MAY 2026
Indonesia remains one of Asia’s largest importers of LPG, with imports supplying more than 75% of the country’s total domestic demand. LPG is a critical household fuel, widely used for cooking following the government’s long-standing kerosene-to-LPG conversion program. As a result, ensuring secure and reliable LPG supply has become a central pillar of Indonesia’s energy policy.
Indonesia’s annual LPG imports rose by around 9% in 2025 to 7.5 MMt/y. Poten estimates 2025 consumption rose by 4% to around 9.9 MMt, while domestic LPG production fell 8% to 2.4 MMt/y.
LPG production fell during 2022 and 2023 in tandem with lower natural gas production. The lower gas production was a result of natural declines in ageing, mature fields and delays in some projects.
For example, the BP-operated Tangguh Train 3 national strategic project started in 1Q 2023 instead of 4Q 2021, following which, production has been steadily increasing.
However, import requirements have also grown as increases in consumption continue to exceed production growth.
Despite its heavy reliance on imported LPG, Indonesia has been relatively insulated from recent supply disruptions linked to the closure of the Strait of Hormuz. This resilience reflects years of deliberate efforts to ensure supply diversification, particularly hedging away from Middle East exposure.
The United States has emerged as Indonesia’s dominant LPG supplier, accounting for nearly two-thirds of imports in 2025. This share has increased further in 2026 to an estimated 74% of total import volumes. State-owned energy company Pertamina underpins this strategy through long-term supply contracts with major US exporters such as Phillips 66 and Energy Transfer, reducing exposure to geopolitical risks and transit chokepoints.
In addition to long-term contracts, Pertamina has supplemented supplies in 2026 via spot purchases, primarily from the US but also from Australia and Algeria. These cargoes were secured at high premiums to CP on a delivered basis, reflecting tighter market conditions.
These additional volumes have been crucial in offsetting reduced flows from the Middle East following the Strait of Hormuz closure, which curtailed shipments from Saudi Arabia, Kuwait, Qatar and the United Arab Emirates. Under normal conditions, these countries together supply 15–20% of Indonesia’s LPG imports, making the disruption significant but ultimately manageable.
Policy ambitions weighed against structural realities
Looking ahead, Indonesia has announced ambitious plans to reduce fuel imports, beginning with an aim to end diesel imports from 2026 and gradually lower other fuel imports through 2030. However, similar efforts to reduce LPG imports in the past—such as increasing domestic gas production, developing coal-to-dimethyl ether (DME) projects and promoting electric induction stoves—have seen limited implementation and mixed results.
Most recently, Energy and Mineral Resources Minister Bahlil Lahadalia stated that Indonesia is exploring the production and use of compressed natural gas (CNG) as a potential alternative to imported LPG.
CNG is currently used in some hotels, restaurants and kitchens that support the government’s free meal programs. The plan is to expand usage by developing 3 kg cylinders, which are the same size of LPG containment that low-income households utilize for residential use.
The idea is to utilize natural gas from domestic gas fields to keep prices lower compared to imported LPG.
There are currently 33 CNG trading companies operating in Indonesia and total production ranges between 30-50 MMcf/d. To convert CNG from cubic feet to metric tons, one needs to account for the pressure, temperature, and composition of the gas. However, based on standard industry conversions for energy calculations, the production roughly equates to 228,000-380,000 t/y.
While CNG could contribute marginally to reducing reliance on LPG imports, large-scale substitutions would require significant infrastructure investment, regulatory alignment and behavioral shifts among consumers.
CNG is more complicated to handle and may require more maintenance because it is lighter gas, which will require more pressure to compress. CNG is also less efficient when compared to LPG because of lower Btu content.
While introducing CNG for residential use may provide another option for consumers, its widespread adoption may be quite difficult and costly. As a result, LPG imports are expected to continue to remain structurally important in the near term, reinforcing the need for supply diversification and risk mitigation strategies.
This excerpt is taken from Poten’s LPG in World Markets. Complete the form below to learn more or request a trial.