Implementation of CCS is Crucial for Realizing Carbon Business in the Upstream Oil and Gas Industry.
TANGERANG – The upstream oil and gas industry is one of the most promising sectors for implementing carbon trading. Its success depends on the industry's ability to implement Carbon Capture Storage (CCS) technology. With the financial and technological capabilities of the upstream oil and gas industry, the realization of carbon trading is believed to be achievable.
Hadi Setiawan, a policy analyst at the Ministry of Finance, revealed that the government is continuously working to improve regulations. Currently, proposed regulatory improvements and the addition of implementing rules are under government discussion. These regulations stem from Presidential Regulation No. 14/2024 concerning the implementation of carbon capture and storage activities.
According to Hadi, carbon pricing in the upstream oil and gas industry can only be implemented when CCS technology is operational.
Hadi explained that carbon trading in the upstream oil and gas industry is not yet optimal and needs to be stimulated with attractive regulatory support, which the government recognizes.
"They (the upstream oil and gas industry) emit significant emissions, and the way to reduce them is through CCS technology. The government has already made the regulations, and the implementing rules are still in process. Hopefully, they will be released soon," Hadi explained.
Businesses could potentially gain more benefits by implementing CCS. The advantages of CCS can be used as a new source of revenue for companies.
The Indonesian government has established Presidential Regulation No. 98 of 2021 on the Implementation of Carbon Economic Value for Achieving NDC Targets and Controlling GHG Emissions in National Development and the Ministry of Environment and Forestry Regulation No. 21 of 2022 on Procedures for Implementing Carbon Economic Value. In September last year, the Indonesia Stock Exchange established a Carbon Exchange to support carbon trading. However, no oil and gas companies have directly participated in carbon trading so far.
Edwin Hartanto, Head of Carbon Trading Development Unit at IDX Carbon, explained that the ecosystem for carbon trading needs to be better prepared, with implementing regulations being key.
According to Edwin, the upstream oil and gas sector has excellent opportunities to be involved in carbon trading, especially if CCS is implemented. In practice, if an oil and gas company has CCS technology with a capacity greater than the emissions produced, the excess capacity can be offered to other parties.
"Oil and gas companies have more advanced expertise in CCS technology, although it is still relatively expensive. We want this to be pushed further so that the cost of this technology decreases, allowing the price of carbon credits to rise. The focus should be on companies with high emissions first. If they have more carbon capture capacity, the excess can be sold, presenting a significant opportunity," Edwin explained.
Riza Suarga, Chairman of the Indonesia Carbon Trade Associations, believes that the carbon market in Indonesia is still unfamiliar with carbon trading activities, especially in the upstream oil and gas sector. Therefore, greater government involvement is needed to create a more business-friendly carbon trading climate. "Currently, the market is not yet stable, but Indonesia has taken a significant step forward with government support," said Riza.
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