Danantara Partners with US Firm to Revive Indonesia's Coal Gasification Project
The Danantara Development Management Fund (Danantara) has partnered with US energy company Latitude Energy Holdings Inc. to develop a coal gasification project to produce dimethyl ether (DME). The collaboration marks the government’s latest effort to revive the downstream coal project, which had stalled after the previous investor withdrew.
Latitude Energy will explore the development of a coal gasification project in Indonesia using Transport Integrated Gasification (TRIG) technology, under a memorandum of understanding signed by both companies. The technology is claimed to be capable of converting coal into synthetic gas, which can then be processed into various products, including DME as a substitute for liquefied petroleum gas (LPG).
Danantara Development Management Fund CEO Sigit P. Santosa stated that the cooperation aligns with the government’s strategy to strengthen energy security through the utilisation of low-calorie coal. “As one of the world’s largest coal producers, Indonesia has significant potential to optimise its coal resources through advanced conversion technology that can support domestic energy needs,” Sigit said in a written statement on Sunday, 12 July 2026.
Under the agreement, Latitude Energy will provide technical support, management, and investment to build a large-scale coal gasification platform. Joy M. Sakurai, Chargé d’Affaires ad interim of the US Embassy in Jakarta, noted that US energy technology has the potential to support Indonesia’s energy security and industrial development while strengthening investment ties between the two countries.
This partnership is a follow-up to the government’s decision to revive the DME project. In March 2025, Bahlil Lahadalia, who chairs the Downstreaming and National Energy Security Task Force, stated that Danantara would be one of the funding sources for coal-to-DME processing projects to be developed in South Sumatra, East Kalimantan, and South Kalimantan.
The DME project was first initiated in 2018 through a collaboration between state-owned coal miner PT Bukit Asam, state energy firm PT Pertamina, and US-based Air Products and Chemicals Inc. The project, valued at approximately US$15 billion, aimed to produce 1.4 million tonnes of DME per year to reduce LPG imports. However, the plan was halted after Air Products withdrew in 2023. PT Bukit Asam did not explain the reasons for the US company’s exit at the time.
Meanwhile, Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), has previously assessed that the production cost of coal-based DME remains too high to compete with LPG. According to Fabby, for DME prices to be competitive, coal prices would need to be in the range of US$15 to US$20 per tonne, whereas PT Bukit Asam’s coal production cost is around US$45 per tonne, reaching approximately US$55 per tonne after accounting for margins. A 2020 study by the Institute for Energy Economics and Financial Analysis (IEEFA) also estimated that the coal gasification project could incur operational and financing losses of around US$377 million, far exceeding the potential LPG import savings, which were estimated at only US$19 million at the time.