JAKARTA: Despite being an oil-producing nation, Indonesia finds itself in an ironic and increasingly unsustainable situation. According to the latest Jakarta Globe report, it imports more than half of its oil from Singapore, which has no domestic oil production. Energy and Mineral Resources Minister Bahlil Lahadalia highlighted this paradox at Jakarta’s 2025 Beritasatu Economic Outlook seminar.

Indonesia currently produces about 600,000 barrels per day (bpd) of crude oil, while its daily consumption exceeds 1 million bpd. To close this gap, the country imports roughly 54% of its oil, predominantly from Singapore—a neighbouring nation that does not even produce oil. “We import 54% of our oil from—guess where—Singapore,” Mr Bahlil remarked, emphasizing the growing disparity between local production and domestic demand.

This reliance on oil imports, particularly from a country without oil resources, starkly contrasts Indonesia’s history as a key oil exporter.

Declining domestic production and rising imports

Indonesia’s oil production has been steadily declining. In 2020, the country produced 707,000 bpd; today, that figure has dropped to 600,000 bpd. During the same period, oil imports have surged to nearly 1 million bpd to meet rising domestic energy needs. This growing dependence on imports leaves Indonesia vulnerable to global oil market fluctuations and trade disruptions.

To address this issue, the Indonesian government has set an ambitious target to increase crude oil production to between 900,000 and 1 million bpd by 2029. This goal dates back to the 1990s, when Indonesia was a significant oil exporter as a member of OPEC, exporting over 1 million bpd while meeting only 600,000 bpd of domestic consumption. Mr Bahlil noted, “This is an upside-down situation compared to 1997-98 when we exported 1 million bpd while domestic consumption was only 600,000 bpd.” The country’s fall from self-sufficiency is a stark reminder of the challenges ahead.

Strengthening domestic refining capacity

One primary strategy to regain energy security is to bolster Indonesia’s domestic refining capacity. With more than 40,000 oil wells across the country, the government plans to reactivate many idle wells, of which only about 16,000 are currently active.

Additionally, Indonesia plans to redirect nearly half of its projected crude oil exports—about 28 million barrels—into its refineries. This move aims to reduce dependence on imported fuel and strengthen the domestic supply chain. Domestic refineries in Balikpapan, Cilacap, and Dumai are already being upgraded to process a broader range of crude, including lower-quality varieties. New refineries in Tuban and Balongan are also under fast-track development to enhance refining capacity and ensure a more stable domestic fuel supply. By 2029, up to 13 million barrels of crude oil, previously destined for export, will be processed domestically, helping to safeguard Indonesia’s energy future.

Singapore’s role in global oil refining

Singapore’s primary role as a refining and trading hub further complicates Indonesia’s oil imports paradox. In a May 2024 Reuters report, Shell announced it had sold its Bukom refinery in Singapore to a joint venture between Indonesian chemicals company PT Chandra Asri and global trading giant Glencore. The transaction is part of Shell’s strategy to reduce carbon emissions and focus on more profitable, sustainable ventures.

The Bukom refinery, one of the largest in the region, has a capacity of 237,000 bpd, with an additional 1 million tons of steam cracker capacity per year. While the sale of this facility marks a shift in Shell’s operations, it does not diminish Singapore’s status as a global oil hub. According to Jean Woo, managing partner of Ashurst’s Singapore office, the sale is a strategic move, as the refinery complements the purchasing companies’ business operations in Southeast Asia, she said in an EDB press release.

However, the sale also reflects broader trends in the oil industry, particularly the shift toward cleaner energy. The Bukom refinery, once a cutting-edge facility, now faces challenges as it contends with outdated technology and regulatory pressure to reduce carbon emissions. As global refineries modernize to meet environmental standards, older facilities like Bukom are increasingly seen as obsolete.

The road ahead

As Indonesia grapples with its growing oil import dependency, its efforts to strengthen domestic production and refining capacity signal a pivotal shift toward energy independence. By revitalizing idle wells, upgrading refineries, and reducing export reliance, Indonesia hopes to reverse the trend of rising imports and regain control over its energy future. However, despite its vast reserves, the country’s reliance on Singapore as an oil import partner remains a curious and challenging paradox.