Analyst
Analyst
Highlights
Indonesia's energy self-sufficiency strategy is centred on supply diversification, upstream production growth, biofuel expansion, and renewable energy development, supported by a more attractive investment framework to strengthen long-term energy security.
We remain OVERWEIGHT on oil & gas as idle-well reactivation, 118 new exploration blocks, major gas projects, and supportive PSC reforms should drive a multi-year investment cycle across upstream and gas infrastructure.
Analysis
A three-pillar resilience blueprint. Pillar 1 (supply mitigation) focuses on fuel/liquefied petroleum gas (LPG) demand management, import-source diversification, domestic supply and refinery optimisation, and new bilateral partnerships (eg Russian crude and Japanese LPG). Pillar 2 (oil & gas production) targets 610 MBOPD in 2026, supported by 118 new exploration blocks, broader opportunities for technology and operating partners, and the Geliga major discovery. Pillar 3 (investment climate) introduces field-risk-based production sharing contract (PSC) profit splits, greater contract flexibility through cost-recovery/gross-split options, and a dedicated production-acceleration task force.
While a US$100/bbl oil-price scenario could lift Indonesia's energy subsidy and compensation burden to Rp309t (~US$17b), the impact may be partly offset by an estimated US$7b increase in upstream state revenue, Rp30t-35t/year (US$1.7b-2.0b) of additional non-tax revenue from revised mineral benchmark pricing (HMA/HPM) for gold, copper, tin and nickel ore, as well as broader fiscal-efficiency measures.
Import diversification reduces Middle East/Hormuz exposure. ESDM is rerouting supply away from the Strait of Hormuz: For crude, Saudi Arabia (~16% of supply) is being supplemented by West African barrels (Nigeria, Angola, Gabon) and Kazakhstan. For fuels, Singapore (62%) and Malaysia (35%) dominate. Lastly, in LPG the UAE (~29%) is being diversified towards the US and Australia. This lowers single-chokepoint risk but keeps Indonesia structurally short of refined products and LPG.
Scaling up biofuel mandate. The government plans to accelerate B50 biodiesel following the successful rollout of B40, with B50 expected to reduce diesel consumption by around 4m kL annually and save around 300,000 bpd of crude and refined product imports. In parallel, Indonesia is exploring B70 and expanding bioethanol blending (E5-E20 by 2028) to curb rising gasoline import dependence, supported by diversified feedstocks including corn, sugarcane, cassava, sorghum, and aren. We view this as positive for long-term domestic biofuel demand and energy security.
Upstream revival gaining traction through idle-well reactivation, new acreage and major gas discoveries. Indonesia has 47,161 oil and gas wells, of which 10,457 are currently idle, with around 7,345 still holding hydrocarbon potential. Following the reactivation of 792 wells in 2025, approximately 5,771 wells remain available for partnership, while the 2026 work programme targets a further 744 reactivations. Production enhancement efforts are centred on fracking, Enhanced Oil Recovery and horizontal drilling across existing fields.
Highlights
Indonesia's energy self-sufficiency strategy is centred on supply diversification, upstream production growth, biofuel expansion, and renewable energy development, supported by a more attractive investment framework to strengthen long-term energy security.
We remain OVERWEIGHT on oil & gas as idle-well reactivation, 118 new exploration blocks, major gas projects, and supportive PSC reforms should drive a multi-year investment cycle across upstream and gas infrastructure.
Analysis
A three-pillar resilience blueprint. Pillar 1 (supply mitigation) focuses on fuel/liquefied petroleum gas (LPG) demand management, import-source diversification, domestic supply and refinery optimisation, and new bilateral partnerships (eg Russian crude and Japanese LPG). Pillar 2 (oil & gas production) targets 610 MBOPD in 2026, supported by 118 new exploration blocks, broader opportunities for technology and operating partners, and the Geliga major discovery. Pillar 3 (investment climate) introduces field-risk-based production sharing contract (PSC) profit splits, greater contract flexibility through cost-recovery/gross-split options, and a dedicated production-acceleration task force.
While a US$100/bbl oil-price scenario could lift Indonesia's energy subsidy and compensation burden to Rp309t (~US$17b), the impact may be partly offset by an estimated US$7b increase in upstream state revenue, Rp30t-35t/year (US$1.7b-2.0b) of additional non-tax revenue from revised mineral benchmark pricing (HMA/HPM) for gold, copper, tin and nickel ore, as well as broader fiscal-efficiency measures.
Import diversification reduces Middle East/Hormuz exposure. ESDM is rerouting supply away from the Strait of Hormuz: For crude, Saudi Arabia (~16% of supply) is being supplemented by West African barrels (Nigeria, Angola, Gabon) and Kazakhstan. For fuels, Singapore (62%) and Malaysia (35%) dominate. Lastly, in LPG the UAE (~29%) is being diversified towards the US and Australia. This lowers single-chokepoint risk but keeps Indonesia structurally short of refined products and LPG.
Scaling up biofuel mandate. The government plans to accelerate B50 biodiesel following the successful rollout of B40, with B50 expected to reduce diesel consumption by around 4m kL annually and save around 300,000 bpd of crude and refined product imports. In parallel, Indonesia is exploring B70 and expanding bioethanol blending (E5-E20 by 2028) to curb rising gasoline import dependence, supported by diversified feedstocks including corn, sugarcane, cassava, sorghum, and aren. We view this as positive for long-term domestic biofuel demand and energy security.
Upstream revival gaining traction through idle-well reactivation, new acreage and major gas discoveries. Indonesia has 47,161 oil and gas wells, of which 10,457 are currently idle, with around 7,345 still holding hydrocarbon potential. Following the reactivation of 792 wells in 2025, approximately 5,771 wells remain available for partnership, while the 2026 work programme targets a further 744 reactivations. Production enhancement efforts are centred on fracking, Enhanced Oil Recovery and horizontal drilling across existing fields.
Analyst
Analyst
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