Unlocking Indonesia’s CCS Potential: A Legal Guide to MEMR Reg 16/2024

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Authors

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Following the enactment of Presidential Regulation No. 14 of 2024 (“PR 14/2024”) that establishes the framework for the implementation of carbon capture and storage (“CCS”) operations within Indonesia, the Indonesian Ministry of Energy and Mineral Resources (“MEMR”) has introduced the MEMR Regulation No. 16 of 2024 regarding The Implementation of Carbon Storage Activities in Carbon Storage Permit Areas for the Purpose of Carbon Capture and Storage Activities (“MEMR Reg 16/2024”). This regulation provides a more detailed legal framework for CCS activities, particularly within Carbon Storage Permit Areas (Wilayah Izin Penyimpanan Karbon – “WIPK”).

MEMR Reg 16/2024 defines the procedures and requirements for business entities engaging in CCS activities while reinforcing the government’s commitment to expanding CCS initiatives as part of Indonesia’s global emission reduction strategy.

We highlighted several provisions introduced in the regulation as follows:

Identification and Designation of WIPK

MEMR is responsible for preparing WIPK to be offered to Indonesian business entities and foreign entities with a permanent establishment presence in Indonesia (hereinafter collectively referred to as “Business Entities”). Although it is within MEMR’s responsibility to prepare a WIPK, Business Entities may also take initiative and propose a WIPK to the MEMR.

Designated WIPK are allocated for Injection Target Zone (Zona Target Injeksi – “ZTI”) exploration activities and carbon storage operations under a business licensing scheme. These areas may be located within: (i) open areas; (ii) mining business permit areas; or (iii) work areas where oil and natural gas exploration and exploitation activities are conducted (Production Sharing Contract Areas).

The WIPK offering mechanism varies based on the entity proposing the area. The WIPK prepared by MEMR are made available to Business Entities through an Auction process. Meanwhile, WIPK proposed by Business Entities are offered through a Limited Selection process.

Aspects	Auction Process	Limited Selection Process
Preparation Stages	The preparation is based on: a. an initial risk assessment; and b. a technical evaluation of data processing results, including oil and gas exploration and exploitation activities or general surveys. Based on the results of the risk assessment and technical evaluation, a proposal is developed and submitted to MEMR for approval, ensuring that the designated WIPK aligns with regulatory and technical requirements.	To propose a WIPK to the MEMR, Business entities must prepare a proposal that at least include: a. proposed area coordinate boundaries; b. an initial risk assessment; c. study of the impact of carbon storage operations; d. technical evaluation of the results of a comprehensive study; e. work plan and budget; f.  administrative documents; and g. experience and investment value related to business in oil, mining, geothermal, and/or CCS project. Upon submission, the preparation shall be conducted by  MEMR based on the proposals. These proposals must be for WIPK not designated for auction.
Participants	a. Business Entities; and b. Business Entities in the MEMR’s Short List	a. Proposer of the Limited Selection; and b. Business Entities in the MEMR’s Short List.
Method	Conducted electronically.
Process	1.  MEMR prepares and issues the bid documents for each WIPK to be offered.
	2.  Participants must purchase the relevant bid documents. If the participants form a consortium, each consortium member is required to purchase the bid documents individually.
	3.  Participants are recorded and reported to the MEMR.
	4.  Participants must submit their participation documents in digital format by uploading them to the MEMR’s website no later than 60 calendar days from the date of access to the bid documents.	4.  Participants must submit their participation documents in digital format by uploading them to the MEMR’s website no later than 30 calendar days from the date of access to the bid documents.
	5.  The participation documents are then opened and examined by the team formed by the MEMR (“WIPK Offering Team”).
	6.  No later than 30 (thirty) business days after the opening and examination, a final assessment of participation documents must be conducted by WIPK Offering Team.
	7.  The WIPK Offering Team will submit a ranking of the prospective Auction winners to  MEMR.	7.  The WIPK Offering Team will submit a ranking of the prospective Limited Selection winners to MEMR. If the proposer is not ranked first in the Limited Selection, they are granted the right to match the highest offer from the top-ranked participant. If the proposer agrees to match, they may be awarded the first rank. The WIPK Offering Team then prepares a report on the implementation of the right to match and submits the final ranking to  MEMR.
	8.   MEMR determine, announce, and send a notification letter to the winner.

Project Selection Procedures

As mentioned briefly on the Auction and Limited Selection Process of acquiring a WIPK, the WIPK Offering Team shall be in charge of conducting the selection process through a 2-steps selection.

1. Opening and Examination of Participation Documents

Results of the opening and examination of participation documents shall be stated in the minutes and signed by the members of the WIPK Offering Team who are present at the opening and examination. If the submitted participation documents are found to be incomplete, the participant will be disqualified, and no further assessment will be undertaken.

2. Final Assessment
1. For an Auction Process, the final assessment includes a technical evaluation of the definite commitment to ZTI Exploration, a financial assessment, and a performance review of Business Entities. The financial assessment examines the entity’s capacity to conduct ZTI Exploration and Carbon Storage operations, while the performance review considers experience in relevant industries, technical capabilities in hazardous material management, and regulatory compliance for entities previously operating in Indonesia.
2. In contrast, the final assessment for Limited Selection focuses solely on the technical evaluation of the definite commitment to ZTI Exploration which considers (i) commitment to geological, geophysical, reservoir and engineering activities; (ii) seismic survey commitment, including type (2D or 3D), survey design and quantity; and/or (iii) commitment to the number of wells drilled and their planned locations.
3. Final Assessment for participants from the MEMR’s Short List is focused on a technical assessment.

MEMR’s Short List

MEMR’s Short List consists of Business Entities approved by MEMR to have met the qualifications to be able to participate in the WIPK offering through a Limited Selection. The registration process for MEMR’s Short List is conducted up to once per year through the MEMR’s official website, where the schedule, selection process, and specific requirements are announced.

To qualify for registration, Business Entities must submit a comprehensive set of documents which includes administrative records, evidence of company experience and investment value in sectors such as oil, mining, geothermal, and CCS, along with other required documents stated in the MEMR’s Short List registration.

Through a similar process as the Project Selection Procedures, WIPK Offering Team shall conduct an opening and examination of participation documents, and a final assessment based on the registration documents. The assessment criteria to decide on the MEMR’s Short List are carried out based on:

1. Technical capabilities related to upstream oil, mining, geothermal, and/or CCS project business activities;
2. Technical capabilities related to the management of hazardous and toxic materials;
3. Financial capability to carry out ZTI Exploration and Carbon Storage operations; and
4. Compliance with the laws and regulations in Indonesia.

Following the assessment, the WIPK Offering Team shall submit a proposed list of qualified Business Entities to MEMR for approval. Upon approval, the MEMR’s Short List is officially established.

Exploration, Storage operation, and Carbon Transportation Permits

For Business Entities selected as winner by the MEMR through an Auction or Limited Selection Process, MEMR Reg 16/2024 introduces the following permits for CCS activities:

1. Exploration Permit
Business Entities that won the Auction or Limited Selection process must apply the Exploration Permit within 12 months of being announced as the winner. ThisPermit shall grant the right to conduct ZTI Exploration activities within WIPK areas through data acquisition, drilling, subsurface studies, and ZTI leakage risk mitigation activities.

The Exploration Permit is issued for a period of 6 years and may be extended once for a maximum of 4 years. However, the permit is strictly non-transferable.

2. Storage Operations Permit

The Storage Operations Permit is only available to Business Entities who already hold an Exploration Permit. However, if an Exploration Permit holder is a permanent establishment, they must establish an Indonesian legal entity to qualify for the Storage Operations Permit and report the establishment to MEMR.

This permit shall grant Business Entities the rights to carry out carbon injection and storage activities within the WIPK.

The Storage Operations Permit is granted for a period of 30 years and can be extended a maximum of 20 years for each extension. However, the Storage Operations Permit is also strictly non-transferable.

3. Transportation Permit

The Transportation Permit shall be granted to Business Entities or holder of a Storage Operations Permit that carries out carbon transportation business activities after obtaining environmental approval and recommendations from the Ministry of Environment after thorough coordination with the Ministry of Marine Affairs and Fisheries and/or the Ministry of Transportation in accordance with their authority.

This permit authorizes Business Entities to conduct carbon transportation via pipeline in which the carbon shall be transported from capture and/or processing facilities using the pipeline transportation mode to the carbon injection delivery point.

The Transportation Permit is granted for a period of 20 years and may be extended a maximum of 10 years for each extension. However, it is strictly non-transferable.

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Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.

Go to

1. Identification and Designation of WIPK
2. Project Selection Procedures
3. MEMR’s Short List
4. Exploration, Storage operation, and Carbon Transportation Permits

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