Indonesia plans 500,000 b/d oil refinery amid energy security push

Indonesia plans to build a new 500,000 b/d oil refinery in the country as part of its government's ongoing efforts to reduce oil product import dependency and boost energy security, its energy and mineral resources ministry said on March 4.

The planned refinery, which will process both domestic and imported crude, will be able to produce up to 531,500 b/d of products and is expected to cost $12.5 billion in investments, the ministry added.

"This will be one of the biggest [refineries] in the future, as part of efforts to truly strengthen our energy resilience," Minister of Energy and Mineral Resources Bahlil Lahadalia said, without elaborating on the project's timeline.

The refinery is part of the government's plan to accelerate the construction of 21 downstream projects worth $40 billion across the oil and gas, mining, agriculture and maritime industries, according to authorities.

"We have determined the first phase of downstreaming, targeting $618 billion in total. For 2025, there are approximately 21 projects in the first phase," Lahadalia said. "We have discussed in detail the names of the investment projects that will be implemented."

As part of this downstream plan, the government will build an oil storage facility on Pulau Nipah, which can meet the country's needs for 30 days, as required by a Presidential Regulation.

In the mining sector, the Indonesian government will also produce dimethyl ether as an LPG substitute.

"We will also [produce] DME using low-calorie coal as a substitute for LPG. We are doing this to ensure the product can be marketed domestically as an import substitute for LPG," Lahadalia said, adding that this project will not rely on foreign investors.

"Everything will be done by leveraging domestic resources. What we need from abroad is only technology and expertise, while the funding and raw materials will come from within the country," Lahadalia added.

The DME project will be developed in parallel in South Sumatra, East Kalimantan and South Kalimantan. Besides DME, the government is also focusing on increasing value-added processing in the mining sector, including the refinement of copper, nickel and bauxite into alumina.

This comes as Indonesian President Prabowo Subianto designated 26 commodity sectors as national priorities, including minerals, oil and gas, fisheries, agriculture, plantations and forestry.

Aside from strengthening energy security, the government expects the downstream expansion to boost employment and stimulate the economy.

In recent weeks, the Indonesian government has made huge strides to minimize import reliance in its oil sector.

In January, Indonesia said it will divert all government crude oil export allocations to domestic refineries, and continue to expand the capacity and slate of its existing refineries.

Despite this major shift by the government, Indonesia will remain reliant on imports to meet its crude and refined oil product needs. The country currently imports around 40% of its crude and 42% of its refined products, state-owned energy giant Pertamina said earlier this week.