Indonesia Plans to Shift Fuel Sourcing from Singapore

Indonesia is shifting away from decades-long dependence on Singapore for refined fuel imports — a move that signals major changes in regional energy trade and national energy policy. With over 54 percent of its gasoline and diesel historically sourced from Singapore, the city-state has served as Indonesia’s dominant external fuel supplier.

In 2024 alone, Indonesia’s total oil imports cost the country US$36.2 billion, contributing significantly to foreign exchange outflows. Singapore, for its part, exported refined petroleum products globally valued at over US$57 billion in 2024. A substantial portion of these exports went to Indonesia, reinforcing the city-state’s strategic importance in Southeast Asia’s fuel trade network. 

That dynamic is now poised to change. In May 2025, Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan announced a directive to Pertamina, the state-owned energy company, to halt fuel imports from Singapore.

For Indonesia, reducing fuel imports is expected to ease foreign exchange pressures, improve the country’s trade balance, and support its broader energy independence goals. A more self-reliant refining sector could also contribute to industrial development, job creation, and long-term energy price stability.

Strategic rebalancing through energy trade

At the core of this policy shift is Jakarta’s broader strategy to gain leverage in ongoing tariff negotiations with the United States. By diversifying its oil imports to include U.S. crude, Indonesia aims to reduce reliance on a single supplier and gain diplomatic advantage in pushing for trade exemptions, particularly for biodiesel and other strategic exports.

This decision also reflects domestic priorities. With energy demand rising, the government is under increasing pressure to reduce import dependency, improve fuel security, and advance its energy independence agenda. Reducing reliance on Singapore also helps mitigate geopolitical and supply chain risks.

Financial considerations are equally pressing. In 2024, Indonesia allocated 186.9 trillion rupiah (US$12 billion) to energy subsidies, including 113.3 trillion rupiah (US$7.2 billion) for fuel and LPG alone. These escalating costs have reignited debate over the long-term viability of blanket subsidies.

Refining infrastructure and the push for capacity expansion

Pertamina has confirmed it will comply with the government’s directive to diversify crude oil imports, including sourcing more from the United States. However, analysts caution that Indonesia’s refining infrastructure is not yet fully equipped to handle such a realignment. The country’s existing refineries are primarily configured to process medium-sour crude from the Middle East. In contrast, U.S. crude tends to be light sweet, which is not readily compatible without significant reconfiguration.

As of the end of 2023, Indonesia’s total refining capacity stood at around 1.15 million barrels per day (bpd), a figure that has remained stagnant since the 1990s, with no new refinery built since 1994. This prolonged stagnation underscores a critical vulnerability in Indonesia’s energy security and limits its flexibility in adapting to global supply shifts. Refining U.S. crude may require costly technical upgrades and risk operational inefficiencies if not managed properly.

To address these challenges and meet long-term energy demands, the government has launched an ambitious strategy to increase refining capacity by an additional 1 million bpd. This includes the construction of new refineries across key regions such as Kalimantan, Sulawesi, Java, Maluku-Papua, Sumatra, and Eastern Indonesia, significantly expanding upon earlier plans that focused on a single 500,000 bpd facility.

Central to this effort are high-profile projects like the Balikpapan Refinery Development Master Plan (RDMP) and the Tuban Grass Root Refinery (GRR). The government is actively promoting public-private partnerships to finance and develop these projects, while also courting foreign investment from countries including the Middle East, Russia, and East Asia.

These developments are expected to not only modernize the refining sector but also provide the flexibility needed to process a broader range of crude types, strengthening Indonesia’s energy resilience.

Economic impact on Singapore

With over half of Indonesia’s refined fuel imports previously sourced from Singapore, this change could affect trade flows, tanker movement, and regional pricing dynamics. While the short-term impact may be notable, Singapore’s diversified energy export base, global trading network, and advanced logistics infrastructure are expected to mitigate long-term effects. The city-state remains a key regional fuel hub, and its broader role in Asia’s oil trade may buffer against the loss of one major buyer.

Looking Ahead: Energy sovereignty and strategic risk management

Indonesia’s planned fuel import reduction marks a pivotal moment in its energy policy, with implications extending beyond economics to diplomacy and regional trade. The country’s success will depend not only on infrastructure execution but also on how effectively it navigates changing geopolitical dynamics. Stakeholders across the energy value chain — refiners, traders, investors — should watch closely as Indonesia transitions from dependency to greater self-determination.

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