Indonesian Petroleum Association

Low Carbon Emission:

A Perspective of Oil and
Gas Company

SKK Migas Focus Group Discussion (FGD)

Bali, 25 November 2021

Ali Nasir,
Chairman, Regulatory Affairs Committee - IPA
VP Legal, Commercial & Planning - Premier Oil, a
Harbour Energy company

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Low Carbon Buzz
• Infographic Style words – What do they really mean?

Low Carbon
Emission

Carbon De-
Neutrality carbonization

Carbon
Buzzwords

Carbon
Net Zero
drawdown

Carbon
Negative

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• Infographic Style

Global Drivers of Low Carbon Emission

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• Infographic Style Paris Agreement

• UNFCCC: a global efforts to combat climate change

• Paris Agreement:
• a landmark agreement to combat climate change
for a sustainable low carbon future
• aiming to limit global warming to well below 2℃
preferably to 1.5℃, compared to pre-industrial
levels
• requiring all Parties to put forward their best efforts
through “nationally determined contributions”
(NDCs)
• Net zero pledges by 2050

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• InfographicRecent
Style COP: More pressure on oil and gas

• US-CHINA COOPERATION: "recall their firm commitment to

work together" to achieve the 1.5C temperature goal set out in
the 2015 Paris Agreement.
• TREES: Leaders from more than 100 world countries,
representing about 85% of the world's forests, promised to stop
deforestation by 2030.
• METHANE: A scheme to cut 30% of current methane emissions
has been agreed by more than 100 countries.
• COAL: More than 40 countries - which include major coal-users
including Poland, Vietnam and Chile- agreed to shift away from
coal.
• MONEY: Some 450 financial organizations, who between them
control $130tn, agreed to back “clean” technology, such as
renewable energy, and direct finance away from fossil fuel-
burning industries.
• BEYOND OIL AND GAS ALLIANCE: This initiative to phase
out oil and gas is led by Costa Rica and Denmark. Additional
members include France, Greenland, Ireland, the Canadian
province of Quebec, Portugal, Sweden, and Wales. Associate
members are the US state of California and New Zealand.
• FOSSIL FUEL FINANCING: US, Canada and 18 other countries
plus 5 development institutions including the European
Investment Bank and the East African Development Bank
committed to stop public financing for fossil fuel projects by
the end of 2022.

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 IEA Roadmap to Net Zero

2020 2050

45%
28%
26%

24%

20%
12%

12%

7%
6%

5%

4%
3%

3%

3%

3%

0%
What does it take?
• No more drilling activities
• Lower energy use in 2050 compared it to today
• Electric car use is 60% in 2030 (currently 4.6%)

• Can we afford it?

• Is it realistic ?

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https://iea.blob.core.windows.net/assets/deebef5d-0c34-4539-9d0c-10b13d840027/NetZeroby2050-ARoadmapfortheGlobalEnergySector_CORR.pdf
• Infographic Style

Global Energy Demand and Emission

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 O&G will still dominate the world energy
• Infographic Style

Source: IEA (2020), World Energy Outlook 2020, IEA, Paris https://www.iea.org/reports/world-
energy-outlook-2020 OPEC (2020), https://www.opec.org/opec_web/en/publications/340.htm

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 The same story in Indonesia energy mix…
• Infographic Style

National Target by
2050
• The share of oil and gas is
decreasing in % but 24%
increasing in volume
• The share of renewable is 2050
increasing but cannot 31%
25% 1.030 MTOE
replace all oil & gas
• Extraordinary efforts
required to further increase 20%
National Target
share of renewables 2025

22%
2025
30%
412 MTOE 23%
2015
status
26% 25%
26%
Renewable
2015 23%
Oil
166 MTOE Gas Source: DEN
Coal
46% 5%
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 Oil and Gas
• Infographic Style Contribute Significantly to Carbon Emission

United Nations Environment Programme (2021). Emissions Gap Report 2021: The Heat Is On –
A World of Climate Promises Not Yet Delivered. Nairobi

What can we do?

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• Infographic Style

Oil and Gas Companies’ Commitment to Low Carbon Emission

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Low Carbon Emission
• Infographic Style – Why Does It Matter to the Oil and Gas?

It’s the right thing to do

It’s a social license to operate

Growing pressures from lenders

Government green policy and measures – carbon tax

Climate change lawsuits against companies/governments

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• How O&G Style
Infographic Companies Contribute to Low Carbon Emissions

• Reducing • Gas for power • Almost 15% of • Lower costs • Producing

Emission:
flaring in generation emissions and the ability more clean
• Exhaust gas
operations produces about reductions in to decarbonize energy
from engines,
• Support the half of the the IEA’s sectors that • Investing a
turbines and
World Bank emissions Sustainable cannot easily growing share
fired heaters;
Global Gas produced by Development convert to of their capital
• Gas flaring;
Flaring coal Scenario electrification expenditure in
• Well testing, etc
Reduction • Cut emissions • Large scale • Hydrogen has low-carbon
Focus on reducing
Partnership from heating by CCS/CCUS is many uses: and renewable
energy
and its Zero 30% and from already a reality industry, power energies
consumption and
Routine Flaring power gen by generation, • O&G has the
targeting energy
by 2030 50%, or to near heating, capability to
efficiency and
initiative. 100%, with the transportation, invest more in
electrification
use of CCS. this sector

https://www.iogp.org/blog/news/how-the-oil-and-gas-industry-contributes-to-a-lower-carbon-future 13
•Major O&GStyle
Infographic Companies Commitments to Emission Reduction

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• Infographic Style

Carbon Tax and Low Carbon Emission:

Recent Development in Indonesia

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 Carbon
• Infographic Style tax (Law No. 7/2021) – The Roadmap

Carbon emission reduction • Reduce GHG emissions by 29% independently and 41% with international support
in 2030;
strategy • Achieve Net Zero Emissions (“NZE”) by 2060 at the latest.

• Energy, transportation and forestry sectors (97% of the total NDC emission
reduction targets)
Priority sector targets • The national industry transformation with clean energy and carbon tax towards
“Indonesia Emas” in 2045 and NZE by 2060

Harmonization with the • Carbon tax policies, carbon trading and sectoral technical policies, phasing out of
coal, the development of new and renewable energy and/or attempts to increase
development of new and biodiversity
• Prioritizing the ‘just and affordable transition’ principle for the public and ensuring
renewable energy the business climate certainty.

Harmonization between • Carbon tax roadmap: carbon emissions reduction strategy within NDC, priority-
sector targets and/or promoting the development of new and renewable energy.
various other policies
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 Carbon tax
• Infographic Style(Law No. 7/2021) – the Content and Comments

Subject Provisions Comments

Subject of • Individuals or entities that purchase goods containing carbon and/or • Too broad? What
Carbon Tax carrying out activities that produce a certain amount of carbon about A&D PSCs?
emissions

Carbon Tax • Higher than or equal to the carbon market price per kilogram of • Stick policy? Too
Rate CO2e low?
• If the carbon price in the market is less than Rp 30,00 per kilogram
of CO2e, then the minimum carbon tax rate is set at Rp 30 per
kilogram of CO2e
Implementation • 2021: the development of carbon trading mechanism; • Need fair carbon
• 2021-2024: the application cap and tax for electricity generating emission cap for oil
sector, limited to Coal Fire Steam Power Plant; and gas industry
• 2025 onwards: full implementation of carbon trading and the • Best international
practice on carbon
expansion of sectors imposed with Carbon Tax in stages according
market & trading
to the readiness of the relevant sectors
scheme

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 Carbon tax
• Infographic (Law No. 7/2021) – the Content and Comments
Style
Subject Provisions Comments

Incentives • Tax Payers participating in carbon emission trading, the carbon

emission offset, and/or other mechanism may receive a reduction of Carrot policy?
Carbon Tax and/or other treatment for fulfilling its Carbon Tax
obligations.

Carbon Tax • Climate change control (mitigation or adaptation to climate change) No allocation for
revenue allocation technology R&D?

Further regulations Government Regulation:

• Addition of tax objects imposed with carbon tax; subject of carbon tax
• Allocation of income of carbon tax for climate change control The industry
need to be
MoF Regulations:
• Carbon tax rates, changes in carbon tax rates and basis of tax involved in
imposition formulating the
• Procedures for calculating, collecting, paying or depositing, reporting regulations
and mechanism for imposing carbon taxes; and
• Procedures for carbon tax reduction.

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• Infographic Style Concluding remarks
...The Stone Age did not end because of a lack of stone. It ended because
bronze tools became cheaper.

…The oil age will not end because we run of oil…but because of reliable and
affordable renewables…

…Until then, we just need to wisely manage oil and gas, the most important
source of energy in modern history… and at the same time we continue to
find ways to reduce emissions from oil and gas…

https://quoteinvestigator.com/2018/01/07/stone-age/ 19
 Thank you
http://www.ipa.or.id

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