Indonesia is making a bold move to strengthen its energy security with a $12.5 billion refinery project. The new facility, designed to process 531,500 barrels of oil per day, aims to reduce the country’s reliance on oil imports and increase domestic refining capacity. This is a crucial step as Indonesia’s fast-growing economy no longer finds it feasible to depend on foreign oil.
Energy Minister Bahlil Lahadalia announced the project, stating, “We will build a refinery that, In shaa Allah, will have a capacity of approximately 500,000 barrels.” This reflects the government’s commitment to boosting domestic refining and follows President Prabowo Subianto’s focus on achieving energy self-sufficiency for Indonesia. Once a major oil exporter, Indonesia now faces rising demand that requires increased oil imports.
Partly funded by Indonesia’s Daya Anagata Nusantara Investment Management Agency (Danantara), the refinery is expected to save Indonesia up to 182.5 million barrels of oil per year. This could result in savings of $16.7 billion, easing the financial strain caused by the country’s dependence on foreign oil. The decision comes as global markets face uncertainty due to trade wars, shifting OPEC+ policies, and fluctuating crude prices.
The refinery project promises more than just energy independence; it will also create thousands of jobs. Officials predict the construction will generate 63,000 direct jobs and 315,000 indirect jobs. This makes the refinery not only an economic boost but also a political success for the government. Indonesia has set a target of 21 energy projects worth $40 billion by 2025, with the refinery as the key project.
Despite efforts to boost production, Indonesia’s oil output has declined significantly. From a peak of 1.6 million barrels per day in the 1990s, production has fallen to under 600,000 barrels per day. The government has partnered with ExxonMobil to increase output, but for now, the focus remains on refining domestic crude oil and reducing costly imports.
Indonesia is making a strong comeback in the oil industry, and this refinery is the first step in that process.
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