Maintaining Energy Security: Indonesia Faces Significant Challenges
The current geopolitical landscape has reshaped global trade flows. Conflicts, sanctions, and security concerns can rapidly impact access to energy, critical minerals, equipment, and essential industrial supplies. This has led to increasingly fragmented supply chains, prompting many parties to pursue supplier diversification and backup systems to ensure resilience.
These energy sector fluctuations significantly impact the business world, particularly industrial players. Lim Chu Chong, President Director of DBS Bank Indonesia, projected that electricity demand is set to increase sixfold, from approximately 300 terawatts to over 1,800 terawatts by 2060. To meet future demand, large-scale investments are required, including 47,700 kilometres of new transmission infrastructure, 10 gigawatts of energy storage capacity, and electricity sector investments valued at approximately US$ 169 billion.
“Despite having renewable energy potential, 81% of Indonesia’s energy still relies on fossil fuels. This highlights how difficult it is to balance growth, affordability, reliability, and decarbonisation,” stated Chu Chong during the CNBC Indonesia Coffee Morning titled ‘Managing Cost to Supply: Challenging Era for Energy, Resouces, and Infrastructure Companies’ on Thursday.
Energy companies in Indonesia currently face three primary challenges: supply security, investment readiness, and infrastructure development. According to Chu Chong, the companies most successful in navigating current pressures are not necessarily those with the lowest costs, but those capable of building operational, energy, and investment resilience from the outset. He noted a widening ‘resilience gap’ between proactive companies and those that remain reactive to market changes.
Furthermore, geopolitical conditions are altering global trade routes. Conflicts and security concerns can disrupt access to critical minerals and industrial supplies. Capital challenges also arise as commodity volatility alters investment planning and decision-making. “Energy prices, raw materials, shipping costs, and currency fluctuations can change very rapidly, even faster than traditional budgeting cycles. This creates uncertainty across all operations and capital projects,” said Chu Chong.
Additionally, the energy transition agenda is reshaping the financing structure of the mining sector through new regulations, carbon policies, and technological shifts. Regarding infrastructure, supply chains are becoming more fragmented, leading companies to seek supplier diversification to maintain stability. “The challenge now is to mobilise capital and secure supplies to transform these opportunities into sustainable growth,” Chu Chong emphasised.
From a regulatory perspective, the Deputy Chairman of the MPR RI, Eddy Soeplarmo, revealed that the fuel supply chain is still hindered by ongoing geopolitical conflicts. Indonesia’s fuel production remains dependent on foreign supplies. Soeplarmo mapped several vulnerabilities in Indonesia’s energy sector amidst the uncertainty in the Middle East, noting that disruptions to global distribution routes impact the availability of fuel stocks for national public and industrial needs.
Currently, Indonesia imports approximately 20% of its crude oil needs from the Middle East, but the greatest dependency lies in refined fuel products. He noted that 70% of the national fuel supply comes from Singapore and Malaysia, meaning disruptions in those supplier nations directly impact domestic availability. “This means that when Singapore and Malaysia face difficulties purchasing crude from the Middle East, we are also hindered in receiving our fuel supply,” he added.
The volume of fuel demand in Indonesia is very high, with Pertalite demand reaching 33-34 million kilolitres (kl) per year, while Diesel demand is around 19 million kl per year, though the latter is being partially assisted by the implementation of biofuels. The disparity between production capacity and daily consumption is a primary driver of pressure on domestic fuel availability. Indonesia currently produces only about 600,000 barrels per day (bpd), whereas the total requirement to drive economic mobility reaches 1.6 million bpd.
Regarding the management of oil and gas, the General Chairman of the Indonesian Oil and Gas Association (ASPERMIGAS), Elan Biantoro, stated that governance remains a shared challenge. “Therefore, regulation is fundamental to governance. Subsequently, derivative products of these regulations can be issued in the form of policies. It is important that there is consistency in policy, so that it does not change frequently,” said Elan. He emphasised that such consistency is vital to ensure that the management of natural resources, which serves as the backbone of Indonesia’s energy supply, remains stable.