Jakarta. The Indonesian government on Monday broke ground on a national strategic project that will convert coal into methanol at the Batuta Chemical Industrial Park (BCIP) in East Kutai Regency, East Kalimantan.

The project is designed to produce around 1.3 million tons of methanol annually and could reduce Indonesia’s foreign exchange spending by as much as Rp 7.1 trillion ($400.6 million) per year by replacing imports.

“This groundbreaking marks the beginning of concrete steps to develop a coal-based methanol industry,” Deputy Energy and Mineral Resources Minister Yuliot Tanjung said in a statement.

“The project is part of our efforts to increase the added value of natural resources, strengthen domestic industries, reduce dependence on imports, and support national energy security and self-sufficiency,” he added.

The project is being developed by Bumi Etam Chemical (BEC), a joint venture between Arutmin Indonesia and Kaltim Prima Coal, across an area of approximately 943 hectares.

BEC will use low-calorie coal, which has relatively limited economic value, as feedstock to produce higher-value products for domestic industries.

Once operational, the facility is expected to process up to 7.78 million tons of coal annually with a calorific value of 3,300-3,400 kcal/kg.

The coal will be converted into methanol meeting standards set by the International Methanol Producers and Consumers Association (IMPCA).

The methanol will be used to meet part of Indonesia’s domestic demand, particularly from the petrochemical and formaldehyde industries.

It is also expected to support the production of Fatty Acid Methyl Ester (FAME), the biodiesel component needed for Indonesia’s planned B50 program, which blends diesel fuel with 50% biodiesel.

Yuliot said the project is also expected to generate broader economic benefits, including job creation, growth in supporting industries, and increased local economic activity.

BEC President Director Rio Supin said engineering work on the project began in late July 2026.

“This first coal gasification project in Indonesia is ready to enter the implementation stage, with commissioning targeted for 2029,” Rio said.

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