Key highlights of Indonesia’s latest carbon storage regulation

12 March 2025

On 20 December 2024, the Minister of Energy and Mineral Resources (“MEMR”) issued Regulation No. 16 of 2024 on Carbon Storage Activities in Carbon Storage Permit Areas within the Framework of Carbon Capture and Storage (“CCS”) (“Regulation No. 16”), following the issuance of Presidential Regulation No. 14 of 2024 on the Implementation of CCS Activities on 30 January 2024 (“Presidential Regulation No. 14”). Effective from 24 December 2024, Regulation No. 16 details the key principles set out in Presidential Regulation No. 14 and establishes the legal basis for one of the two schemes possible under this regulation, with the other scheme being CCS within the Framework of an Oil and Gas Production Sharing Contract (“PSC”). Regulation No. 16 provides the specific requirements for non-PSC business entities to engage in CCS activities in MEMR-designated areas.

This article provides an overview of the regulatory framework provided by Regulation No. 16.

Establishment of carbon storage permit areas

MEMR will establish carbon storage permit areas (“CSP Area”) and offer them to entities established under Indonesian law or with the status of permanent establishments in Indonesia (collectively, “Entities”). The term “permanent establishment” refers to a foreign entity established outside Indonesia that conducts business in Indonesia. Entities may also propose CSP Areas to MEMR for establishment.

A CSP Area will be established for the exploration of the injection target zone (“Target Zone”) - that is, a geologically appropriate location for storing injected carbon - and the operation of carbon storage activities under a business licensing scheme.

Obtaining rights over CSP Areas

A CSP Area is offered through either a bid or a limited tender process. A bid is a bidding mechanism used for the offering of a CSP Area determined by MEMR. A limited tender, on the other hand, is a bidding mechanism used for the offering of a CSP Area proposed by an Entity. MEMR will compile a shortlist of Entities that meet the qualifications for the limited tender process and are therefore able to bid for a CSP Area.
In a limited tender, only bidders that have proposed a CSP Area, where the CSP Area has been established by MEMR, or shortlisted Entities may submit a bid. Both types of bids must be submitted electronically.

Issuance of exploration permits

The Entity that is the winning bidder or awarded a limited tender must provide a Business Identification Number before applying for an exploration permit through the Online Single Submission (“OSS”) system. The application must be submitted to MEMR within 12 months of the Entity being designated as the winning bidder or being awarded the limited tender.

An exploration permit is limited to exploration activities in the Target Zone and will be issued after the Entity fulfils administrative, technical, environmental, and financial requirements, including the preparation of constitutional documents, technical reports and montage illustrating visual representations or compilations, environmental approval as required by Indonesian environmental standards and regulations, and a guarantee of firm commitment to explore the Target Zone.

Entities may hold exploration and/or storage operation permits for more than one CSP Area. An exploration permit is valid for six years, can be renewed once for up to four years, and is non-transferable.

Issuance of storage operation permits

MEMR will issue a storage operation permit to an exploration permit holder and an Entity or consortium of Entities. To obtain a storage operation permit, an exploration permit holder must submit an application to MEMR through the OSS system. A storage operation permit is granted for 30 years, may be renewed for a maximum of 20 years at each renewal, and is non-transferable.

Submission of carbon storage operation plans

Storage operation permit holders must prepare and submit carbon storage operation plans to MEMR for approval. These plans include, among other things, business plans, cost budget plans, and carbon storage operation closure plans. They must be submitted annually in electronic form and/or through an information system specified by MEMR. MEMR will approve or reject the application within 20 working days after receiving a complete and correct submission.

Carbon storage operation guarantees

Storage operation permit holders must prepare and submit a carbon storage operation guarantee amounting to either 10% of the carbon injection well budget or a minimum of US$1,500,000, whichever is greater. They must also submit a statement committing to cover the budgeted costs of any planned carbon injection wells that are not drilled. The guarantee remains valid for five years from the issuance of the storage operation permit and must be issued by a commercial bank. It must be secured before applying for a storage operation permit through the OSS system. Once the permit holder has completed all carbon injection well drilling, the guarantee may be returned.

Carbon storage services

A storage operation permit holder negotiates a carbon storage services agreement with a carbon emitter or another party supplying carbon for injection. Once an agreement is reached, the permit holder must apply to MEMR for approval of the carbon storage services agreement. The approved carbon storage services must be formalised in an agreement signed by the permit holder and the carbon emitter or carbon supplier.

Carbon storage operation closures

Carbon storage operations must be closed when, among other things, the carbon storage capacity in the Target Zone is full, carbon is not being injected, the storage operation permit expires and is not renewed, or a force majeure event occurs, making the cessation of carbon storage operations the most appropriate option. Carbon storage operations must be closed prior to or upon the expiration of the storage operation permit. The storage operation permit holder must submit a closure plan and report to MEMR no later than 30 calendar days after completing the closure.

Post-operation funds

Storage operation permit holders must reserve post-operation funds in a joint account held jointly with the Directorate General of Oil and Gas. These funds must be allocated annually through the submission of a business and budget plan for carbon storage operations. The post-operation funds will be used for the closure of carbon storage operations and for MEMR monitoring activities for 10 years after the closure is deemed complete. Monitoring refers to the continuous or periodic process of checking, supervising, observing, measuring, or assessing a system to detect changes from the baseline or deviations from expected performance.