Indonesia bets on carbon capture to balance oil, gas production, emissions cuts

Indonesia is planning to expand domestic oil and gas output to fuel its fast-growing economy while simultaneously trying to meet emissions reduction targets by betting on technologies like carbon capture and storage, government officials and energy company executives said at an Indonesia Petroleum Association virtual event.

The plan puts Indonesia, one of Asia's few oil and gas exporters, in the camp of several international oil companies and hydrocarbon-exporting countries betting on CCS to offset their CO2 footprint.

The list includes Qatar and Australia, the world's two largest LNG exporters, where companies have poured billions of dollars into carbon capture projects, and Permian Basin producer Occidental Petroleum, which is trying to commercialize CCS technology.

The experts from Indonesia's upstream oil and gas industry at the July 28 event called on the government to draft clear policies on carbon pricing and CCS that are necessary to avert delays on key projects needed to meet long-term production targets.

The resource-rich Southeast Asian nation aims to grow its oil production from around 700,000 b/d in 2020 to 1 million b/d by 2030, and more than double its gas output to 12 billion standard cubic feet of gas per day in the same period.

Indonesia's gas production in 2020 was 57.9 Bcm, or roughly 5.6 Bcf/d, so the country would need to more than double its current output in order to hit its target, said Jeff Moore, manager of Asian LNG analytics at S&P Global Platts.

Indonesia, which has the world's fourth-largest population, has been struggling with declining oil and gas production as old fields deplete, and resource nationalization policies have forced international oil companies to exit and put flagship E&P projects on hold.

The country pledged a net-zero emissions target by 2060 or sooner in this month's update to its nationally determined climate goals to the United Nations ahead of COP26.

A call for greener policies

Fatar Yani Abdurrahman, vice chairman of upstream regulator SKKMigas, said the upstream sector will have to turn to carbon capture or storage to meet emission targets while ramping up output.

Abdurrahman said CCS was not a requirement for upstream projects as recently as 2019, but the technology now needs to be incorporated for projects to be competitive and secure funding amid intensifying scrutiny on emission profiles in the financial sector.

Saleh Abdurrahman, a senior advisor to the energy and mineral resources ministry, said the proposed carbon capture and enhanced gas recovery for BP's Tangguh liquefied natural gas complex may gain economic viability if Indonesia starts imposing carbon prices.

BP plans to invest $4 billion in Indonesia's Tangguh LNG development to increase its gas reserves and add a carbon capture, utilization and storage, or CCUS, plant to the facility, which was part of the second plan of development, or POD II document, that was submitted to the Indonesian government this year.

Greg Holman, Repsol Indonesia's director, said at the event production sharing contracts should allow for recovering additional costs incurred by oil companies for carbon capture projects in new and existing oil and gas fields.