Turning Coal into Petrol: Technology Exists, but Economic Viability Remains a Question - PERHAPI
The government is beginning to explore options for utilising coal as a raw material for fuel amid global geopolitical uncertainty and the need to reduce Indonesia’s dependence on energy imports. This plan was revealed directly by President Prabowo Subianto, who emphasised that the government intends to produce petrol from coal.
The Head of State noted that Indonesia has already developed palm oil-based fuels, including the implementation of diesel with a 50% biodiesel blend (B50). He then opened the possibility of expanding the use of domestic resources by producing petrol from coal.
“Professors from our engineering faculties have successfully produced diesel from palm oil and can already produce petrol from palm oil, and later we will also produce petrol from coal,” Prabowo stated during a ceremony at the 100th anniversary of Pondok Modern Darussalam Gontor, East Java, on Saturday (19/9/2026).
Prabowo also mentioned that Indonesia has halted diesel imports since 1 July 2026 following the implementation of the B50 policy. According to him, this condition demonstrates that utilising domestic resources can serve as an instrument to reduce import dependency.
Responding to this, the Minister of Energy and Mineral Resources (ESDM), Bahlil Lahadalia, confirmed that the plan will be followed up. According to Bahlumn, developing fuel from coal is one of the options to strengthen national energy security, especially since Indonesia possesses abundant coal resources.
“One of them is alternative energy from coal. The technology is now advanced, where low-calorie coal can produce both gas and oil,” Bahlil said in Jakarta on Monday (21/9/2026).
He stated that rising global geopolitical tensions necessitate that every country ensures its domestic energy availability. This condition is one of the reasons the government is seeking alternative energy sources that can utilise domestic resources.
The Chairman of the Golkar Party mentioned that technology to process coal into gas or oil has been implemented in several countries, including China. He added that the government has also received offers from several companies regarding cooperation in coal processing technology.
Therefore, the Ministry of ESDM will immediately follow up on President Prabowo’s directive, particularly in the context of optimising domestic resources to strengthen energy security. “The goal is so that we do not import, so our foreign exchange reserves can remain within the country,” said Bahlil.
Economic Challenges
Technologically, the plan is not new. The conversion of coal into liquid fuel has long been known as coal-to-liquid (CTL).
The General Chairman of the Indonesian Mining Experts Association (Perhapi), Sudirman Widhy, stated that the technology to convert coal into gasoline is available. One country that has developed this technology is South Africa, through the company Sasol Ltd.
According to Sudirman, the CTL process is essentially similar to the technology used to process coal into dimethyl ether (DME), which the government has been promoting as a substitute for imported LPG. In the initial stage, coal gasification produces synthetic gas (syngas). In this process, coal is reacted with oxygen and steam at high temperature and pressure to produce synthesis gas consisting of carbon monoxide (CO) and hydrogen (H2).
Syngas is then further processed into methanol. From methanol, the conversion process can be directed to produce various products, including DME and gasoline.
Consequently, the greatest challenge in the plan to produce petrol from coal does not lie solely in the availability of technology. Sudirman assesses that the economic aspect is the primary challenge for CTL development in Indonesia.
“The main problem is not about technology. It is more about economics,” Sudirman told Bisnis.
He explained that the technology requires significant initial investment or capital expenditure (capex). Additionally, operational costs are relatively high. This situation has the potential to make CTL projects difficult to attract private investors unless there is policy support and certainty regarding the project’s economic viability.
Sudirman cited the development plan for DME from coal, which previously faced similar issues. Air Products, a US-based company, eventually withdrew from the plan to develop a coal-to-DME project in Indonesia, partly due to economic considerations.
In his view, that experience serves as a lesson that the existence of technology and the availability of raw materials do not automatically make coal downstreaming projects commercially viable.
“This process will require quite large capital and operational costs, which means that currently, not many private parties would dare to invest or commit capital to this process of making petrol from coal,” Sudirman explained.
He believes the government needs to consider financing schemes if it truly intends to realise this project. One option is to involve Danantara alongside State-Owned Enterprises (BUMN), including coal mining companies and energy companies.
Sudirman mentioned that PT Bukit Asam Tbk, a state-owned coal producer, could be involved alongside PT Pertamina (Persero), the state-owned oil and gas company. He noted that a government project could serve as the initial stage to prove the technological and economic feasibility of CTL in Indonesia.
“If this government project runs successfully and is economically feasible, it is not impossible that it will be followed by private parties…”