Indonesia to break ground on coal-to-DME project in February

The chief executive of sovereign wealth fund Danantara said a project to replace liquefied petroleum gas (LPG) by converting coal into dimethyl ether (DME) is scheduled to break ground in February 2026, as Indonesia steps up efforts to cut its reliance on imported fuel.

“If I am not mistaken, February,” Danantara CEO Rosan Roeslani said on Wednesday, January 14, 2026.

Rosan said the project’s technology has been reviewed internally and discussions are ongoing. “It has been analyzed by our Chief Technology Officer, Pak Sigit. We are planning to hold a meeting today,” he said.

The coal-to-DME project has been highlighted by the government as a key element of Indonesia’s energy security strategy, particularly to reduce dependence on LPG imports, which account for the majority of domestic consumption.

Indonesia consumes around 10 million tonnes of LPG annually, while domestic production capacity stands at only about 1.6 million tonnes, according to Energy and Mineral Resources Ministry data.

Energy and Mineral Resources Minister Bahlil Lahadalia has said expanding domestic LPG production is challenging because Indonesia’s gas reserves are dominated by methane (C1) and ethane (C2), while LPG requires feedstock rich in propane (C3) and butane (C4).

“Our gas is mostly C1 and C2. Like it or not, import substitution is necessary,” Bahlil said previously. “The solution is to use low-calorific coal to produce DME, which can replace LPG.”

Indonesia is one of the world’s largest coal producers and holds significant reserves of low-rank coal that are considered less competitive for export but suitable for downstream processing.

In a related development, state-owned oil and gas company PT Pertamina (Persero) and state-owned mining holding company MIND ID recently signed a strategic agreement to jointly develop coal gasification technology to produce DME as an LPG substitute, as well as other downstream products.

Read also : MIND ID and Pertamina team up on coal downstreaming projects

Under the agreement, Pertamina will act as the offtaker and aggregator of distribution infrastructure. Leveraging its nationwide network, the company is expected to ensure that coal-based downstream products — including DME, synthetic natural gas (SNG) and methanol — are absorbed and distributed to households and industrial users as alternatives to imported energy.

Pertamina President Director Simon Aloysius Mantiri described the cooperation as a milestone in strengthening Indonesia’s energy sovereignty.

“As the backbone of national energy, we are committed to optimizing Pertamina’s distribution infrastructure to support this downstreaming effort with MIND ID,” Simon said on Wednesday. “This is a concrete step to reduce dependence on LPG imports and provide more affordable energy for the people, in line with the government’s energy self-sufficiency target.”

MIND ID President Director Maroef Sjamsoeddin said the partnership aligns with the company’s broader strategy to strengthen domestic value chains across minerals, coal and energy.

“Through cooperation with Pertamina, MIND ID is committed to promoting downstreaming that creates added economic value, reduces import dependence, enhances competitiveness, opens new job opportunities and strengthens national energy resilience in the long term,” Maroef said.

The government has previously promoted coal downstreaming projects as part of a wider industrial policy aimed at increasing value addition and reducing exposure to volatile global commodity prices, although such projects have faced delays in the past due to financing, technology and environmental concerns.

By advancing coal-to-DME and coal-to-SNG projects, policymakers see an opportunity to narrow Indonesia’s LPG supply gap by utilizing abundant domestic coal resources, while also supporting broader goals of energy independence and industrial development.

Danantara’s involvement is expected to play a role in improving project bankability and coordination among state-owned enterprises, as Indonesia accelerates efforts to translate long-planned coal downstreaming initiatives into operational projects.

Editing by Reiner Simanjuntak