Jakarta. As global oil prices rise above $100 a barrel, Indonesia is promoting domestic energy resources to diversify its supply, including converting low-calorie coal into methanol for use as a fuel additive.

Deputy Energy and Mineral Resources Minister Yuliot Tanjung said the government is encouraging investment in coal-to-methanol projects in regions with large coal reserves.

“We’ve already begun investment activities for coal-to-methanol processing in East Kalimantan. I personally performed the groundbreaking ceremony for that project,” Yuliot said.

The project, developed by Bumi Etam Chemical at the Batuta Chemical Industrial Park in East Kutai, East Kalimantan, is now under construction. The joint venture between Arutmin Indonesia and Kaltim Prima Coal covers about 943 hectares and is designed to produce 1.3 million metric tons of methanol annually from up to 7.78 million metric tons of coal.

The government is also promoting similar projects in South Sumatra and other coal-producing regions, particularly to utilize low-calorie coal that has relatively low economic value.

The resulting methanol would not be used as gasoline but could serve as a fuel additive and as a feedstock for industries including petrochemicals and formaldehyde. It could also support the production of fatty acid methyl ester (FAME), a key component of biodiesel under the planned B50 program.

However, the project will not provide an immediate solution to Indonesia’s energy needs. Bumi Etam Chemical aims to begin commissioning in 2029.

Yuliot said the coal-to-methanol project could save up to Rp7.1 trillion ($400 million) in foreign exchange annually by reducing some import requirements.

“With our existing natural resources, we are meeting our energy needs today, and we are also considering conversion and diversification,” Yuliot said.

The push comes as Indonesia faces rising global oil prices and continued dependence on imported energy. Brent crude recently traded as high as $107 a barrel, increasing pressure on the government to strengthen domestic supply.

The government is pursuing higher domestic oil production while developing alternative energy sources from its coal reserves. Oil exploration and production are expected to be accelerated in 2027-2028, while the East Kalimantan methanol project is not expected to contribute until 2029.

Yuliot also stressed that exploiting domestic resources must be balanced with conservation.

“We are not utilizing everything we have right now; instead, we will pass on most of it to future generations,” he said.

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