Ruth Dea Juwita, Jakarta – The government is considering using compressed natural gas (CNG) as a substitute for mostly imported liquefied petroleum gas (LPG) to shield domestic energy supplies from global disruptions caused by the US-Israel war against Iran.
The proposal is still under cross-ministerial discussion and has not yet been adopted as national policy, but officials see strong potential given the country's relatively abundant natural gas resources, according to Energy and Mineral Resources Minister Bahlil Lahadalia.
"That [CNG] industry is widely available domestically, but it requires equipment to compress gas to around 250-400 bar," Bahlil told reporters at the State Palace on Monday, adding that the government is working to align stakeholders before moving forward.
CNG is produced by compressing methane extracted from natural gas, while LPG consists mainly of propane and butane derived from gas processing and oil refining.
Indonesia's limited output of propane and butane has made it heavily reliant on imports of LPG, which is primarily used for household cooking, heating and feedstock for petrochemical plants.
By contrast, CNG feedstock, mainly methane and ethane, is more readily available domestically, potentially reducing reliance on costly imported fuels.
"Hotels and restaurants are already using [CNG]. Some CNG refueling stations are also available. We don't import the raw materials, they're all entirely sourced within the country," Bahlil said.
CNG has been used widely in the transportation and power generation sectors, supplying fleets such as Jakarta's Transjakarta bus network and bajaj (three-wheeled motorcycle taxis).
State oil and gas company Pertamina recently raised prices of non-subsidized LPG products by nearly 19 percent as LPG prices rise sharply following global energy market volatility linked to geopolitical tensions.
Prices for Pertamina's 5.5-kilogram cylinders rose to Rp 107,000 (US$6.60) per unit in Jakarta and Java Island, up Rp 17,000 from November 2023 levels, while 12-kg cylinders increased by Rp 36,000 to Rp 228,000.
Southeast Asia's largest economy is spending significant foreign exchange on LPG imports, with around Rp 500 trillion spent each year to purchase oil and gas, including LPG.
Domestic LPG consumption stands at around 8.6 million tonnes per year, while local production is only about 1.7 million tonnes, leaving a 7-million tonne gap that must be met through imports.
Supply dynamics have tightened in recent months, with LPG exports from the Middle East, Asia's largest supplier, falling sharply since the Iran war began in late February, prompting countries to rebalance their sourcing.
Currently, about 85 percent of Indonesia's LPG is expected to come from the United States, up from around 55 percent last year. About 20 percent previously came from the Middle East, but the government has been shifting toward alternative suppliers, including the US, Africa and Australia, to mitigate disruption risks.
Indonesia has also secured a commitment from Russia to supply up to 150 million barrels of crude oil at a "special price," according to President Prabowo Subianto's special envoy for energy and the environment, Hashim Djojohadikusumo.
Hashim, who is also the President's brother, said the strategic petroleum reserve would serve as a critical buffer against what he described as impending global economic turmoil. The deal was forged during President Prabowo's three-hour meeting with Russian President Vladimir Putin on April 13.