Energy ministry open to shifting LPG subsidies to DME

Deputy Minister of Energy and Mineral Resources Yuliot Tanjung said the government is open to providing subsidies for dimethyl ether (DME) produced from coal gasification, including by reallocating part of the existing liquefied petroleum gas (LPG) subsidy, to ensure the project’s economic viability.

Speaking to reporters, Yuliot said the option is being considered following views from Indonesia’s sovereign investment authority, Daya Anagata Nusantara Investment Management Agency (BPI Danantara), which has stressed the need for government support to advance coal-to-DME downstream projects.

“If subsidies are needed, it could involve shifting subsidies currently allocated to LPG to DME,” Yuliot said at his office on Friday (Dec. 12). He added that any decision would be subject to further study, including a detailed calculation of DME’s cost of production.

“We are still calculating the cost of production for DME. If subsidies are required, they would be a reallocation from the existing LPG subsidy,” he said.

BPI Danantara is currently finalising feasibility studies on 18 strategic downstream projects submitted by the Task Force for the Acceleration of Downstream Industries and National Energy Security, led by Energy and Mineral Resources Minister Bahlil Lahadalia.

Coal gasification into DME is among the most closely watched projects. President Prabowo Subianto has agreed to continue the flagship programme initiated under former president Joko Widodo. DME can be used as a substitute for LPG, helping the country reduce its reliance on LPG imports.

The project has been stalled for years following the withdrawal of U.S.-based Air Products & Chemicals Inc. from its partnership with state-owned coal miner PT Bukit Asam Tbk, largely due to economic feasibility challenges.

Read also: PTBA, ECEC explore Coal-to- DME project partnership

To address these concerns, Danantara has argued that government subsidies are essential for the DME project to move forward. If implemented, the project could help curb Indonesia’s growing dependence on imported LPG.

Senior Director for Oil & Gas and Petrochemicals at Danantara Indonesia, Wiko Migantoro, said DME would require government subsidies, similar to LPG, to ensure it can compete on price.

“Substantial government support is needed so that in the future the price of DME can be broadly comparable to current LPG prices,” Wiko said in Jakarta on Wednesday (Dec. 10).

He added that the public’s ability to pay is a crucial factor in determining the project’s economic viability, noting that discussions on the subsidy scheme are still ongoing.

In terms of project development, PT Bukit Asam Tbk (PTBA) is confirmed to develop one of the coal-based DME production facilities. Danantara Investment Management will be involved in managing the upstream segment, while state energy firm PT Pertamina (Persero) is expected to handle distribution.

“The upstream segment will involve Danantara Investment Management, among others, while distribution is planned to follow the existing LPG network through Pertamina,” Wiko said.

Editing by Reiner Simanjuntak