Oil and Gas: A Strategic Pillar in National Energy Transition and Security
Amid growing global momentum for a shift toward clean energy, the reality of global energy consumption still indicates a high demand for oil and gas. Geopolitical uncertainties, global supply constraints, and the complex implementation of renewable energy projects in various countries have only strengthened the role of oil and gas as a backbone in maintaining short- to medium-term energy supply stability.
Indonesia is in a similar position. While fully supporting the energy transition agenda, the government recognizes that oil and gas remain vital, particularly as a safeguard for the national energy supply and a driver of economic growth. In the 2023 national primary energy mix, oil and gas ranked second after coal. This data shows that oil and gas must still be strategically utilized to support a sustainable transition.
The Role of Oil and Gas in Indonesia's Energy Transition Strategy
Oil and gas serve as a bridge between current energy demands and the long-term goal of achieving net-zero emissions. Sectors such as transportation, manufacturing, and power generation in Indonesia still rely heavily on oil and gas as their main energy source. In this context, accelerating the development of renewable energy remains a priority, but ensuring the availability of oil and gas is a critical necessity.
Several reasons highlight why oil and gas remain essential:
- Increasing National Energy Demand: Alongside economic and population growth, Indonesia's energy needs are projected to rise significantly in the coming decades. Oil and gas provide a stable supply to meet this surge in demand, particularly in the transportation and heavy industry sectors.
- Support for National Infrastructure and Industry: Industries such as petrochemicals, fertilizers, and power generation depend heavily on natural gas as both a fuel and a raw material.
- Guaranteeing National Energy Security: Domestic oil and gas availability serves as an important reserve to anticipate global volatility.
- Enabling a Just Energy Transition: Oil and gas can act as a "buffer energy" source while reducing their emission intensity through technological solutions, including Carbon Capture and Storage (CCS).
The government positions the oil and gas sector as an integral part of the national energy transition strategy. Major upstream oil and gas investments continue to be promoted to maintain production capacity, particularly through the development of new fields and the revitalization of mature ones. National strategic projects such as Abadi Masela and Indonesia Deepwater Development (IDD) exemplify the government’s commitment to securing future national energy supplies.
Despite strong government commitment, the national oil and gas sector still faces significant challenges, including global oil price fluctuations, geological complexities, regional competition with other countries, and global decarbonization policies. Addressing these challenges requires strategic and collaborative approaches among stakeholders.
The government is also taking progressive steps, including simplifying regulations, expediting the permitting process, and offering fiscal incentives such as tax holidays, royalty reductions, and more competitive profit-sharing schemes.
Presidential Decree No. 1 of 2025 on the acceleration of downstreaming and national energy security has been issued. One of its implementations is inter-ministerial collaboration, such as with the Ministry of Marine Affairs and Fisheries (KKP), resulting in the issuance of over 300 KKPRL (Marine Spatial Utilization Activity Permits) by early 2025 to support oil and gas exploration and production activities.
The investment climate is also being improved through regulatory simplification, the provision of fiscal and non-fiscal incentives, and the strengthening of legal certainty and political stability to ensure investor confidence.
Indonesia's success in maximizing the role of oil and gas as a pillar of the energy transition will be crucial to national energy stability over the next 10–20 years. With a measured and realistic strategy, Indonesia does not need to choose between oil and gas or green energy; both can coexist as part of a roadmap toward a sustainable, just, and inclusive energy future.
