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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