Repsol project adds to Indonesia’s carbon capture ambitions

Indonesia's ambitions for cutting its GHG emissions with carbon capture and storage (CCS) moved one step closer to realization after Repsol advanced a project in Sakakemang in South Sumatra.

The country, one of the world's top 10 GHG emitters, said in its latest Nationally Determined Contribution that CCS projects could help it achieve net-zero emissions by 2060.

While the Indonesian government has yet to develop a regulatory framework for carbon extraction, Repsol earlier this month announced plans to commission a geological CCS plant with a storage capacity of 2 million metric tons (mt) per year in 2027.

In an email to Net-Zero Business Daily, the Spanish energy major confirmed the facility would capture CO2 from the Sakakemang natural gas field and store it in nearby depleted gas fields.

In 2019, Repsol, Petronas, and MOECO discovered at least 2 trillion cubic feet of recoverable resources in the field's KBD-2X well, the largest gas discovery in Indonesia for nearly two decades.

As the project's gas has a high CO2 content of 26%, Repsol said it is developing the CCS project simultaneously to meet the company's target of achieving carbon neutrality by 2050.

"We have made the commitment that all new greenfield projects should have net-zero emissions," the company said. "CCS will be an important instrument for us to reach that goal."

In the absence of a global emissions market, Repsol said it has established an internal carbon price for all potential new investments—a methodology that helps it select projects with a lower carbon footprint.

The CCS plant's future is dependent on the final investment decision for the Sakakemang gas project, which is due in 2022. According to Repsol, the project could begin producing gas as early as 2025, and full output would be reached in 2027 when the CCS facility comes onstream.

The company said the cost for CCS would be shared with Petronas and MOECO and that the stored carbon could be for further trading, but refrained from disclosing financing details.

The facility, if it is built, will be among Asia's largest CCS projects. It will be Repsol's first carbon extraction plant and one of Indonesia's first.

Think tank Global CCS Institute (GCI) said in an annual status report that the plant "is well positioned to be an anchor for a South Sumatran CCS hub, reducing emissions from gas processing, power stations, and other emitting sectors."

"The Repsol project demonstrates the trend for large corporations, headquartered in developed countries with net-zero commitments, to develop emissions-reducing CCS projects even in the absence of policy support," GCI added.

Laying the groundwork

In 2017, Indonesia's Ministry of Energy and Nature Resources established the National Center of Excellence for CCS and CCUS (referring to carbon capture, usage, and storage) to coordinate research and development efforts on CO2 extraction in the country.

Rich in natural resources, Indonesia is seeking to continue producing fossil fuels and reduce its net emissions via the technology for the long run.

"We are looking for a balance between increasing oil and gas production and reducing carbon emissions," Tutuka Ariadji, director general of oil and gas at the ministry, said during a recent webinar.

The country wants to hike its oil production by 1 million b/d and gas output by 12 billion cubic feet per day by 2030, said Ariadji, without specifying exact target volumes. Figures from the US Energy Information Administration showed Indonesia produced 667,000 b/d of oil in January-May 2021 and 2.2 trillion cubic feet of dry gas in 2020.

"In order to take into account climate change through carbon emissions, we will carry out CCUS in the [oil and gas] fields which have a high CO2 content," he added.

According to the government, Indonesia has a total CO2 storage capacity of 1.5 billion mt in depleted oil and gas fields, and several CCS projects are currently being studied.

National oil company Pertamina, Japan International Cooperation Agency, Japan Science and Technology Agency, and a number of research institutions were engaged in developing a pilot project in Gundih, Central Java with a storage capacity of 11,000 mt/year in the last decade, with financial support from the Asian Development Bank.

While the plan did not come to fruition, the company in June joined heads with JANUS, JGC, Electric Power Development, and the Bandung Institute of Technology to study a 30,000-mt/year project at the same location.

Separately, Pertermina agreed to conduct a feasibility study of a CCUS project in Sukowati, East Java with LEMIGAS and Japan Petroleum Exploration (JAPEX), but further details about the plant are unclear.

Other proposals under consideration include a JAPEX-LEMIGAS CCUS project in Limau Biru and the Sink Match project by ITB and JANUS.

UK-based energy major BP, which has a goal of achieving net-zero GHG emissions by 2050, recently received regulatory approval to develop a CCUS project at the Tangguh LNG facility in West Papua. With a potential start date of 2026, the facility aims to inject 25 million mt of CO2 into the Vorwata reservoir overall.

Paola Perez Pena, principal research analyst for clean technology at IHS Markit, said energy firms with robust emission targets are increasingly opting for carbon extraction as an abatement measure for mega upstream projects.

"This is a trend that is slowly going to become more common, but mainly for very large projects, where large volumes of CO2 could make the economics of installing a CCS plant more attractive," Perez Pena said.

"For small projects, I don't see this happening any time soon due to the high cost associated to CCS plants," she added.

More efforts needed

In July, the government said Indonesia will maintain its target of cutting GHG emissions by 29% below a business-as-usual scenario unconditionally, or 41% with international financial support.

But coal accounts for more than half of Indonesia's electricity mix. According to Global Energy Monitor, 36.7 GW of coal-fired plants are in operation and 18.4 GW under construction as of July.

Jakarta is only willing to phase out power plants running on the fossil fuel by 2055. Indonesia is also the world's largest exporter of steam coal.

Filda Yusgiantoro and Haryanto, researchers at the Purnomo Yusgiantoro Center (PYC), an Indonesia-based think tank, said carbon extraction will play a key role in Indonesia's plan to reduce emissions given the country's dependence on coal.

"The adoption of CCS would depend on the economic feasibility, or unless there is incentive/subsidy given by the government," they told Net-Zero Business Daily in an email.

The government is aiming to introduce regulations for carbon extraction by the end of this year, having unveiled draft rules in 2019.

But some observers said Jakarta tends to be slow in formulating and implementing energy regulations.

"The government needs to provide more incentives, not only for foreign energy companies but also for local companies," said the PYC researchers, adding that international CCS and CCUS standards should be introduced to the proposed regulations.

Also, Indonesia will impose a carbon tax of Rp 30 ($0.40) per kilogram of CO2-equivalent on coal-fired power plants from next year, which would pave the way for a carbon trading market later this decade.

"This also could incentivize firms, especially the carbon-intensive ones, to implement CCUS to reduce the amount of carbon tax they need to pay in the future," the researchers said.

Challenges remain

Many energy analysts expect carbon extraction to play an important role in the world's transition to a low-carbon economy in most scenarios.

In its Net-Zero by 2050 report, the International Energy Agency said the amount of CO2 captured will need to rise from 40 million mt in 2020 to 7.6 billion mt in 2050 to help achieve climate neutrality globally.

The GCI said the number of CCS projects globally reached 135 in 2021, including 27 in operation. With many countries and companies pledging to achieve net-zero emissions, the CO2 capacity of all the facilities under development has risen to 111 million mt/year, up 48% from the year-ago level.

Some believe that Southeast Asia, where many energy-intensive industries and depleted oil and gas fields are located, is well positioned to become a major carbon extraction and storage hub. ExxonMobil estimates the region can store 300 million mt of captured carbon.

But the sector's development in the region has been hampered by the lack of CCS-specific regulations and government initiatives, according to industry observers. Just three Southeast Asian projects are listed in GCI's database, compared with 78 in North America and 38 in Europe.

"Most of the current operating projects have benefited from policy support and it's the same case for large-scale projects in the pipeline," Perez Pena said.

"Asia is lagging behind in terms of policy support for the CCS industry, so companies developing CCS projects would prefer other regions with better incentives, which means better project economics," she added.

Posted 19 October 2021 by Max Tingyao Lin, Principal Journalist, Climate and Sustainability