Indonesia was once closely associated with petroleum exports and membership in the Organization of the Petroleum Exporting Countries. Its present oil sector has a different defining problem: domestic fuel demand has grown while crude production from mature fields has declined.
The country still produces substantial volumes of oil, and fields in Sumatra and East Java remain nationally important. However, production is no longer sufficient to support Indonesia’s large transport market and refining system. The government must therefore manage two connected priorities—raising upstream output and reducing the amount of crude and refined fuel that must be purchased abroad.
Rokan and Cepu Carry a Large Share of National Production
Indonesian crude production fell from more than 800,000 barrels per day in 2016 to approximately 581,000 barrels per day in 2024. Many producing areas have operated for decades, and natural reservoir decline continues to place downward pressure on output.
Two developments have become especially important: the Rokan Block in Sumatra and the Cepu Block in East Java.
Rokan includes the Duri and Minas fields, both central to Indonesia’s petroleum history. Pertamina Hulu Rokan assumed operatorship from Chevron in 2021 and has since pursued an intensive programme of drilling, workovers, enhanced oil recovery, and infrastructure renewal. The block accounted for roughly 27% of national production in 2024.
Duri is known for large-scale steam flooding, which heats heavy oil and allows it to flow more easily through the reservoir. Minas and other Rokan fields increasingly depend on infill wells, reservoir management, and technology designed to recover additional oil from mature formations. These techniques can slow decline, but they require continuous capital spending and high operational discipline.
The Cepu Block provides a different production story. Operated by ExxonMobil Cepu Limited in partnership with Pertamina and regional interests, its Banyu Urip field became one of Indonesia’s most productive and lowest-cost oil assets. Technical assessments have increased the estimated recoverable potential of Banyu Urip far beyond expectations at the time of development.
New infill and clastic wells brought additional production online in 2025. The programme was designed to add as much as 30,000 barrels per day and extend the productive life of the field. By late 2025, the Cepu Block had produced more than 700 million barrels and was contributing close to 30% of national oil output.
Indonesia’s production base is therefore highly concentrated. Strong performance at Rokan and Cepu can affect the national result, while operational problems or accelerated decline at either development can quickly widen the import requirement.
The 2025 Increase Did Not End the Long-Term Production Problem
Indonesia recorded average oil lifting of approximately 605,300 barrels per day in 2025, slightly exceeding the government’s annual budget target. This represented an improvement after years in which national targets were frequently missed.
The result was supported by additional drilling, field optimisation, new production at Banyu Urip, and efforts to maintain output from mature Pertamina assets. It demonstrated that decline can be slowed or temporarily reversed when investment and project execution are concentrated on existing producing areas.
However, the increase does not yet represent a full structural recovery. Indonesia’s older fields have high natural decline rates, and new wells are often required simply to replace production lost elsewhere. Small discoveries and marginal-field projects can support the national total, but they do not automatically provide the scale of a new Rokan or Banyu Urip.
The government has promoted a long-term goal of reaching one million barrels per day. Achieving that level would require more than improvements to existing fields. It would depend on large discoveries, faster project approval, enhanced oil recovery, investment in frontier basins, and commercial terms capable of competing with opportunities in other producing countries.
Exploration potential remains in eastern Indonesia, deepwater areas, and basins that have received less attention than the mature western producing regions. These areas can be technically difficult and expensive. Their development may require subsea systems, long pipelines, new terminals, or other infrastructure that cannot be justified without sufficiently large discoveries.
Refinery Expansion Addresses a Different Import Dependence
Indonesia imports both crude oil and refined petroleum products. Domestic production does not supply enough feedstock for the refining system, while existing refineries have not always produced enough petrol, diesel, aviation fuel, and LPG to meet national consumption.
The country’s island geography adds another layer of complexity. Fuel must be transported through terminals, depots, ships, trucks, and pipelines to communities spread across a large archipelago. Pertamina’s national distribution role therefore extends far beyond operating refineries or retail stations.
Balikpapan is the most important current refinery expansion. The Refinery Development Master Plan increased design processing capacity from 260,000 to 360,000 barrels per day. New facilities improve refinery complexity, allow a wider range of crude to be processed, and support production of fuels meeting the stricter Euro V standard.
The project also includes a residue fluid catalytic cracking unit, a very large crude carrier mooring system, pipelines, and two new storage tanks at Lawe-Lawe with capacity of one million barrels each. Initial operation of major units began during 2025.
Balikpapan will increase domestic fuel output, but greater processing capacity does not remove the upstream shortage. Unless crude production also rises, some of the additional refinery feedstock will still need to be imported. Refinery expansion can reduce purchases of finished fuel while increasing the need for imported crude.
Other proposals, including the planned Tuban refinery and petrochemical complex, have been discussed as part of Indonesia’s longer-term downstream strategy. Their final effect will depend on financing, partnerships, construction progress, and future demand.
Pertamina Leads, but Foreign Investment Remains Necessary
State-owned Pertamina controls a large part of Indonesia’s oil value chain. Through Pertamina Hulu Energi and its regional subsidiaries, it operates major upstream assets including Rokan. Through Kilang Pertamina Internasional, it manages the principal refining system, while other units handle shipping, storage, distribution, and retail sales.
Foreign operators remain important because Indonesia needs external capital, technology, and experience, particularly for deepwater exploration and complex reservoirs. ExxonMobil’s role at Cepu shows how an international operator can remain central to national production even within a sector led by a state company.
Upstream activities are conducted through production-sharing contracts overseen by SKK Migas. Indonesia uses both cost-recovery and gross-split structures. Updated rules have increased flexibility by allowing qualifying contracts to move between the two systems.
This flexibility addresses a long-standing investment question. Mature fields, marginal projects, deepwater developments, and frontier exploration do not have the same economics. A contract suitable for a low-cost producing field may not attract investment to a remote area requiring billions of dollars in new infrastructure.
Indonesia must also manage domestic market obligations, local-content rules, permitting, land access, and coordination between national and regional authorities. Each requirement may serve a policy purpose, but together they can affect project timing and investor returns.
Biodiesel Reduces Diesel Imports but Does Not Replace Crude Oil
Indonesia has used palm-oil-based biodiesel as a direct response to petroleum import dependence. The mandatory B40 programme requires a blend containing 40% biodiesel and 60% conventional diesel.
Domestic biodiesel use reached approximately 14.2 million kilolitres in 2025. The government estimated that B40 reduced diesel imports by around 3.3 million kilolitres while supporting the domestic palm-oil industry.
The programme is strategically important because diesel is used across road transport, mining, agriculture, industry, and electricity generation. Replacing part of the fossil component reduces the foreign-exchange cost of imported fuel.
Biodiesel does not solve the wider oil imbalance. Indonesia still requires petrol, aviation fuel, LPG, petrochemical feedstocks, lubricants, and crude for refineries. Electric vehicles, public transport, fuel efficiency, and refinery modernisation will therefore remain part of the same energy-security effort.
Indonesia Needs Sustained Investment Rather Than a Single Production Recovery
Indonesia’s 2025 oil result showed that production decline is not irreversible. New wells at Banyu Urip, continued activity in Rokan, and optimisation of mature assets lifted national performance. The larger question is whether those gains can be repeated as existing reservoirs continue to age.
The country’s oil strategy now depends on several developments moving together. Pertamina must maintain output from mature fields, international companies must remain willing to invest, new exploration must produce commercial discoveries, and refinery projects must deliver reliable fuel supply.
Indonesia is unlikely to return quickly to the export-led oil model of earlier decades. A more realistic objective is to narrow the gap between production and consumption while reducing purchases of finished fuel. Success will be measured not by one annual target, but by whether the country can establish a stable production base, complete refinery upgrades, and prevent import dependence from growing faster than the wider economy.
