Understanding carbon capture and storage in Indonesia

Market overview

Indonesia has committed to achieving Net Zero Emissions by 2060, consistent with its obligations under the Paris Agreement. Carbon capture and storage (CCS) and carbon capture, utilisation and storage (CCUS) are central to this strategy, particularly in the upstream oil and gas sector. Leveraging an estimated 400 gigatons of geological storage capacity, Indonesia is positioning itself as a regional CCS hub in the Asia-Pacific.

To support these ambitions, the government has introduced a series of key regulations:

• Ministry of Energy and Mineral Resources (MEMR) Regulation No. 2/2023: governing the implementation of CCS and CCUS in upstream oil and gas operations.
• Presidential Regulation No. 14/2024: establishing a comprehensive legal framework for CCS activities not only in the upstream oil and gas working areas but also in the designated carbon storage licence areas.
• MEMR Regulation No. 16/2024: regulating the CCS activities in designated carbon storage licence areas and the licensing regime.

Additionally, the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) has also issued PTK-070/2024 as an implementing guideline for the CCS and CCUS in upstream oil and gas operations.

The following sections provide an overview of Indonesia’s CCS/CCUS landscape, including ongoing projects, regulatory incentives, strategic opportunities and challenges shaping the sector’s trajectory.

Projects

By July 2024, the MEMR had identified 15 potential CCS/CCUS projects scheduled to commence operations between 2026 and 2030¹. Among the most advanced initiatives are:

• Tangguh EGR/CCUS Project: Located in West Papua and operated by bp Berau Ltd (bp), this project integrates enhanced gas recovery with carbon dioxide (CO₂) reinjection into the Vorwata field². It has a projected CO₂ storage capacity of 25–30 million tons over 10–15 years, with expected onstream by 2028.³ bp has also signed a Memorandum of Understanding with Chubu Electric Power Co., Inc. to explore a CCS value chain between Japan and Indonesia, positioning Tangguh as a potential international hub.⁴
• Gundih CCUS/CO₂-EGR Project: Situated in East Java, this project is led by PT Pertamina (Persero) in collaboration with the Bandung Institute of Technology, JGC, J-Power and JANUS, and is supported by METI Japan. It targets a CO₂ storage capacity of 3 million tons over 10 years, with operations expected to commence before 2030.⁵
• CCS Sakakemang Project: Located in South Sumatra and operated by Repsol Sakakemang B.V., this project is expected to be onstream by 2027, with a projected CO₂ storage capacity of 30 million tons over 15 years.^6,7,8

In addition, Pertamina EP has trialled CO₂ utilisation for enhanced oil recovery (‘huff and puff’) in the Jatibarang (October 2022)⁹ and Sukowati (February 2024) fields in West Java. These trials, conducted jointly with Japan Oil, Gas and Metals National Corporation (JOGMEC), demonstrated potential production increases of 30–40 percent, highlighting the commercial viability of CCUS in mature fields.¹⁰

Development and support regime

While large-scale commercialisation is still developing, Indonesia has demonstrated strong regulatory foundations and is sending a clear signal of growing investor confidence. The government has implemented an ambitious regulatory approach to accelerate CCS/CCUS deployment, offering legal certainty, operational guidance, and fiscal incentives:

• MEMR Regulation No. 2/2023: This regulation marks the first legal framework governing CCS and CCUS activities in Indonesia. It enables oil & gas production sharing contract (PSC) contractors to inject and store carbon not only within their own contract areas but also across other contractors’ areas and also permits the storage of carbon from third-party sources; thereby paving the way for the development of multi-user CCS hubs. Importantly, it recognises CCS costs as cost-recoverable under PSC schemes. Contractors may integrate CCS into petroleum operations, and revenues can offset operating costs. The regulation also enables monetisation through Carbon trading (cap-and-trade) via the generation of tradable credits.
• Presidential Regulation No. 14/2024: This regulation serves as the umbrella regulation for CCS in Indonesia, significantly broadening the scope of permitted activities beyond the existing PSC blocks to include the designated carbon storage licence areas. It allows CCS operators to charge service fees for carbon storage, establishing a viable commercial model for carbon storage services. Importantly, this regulation introduces fiscal incentives, such as tax allowances and exemptions, to enhance project economics. It also permits the use of up to 30% of a storage site's capacity for imported CO₂, thereby enabling cross-border CCS operations.
• MEMR Regulation No. 16/2024: This regulation provides a more detailed legal framework for CCS activities, particularly within the designated carbon storage licence areas. This regulation provides business actors with clear guidelines concerning various aspects of their operations, specifically covering exploration, storage operations, and transportation activities.

Opportunities and challenges

Indonesia’s geology provides significant long-term CCS/CCUS potential, with MEMR estimating 573 gigatons of storage in saline aquifers and 4.8 gigatons in depleted oil and gas reservoirs across Sumatra, Java, Kalimantan, Sulawesi, and Papua.¹¹

The government aims to leverage this endowment to become a regional CCS hub, serving domestic and international emitters, particularly countries with limited storage capacity such as Singapore and Japan. By enabling cross-border CO₂ transportation and integrating CCS into upstream operations, Indonesia seeks to attract foreign investment and strengthen its role in the global carbon management ecosystem.

However, several challenges remain:

• High implementation costs: The primary challenge facing the CCS industry in Indonesia is its high cost¹², estimated at US$ 35-60 per ton of CO₂.¹³ Due to these significant expenses, investors are heavily reliant on government support, such as tax incentives, subsidies or regulatory frameworks, to make projects financially viable. However, they also anticipate that technological advancements and economies of scale will drive down costs over time. In addition, currency volatility and elevated financing costs in Indonesia further undermine the economic feasibility of these capital-intensive CCS initiatives.
• Limited technical capacity: Although CCS technologies are well-established globally, they remain relatively new to Indonesia. This creates a potential skills gap in engineering, operation, and managing these projects which requires highly skilled personnel and advanced monitoring technology.¹⁴
• Regulatory gaps: Despite the regulations issued, certain critical issues such as carbon quality specifications, leakage risks and commingled carbon streams are not yet addressed in detail. Existing regulations primarily target the oil and gas sector, leaving significant regulatory gaps in other high-emission industries such as cement, steel and petrochemicals. Additionally, as with other projects in Indonesia, execution risks must be carefully considered, particularly permit delays and other risks influenced by shifting political trends. Addressing these challenges will require coordinated efforts across government, industry, and academia, supported by international partnerships and access to climate finance mechanisms.¹⁵

Hot topics / Areas of focus

Several issues are currently shaping Indonesia’s CCS/CCUS landscape:

• Cross-border CO₂ transport: As regulated under Presidential Regulation No. 14/2024, importing of CO₂ is permitted up to 30 percent of storage capacity. In 2024-2025, Indonesia proactively engaged neighbouring countries to foster collaboration on CCS. A prominent development is the Indonesia-Singapore CCS partnership; following the signing of a Letter of Intent, both governments are currently negotiating a binding agreement to facilitate the export of CO₂ from Singapore to Indonesia.^16,17 

• CCS hub development: The government is prioritising the Sunda Asri Basin and Bintuni Basin as strategic hub locations due to favourable geology and their potential to serve both domestic and international emitters, notably Singapore, Japan, and South Korea which are currently engaged in various joint studies. These developments sparked discussions about Indonesia becoming the “CCS hub of Asia-Pacific”.¹⁸ 

• Sectoral focus: The current regulatory framework (MEMR Regs. 2/2023 and 16/2024) applies exclusively to oil and gas. It is expected that CCS and CCUS regulatory framework will expand to other industries that collectively represent a significant share of national emissions. However, there is no clear timeline for extending coverage to non-oil and gas industries.