of Energy and Mineral Resources (MEMR) Regulation No. 2 of 2023 on the implementation of CCS / CCUS (MEMR 2/2023) in March 2023 (which we discussed in an earlier blog post.

Building on MEMR 2/2023, the Government recently issued the highly anticipated Presidential Regulation No. 14/2024 on Carbon Capture and Storage Activities (PR 14/2024) on 30 January 2024. The new regulation addresses a number of areas that were not addressed in MEMR 2/2023 and, importantly, provides a framework to support the country’s vision of being a leading CCS / CCUS hub by facilitating the import of CO2 into Indonesia from other countries. 

Key coverage 

PR 14/2024 sets out a general regime for undertaking CCS and CCUS activities in Indonesia, including the following: 

  • Expansion from activities in an upstream oil & gas context: while MEMR 2/2023 focused on CCS / CCUS activities within the upstream context only, PR 14/2024 provides a clear basis for the undertaking of carbon storage activities (subject to the obtaining of the requisite permits) outside of the existing oil and gas cooperation contract framework.  The new permits for the exploration of sites suitable for CCS / CCUS activities, and the subsequent injection and storage of CO2, will be in respect of specific permit areas. Such areas will be expressly set out in subsequent ministerial regulations and the issuance of the relevant permits is currently contemplated to be subject to tender or limited selection processes.
  • Express consideration of the CCS value chain: consistent with its remit to set out the overall framework for the CCS / CCUS industry in Indonesia, PR 14/2024 establishes a broad regime for different aspects of the CO2 value chain. In particular:
    • It contemplates that CO2 that may be transported, injected and stored in Indonesia would have to satisfy certain standards and specifications, detailed in further ministerial regulations. This will have an impact on the carbon capture processes utilised by operators, and may require further processing of captured CO2 (including captured offshore CO2) prior to transportation, injection or storage in Indonesia.
    • There is now further (but perhaps still insufficient) clarity on the regime for the transport and importation of CO2. In particular, the transporting operator can be a different entity from the storage operator, and there is a built-in exception from the general requirement to obtain transport permits for the transport of CO2 within PSC contract areas, or from one PSC contract area to another.
  • CCS value chain economics: while PR 14/2024 does not expressly set out clear economic incentives for the building out of the CCS value chain, it does contemplate that operators may charge storage service fees (which would be subject to government royalties), and that further specific tax exemptions or incentives may also be offered to investors. The level of such incentives may be critical to the commercial viability of future CCS / CCUS projects in Indonesia.
  • Import of CO2: a key concern for the industry has been whether and how CO2 could be imported into Indonesia for storage, potentially creating a cross-border CO2 value chain (which we commented on in our previous blog post. While PR 14/2024 does contemplate and permit the importation of CO2, the following are clear:
    • For now, storage is to be prioritised for domestic carbon producers and domestic industry more generally. Specifically, the regulations provide that 70% of storage capacity will need to be reserved for domestic carbon storage. The remaining 30% of capacity can be taken up by imported CO2, provided that the producers of such CO2 have to have invested in Indonesia or are affiliated with investments in Indonesia. This domestic prioritisation is understandable given Indonesia’s own net-zero goals, but (and together with available subsidies and incentives as well as a potential tariff structure) will need to be carefully modelled at the feasibility study stage by any potential developers of cross-border CCS hubs.  
    • The execution of a bilateral cooperation agreement between Indonesia and the government of the country of origin of the CO2 is required before imports are allowed. We would expect that such agreements would cover broad international carbon accounting issues, amongst other cross border issues including allocation of liability for any leakage. As what appears to be a first practical example, a letter of intent to collaborate on CCS / CCUS has recently been executed between Indonesia and Singapore, with a view to entering into a legally binding bilateral agreement that will enable cross-border transport and storage of CO2 between Indonesia and Singapore.  
  • Trailing liability: as with the position set out in MEMR 2/2023, PR 14/2024 obliges CCS / CCUS operators to reserve funds to cover the costs of monitoring, reporting and verification activities. Such obligations will continue for a period of 10 years following the expiry of the carbon storage permit (the MRV Period). PR 14/2014 also regulates the carrying out of such activities, and the termination of the rights, obligations and responsibilities of a CCS / CCUS operator upon expiry of the MRV Period, which remain subject to confirmation that the monitoring results indicate that there is no detectable CO2 leak. Following such termination, the regulations provide that MEMR will supervise the storage areas where the relevant CCS / CCUS activities have been carried out. However, as was the case with MEMR 2/2023, PR 14/2024 stops short of stating expressly that following the expiry of the CCS / CCUS operator’s obligations, any subsequent liability for CO2 leakage will be the legal responsibility of MEMR, and further clarity on this position would be very helpful for project developers. 

PR 14/2024 also expressly provides that further ministerial regulations will be issued by the MEMR to provide details on the carbon capture and storage permitting process, the certification process, and the calculation of carbon storage services fees and royalties payable to the Government from such fees.


Following the issuance of MEMR 2/2023, PR 14/2024 marks a clear step in the right direction in the development of a carbon value chain in Indonesia. It is also apparent that the Indonesian Government has sought to balance the need for legal clarity and development of a full carbon value chain, against other national considerations.

However, there remain several key areas and issues which we hope will be clarified in subsequent regulations (which will need to be promulgated by the relevant Indonesian ministries and authorities), to firmly establish the basis for a commercially viable carbon value chain in Indonesia. We will explore these in the next part of this blog series.

If you would like to discuss any of the topics in this series further, please do not hesitate to contact us.


asia-pacific, climate change, energy transition, low-carbon