Efforts to strengthen energy security and downstreaming in Indonesia are increasingly evident with the planned construction of 17 small modular oil refineries. Thus, oil distribution can be more evenly distributed so as to create one price throughout Indonesia and reduce oil supply shortages.
Coordinating Minister for Economic Affairs Airlangga Hartarto emphasized that the focus of the investment is the construction of 17small modular refineries in Indonesia, not in the US.
"We are not investing in America. We will build small refineries in Indonesia, we will build 17small modular refineries," Airlangga explained at the Economic Diplomacy event: Navigating Global Challenges Towards a New Economic Partnership in Jakarta, Tuesday (29/7/2025).
Airlangga further explained that the 17 refineries will be built separately, taking into account logistics cost efficiency. He also clarified that Indonesia will purchase Engineering Procurement Construction (EPC) services from the United States as a trading partner.
In line with Airlangga, Minister of Investment and Downstream Rosan P Roeslani added that the construction of oil refineries in Indonesia is very necessary. This is related to one of the strategic cooperation points between Indonesia and the United States, namely the import ofcrude oil from the US.
"The refinery must of course be in accordance with the characteristics of the crude oil that will be imported from the United States. Investment from America and refineries are also in accordance with the characteristics of the country," Rosan said at a press conference in Jakarta, Tuesday (29/7/2025).
The importance of downstream and energy security
The construction of the oil refinery is good news for the Indonesian economy as it will provide added value and multiplier effect according to Pri Agung Rakhmanto, Founder & Advisor of Research Institute for Mining and Energy Economics (ReforMiner Institute). He argues that in terms of needs and interests, both energy security and the economy, Indonesia far more needs refinery investment to be built domestically.
He added that Indonesia's refinery capacity has long been stagnant at 1 million barrels per day (bpd). "The additional 1 million bpd capacity will strengthen our energy security in the next 5-10 years, in terms of reducing imports," he explained to Suar, (30/7/2025) although he also acknowledged that this investment is part of a broader trade negotiation deal.
The cooperation between the US and Indonesia is potentially mutually beneficial and the size of Danantara's managed funds logically leads to global cooperation, according to economist at the Institute for Development of Economics and Finance (Indef), Eko Listyanto.
"With Danantara's large managed funds, in the end, the cooperation carried out will be global, including in the context of this oil refinery in the US," he told SUAR, Wednesday (23/7/2025).
Furthermore, he highlighted the timing context of this investment, which is close to the tariff negotiation deal with Trump. He sees that this cooperation can provide dual benefits: increasing oil supply to Indonesia on the one hand, and on the other hand, helping to maintain a strong trade relationship with the United States as a key market for Indonesia's labor-intensive industries.
"In general, as long as it is still profitable to increase oil supply to Indonesia on the one hand, and the trade relations with the US as a market for Indonesia's labor-intensive industries, then I think this cooperation can be mutually beneficial," he explained.
