Indonesia plans to build new 500,000 b/d oil refinery

Market: Crude oil, LPG, Oil products
05/03/25

Indonesia plans to build an oil refinery with a planned capacity of approximately 500,000 b/d, as part of the country's push to develop its downstream sectors to ensure energy security.

The refinery will be able to process domestic and imported crude oil, and will produce up to about 532,000 b/d of various oil products, according to the ministry of energy and mineral resources (ESDM).

The construction of the refinery will require investments of up to $12.5bn, and it will help to reduce Indonesia's dependence on imports, said the ESDM. No details on timeline or location were provided.

It is unclear how the new refinery fits with Indonesia's existing downstream expansion plans, many of which have stalled. The country has not built a new refinery since 1994, leaving it reliant on imports to meet demand for oil products, notably gasoline. Several new projects have been touted in recent years, including a joint venture between state-owned Pertamina and Russian firm Rosneft for a 300,000 b/d refinery and petrochemical plant at Tuban in east Java, but have yet to reach a final investment decision.

The country's president Prabowo Subianto has set a target for reviving Indonesia's oil output to 900,000-1mn b/d by 2028-29. "We still have a lot of oil," said energy minister Bahlil Lahadalia last month, encouraging the use of enhanced oil recovery and urging exploration wells to be upgraded to production wells.

The country's oil production currently stands at around 600,000 b/d, with state-owned refiner Pertamina accounting for 400,000 b/d of this, while the country's consumption amounts to more than 1.5mn b/d.

Developing DME

Another downstream initiative that the ESDM is planning is the acceleration of the development of dimethyl ether (DME) through coal gasification, to use it as a substitute for LPG and reduce imports.

The development of the DME industry will "no longer depend on foreign investors," said Bahlil, adding that it will instead rely on domestic resources and capital, "which will be implemented through government policies."

Indonesia already has the raw materials as well as the offtakers, while the technology, money and capital expenditure can all come from the government and domestic private sector, said Bahlil, so Indonesia does not have to be "dependent on other parties."

Indonesia has agreed to provide $40bn worth of funding to 21 first-phase downstream projects.

By Prethika Nair

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