Indonesia's Energy Industry

Indonesia: upstream renewal and gas development

Indonesia’s oil and gas sector has long been a key driver of the country’s economic development. Commercial production began in the late 19th century, with early discoveries in North Sumatra helping to lay the foundations for the modern industry. Hydrocarbons production remains an important contributor to the economy, even as Indonesia’s mature fields decline and domestic consumption continues to rise, increasing pressure on the country’s energy balance. Despite being Southeast Asia’s largest economy, Indonesia has faced recurring challenges in attracting foreign investment into upstream projects, driven by regulatory complexity, shifting fiscal terms and perceptions of policy risk.

Indonesia’s upstream and gas activities are overseen by SKK Migas, which has set out a roadmap aimed at improving project delivery, restoring production and accelerating exploration. State-owned Pertamina remains the dominant upstream player, while international companies continue to participate through production sharing contracts and partnerships. Much of Indonesia’s remaining gas potential sits offshore, often in frontier basins and remote provinces, requiring significant investment in infrastructure to bring volumes to market. The government has also promoted unconventional resources such as coalbed methane and shale gas as part of a broader push to strengthen domestic supply.

Indonesia remains an important LNG exporter, although its role has evolved over time. In the 1990s, it was one of the world’s leading suppliers, but it has since been overtaken by major exporters such as Qatar, Australia and the USA. Even so, Indonesia continues to supply regional markets, with Japan, South Korea and China among its key buyers, while also managing the growing domestic call on gas for power generation and industry.

Alongside the upstream, Indonesia is seeking investment in midstream and downstream infrastructure. While the country has multiple refineries, capacity and configuration constraints mean domestic production does not fully meet demand, leaving Indonesia reliant on imports for a portion of its fuel needs. Pertamina owns and operates most refining assets and is pursuing upgrades to improve efficiency and product quality. With no cross-border oil pipelines, maritime transport remains central to the energy value chain. In gas, state-controlled Perusahaan Gas Negara plays a leading role in transportation and distribution and operates much of the country’s pipeline infrastructure.