Indonesia Reports 1.4 Billion Liter Diesel Surplus as It Targets an End to Imports in 2026

A diesel surplus puts Indonesia's import plans in focus

Indonesia has recorded a surplus of approximately 1.4 billion liters of subsidized diesel fuel, giving the government a stronger basis for its plan to end diesel imports in 2026. Energy and Mineral Resources Minister Bahlil Lahadalia attributed the surplus to increased biodiesel production and expanded domestic refining capacity.

As of January 28, 2026, the government's strategy brings together several changes: a larger share of palm oil based biodiesel in fuel, a $7.4 billion upgrade to Pertamina's Balikpapan refinery, restrictions on imports by private retailers and plans to use excess diesel supply to produce aviation fuel.

The next steps depend on timing. The Balikpapan refinery must reach full operation, while a proposed increase in the mandatory biodiesel blend from 40% to 50% still faces technical and feasibility concerns. Bahlil has acknowledged that small diesel imports may be needed in the opening months of 2026 to keep supplies secure.

Indonesia's aim is to reduce its exposure to changes in global fuel prices and make greater use of domestic resources. The reported surplus supports that effort, although the government's plans extend beyond subsidized diesel to the wider market for diesel, aviation fuel and gasoline.

How B40 helped reduce demand for imported diesel

The B40 policy requires diesel sold domestically to contain 40% biodiesel. Its main ingredient is fatty acid methyl ester, known as FAME, made from palm oil, a resource abundant in Indonesia. Increasing the biodiesel share reduces the amount of fossil diesel needed in the fuel mixture.

Government figures put biodiesel consumption at 14.2 billion liters in 2025, compared with 9.3 billion liters in 2021. That is an increase of 4.9 billion liters, or about 53%, over the period. The expansion has made biodiesel a larger part of the country's fuel supply.

The ministry reported that consumption in 2025 reached 105.2% of its target of 13.5 million kiloliters. A kiloliter is 1,000 liters, so that target was equivalent to 13.5 billion liters. The figures show that use exceeded the government's planned level.

The rise in biodiesel use contributed to a reduction in fossil diesel imports of around 3.3 million kiloliters. Officials see this performance as support for moving toward an even higher mandatory blend, although introducing B50 will require further preparation.

Biodiesel and refinery expansion address different parts of the same supply problem. Biodiesel replaces some fossil diesel in the final mixture, while additional refining capacity allows Indonesia to produce more fuel domestically. Together, they underpin the government's expectation of a lasting surplus.

What the Balikpapan upgrade adds

Pertamina's Balikpapan project is part of the Refinery Development Master Plan, or RDMP, which aims to modernize Indonesia's refining capabilities. The upgrade carries an investment value of $7.4 billion and raises crude processing capacity from 260,000 barrels per day to 360,000.

The additional 100,000 barrels of daily capacity represents an increase of about 38% from the previous level. Processing capacity describes how much crude oil a refinery can handle; the project is intended to turn that larger volume into more domestically produced fuel.

Bahlil, speaking during a cabinet meeting, linked the expansion directly to Indonesia's diesel supply goals.

"The Balikpapan refinery will allow us to add around 100,000 barrels per day [in processing capacity], allowing us to reach a diesel surplus," Bahlil said.

A central addition is a Residue Fluid Catalytic Cracking unit, known as an RFCC. This equipment converts heavy oil fractions with lower value into lighter products with higher value, including diesel and gasoline. In simple terms, it helps the refinery make more useful fuel from the oil it processes.

The upgrade also improves product quality from Euro 2 to Euro 5 standards. These higher environmental standards reduce harmful emissions and improve engine performance, bringing fuel quality closer to more stringent international requirements. The RFCC unit contributes to the refinery's ability to produce fuels meeting those standards.

Why a surplus could support aviation fuel production

Indonesia plans to direct excess diesel supply toward aviation fuel production instead of leaving the surplus unused. Officials see this as another way to reduce imports, using expanded refining capacity to process surplus stocks into Avtur, the aviation fuel used by jet engines in the country.

The aviation fuel import figures show the scale of that challenge. Indonesia imported nearly 1.8 million kiloliters in 2025, compared with 278,000 kiloliters in 2024. The later figure was more than six times the earlier one, showing a sharp increase in the amount supplied from abroad.

Bahlil said the proposed B50 mandate could create more excess supply for conversion into aviation fuel. B50 would raise the biodiesel share of the diesel mixture to 50%, further reducing the fossil diesel needed to meet domestic demand.

"If we can further push the mandatory mandate to B50, we should be able to get 4 million tons of surplus, which we will convert into aviation fuel," Bahlil said.

The proposed conversion links two government objectives: managing an expected diesel surplus and reducing reliance on imported jet fuel. Its scale depends on the additional surplus that officials expect from B50 and on the country's ability to process that supply into aviation fuel.

The timetable for ending diesel imports

The Ministry of Energy and Mineral Resources has indicated that a ban on diesel imports by private fuel retailers will take effect in April 2026. From that point, diesel demand must be supplied by domestic refineries or through Pertamina.

Bahlil has allowed for a transition at the start of the year. If Balikpapan reaches full operation around March, limited imports may continue through January and February to cover national supply needs. The timing of full refinery operation is therefore central to the import plan.

The minister explained how the government might bridge that period.

"If full operations start in March, then in January and February there may still be small imports to cover supply needs," Bahlil explained.

Once the refinery is fully online, officials project an annual diesel surplus of roughly 3 million to 4 million kiloliters. That would put Indonesia in a position to move from being a net importer toward becoming a potential diesel exporter.

The proposed B50 mandate is planned for the second half of 2026. The government has not given an exact implementation date. Its successful introduction, alongside the Balikpapan expansion, is a central part of the projected shift in diesel supply.

The key dates in the fuel transition

Indonesia's plans stretch across several years, with growth in biodiesel use preceding the proposed import restrictions. The schedule also shows that diesel measures come before the planned changes to gasoline.

• 2021: Biodiesel consumption stood at 9.3 billion liters.
• 2024: Indonesia imported 278,000 kiloliters of aviation fuel.
• 2025: Biodiesel consumption reached 14.2 billion liters, while aviation fuel imports rose to nearly 1.8 million kiloliters.
• January and February 2026: Limited diesel imports may be needed if Balikpapan has not reached full operation.
• March 2026: Bahlil identified this as a possible starting point for full refinery operation.
• April 2026: The ministry has indicated that the diesel import ban for private fuel retailers will take effect.
• Second half of 2026: The government plans to introduce the B50 mandate.
• 2027: Officials plan to begin phasing out imports of RON 92, 95 and 98 gasoline and require a 10% ethanol blend in gasoline sold domestically.

The schedule places refinery readiness, retailer supply arrangements and biodiesel preparation within the same year. Maintaining adequate fuel supplies during those changes is part of the reason the government has left room for limited imports early in 2026.

Technical concerns could affect delivery

Indonesia is currently one of Asia's biggest importers of gasoil with high sulphur content, with imports ranging from 70,000 to more than 150,000 barrels per day. Moving from that position to potential diesel exports would require the planned domestic supply increases to arrive on schedule.

Market participants have expressed skepticism about the timetable for both the Balikpapan upgrade and higher biodiesel blends. The government's export prospects depend heavily on successful delivery of the RDMP project and the B50 programme.

RFCC units can be technically difficult to start up. Similar projects elsewhere in the region have faced delays and technical problems, creating concern about whether Balikpapan will meet its targets. The additional capacity must become dependable operating capacity for it to support the planned reduction in imports.

B50 brings another set of practical concerns. Higher biodiesel blends can affect engine compatibility and cold flow properties, meaning how readily fuel flows at lower temperatures. Rigorous testing and adjustments to infrastructure are needed to address those issues.

The strong biodiesel consumption figures have encouraged plans for a higher blend, while the technical questions concern how that blend will work across the fuel system. Both production and reliable use matter to the government's proposed transition.

Private retailers focus on fuel quality and supply choice

Private fuel retailers have raised concerns about the proposed import ban. Hadi Ismoyo, president director of PT Petrogas Jatim Utama Cendana, warned that it could narrow the operating space for private businesses in the downstream sector, which covers fuel processing, distribution and sales.

Hadi also warned that the policy could create a perception of fuel supply coming from a single source through Pertamina. His concerns extend beyond how much diesel is available to the specifications that retailers need for their customers.

"Capacity may be sufficient quantitatively, but that does not necessarily mean product specifications and quality will match the needs of private retailers," Hadi said.

The April restrictions would change how those retailers obtain diesel. Access to domestic supply, suitable product quality and dependable delivery will be central to their ability to operate under the new arrangements.

Indonesia currently produces diesel with a cetane number of 51, while the government wants fuel quality aligned with Euro 5 standards. Cetane number describes diesel's ignition quality, or how readily it ignites in an engine. Meeting the broader quality objective requires substantial upgrades to existing refinery infrastructure.

Gasoline and ethanol are next on the agenda

Bahlil has announced that officials are designing a roadmap to phase out imports of gasoline with octane ratings of 92, 95 and 98 starting in 2027. These are the middle and higher octane grades identified in the government's plan.

RON, or research octane number, describes a gasoline's resistance to unwanted early ignition in an engine. The proposed phaseout focuses on those specified grades and would rely on processing more crude oil in domestic refineries instead of importing finished gasoline.

The government is also preparing to require a 10% ethanol blend in all gasoline sold domestically from 2027. Ethanol would replace part of the fossil fuel content, extending the biofuel approach already being used in diesel.

The ethanol plan is intended to reduce dependence on imported fossil fuels and support agriculture by creating a market for ethanol made from sugar. Alongside the gasoline import roadmap, it forms part of a broader effort to use domestic refining and renewable biofuels to meet fuel needs.

Indonesia's strategy therefore combines more refining capacity, higher fuel quality and larger biofuel shares. The reported subsidized diesel surplus is the immediate development, while the import restrictions, aviation fuel conversion and gasoline changes are the next stages officials are pursuing.

Key Points

• Indonesia has reported approximately 1.4 billion liters of surplus subsidized diesel.
• Biodiesel consumption reached 14.2 billion liters in 2025, up from 9.3 billion liters in 2021.
• The $7.4 billion Balikpapan upgrade raises crude processing capacity from 260,000 to 360,000 barrels per day.
• The government aims to end diesel imports in 2026, with restrictions on private retailers indicated for April.
• Limited imports may continue in January and February, depending on refinery readiness.
• B50 is planned for the second half of 2026, with excess diesel intended for aviation fuel production.
• Refinery startup, engine compatibility and private retailers' quality requirements remain practical concerns.
• Plans for 2027 include phasing out imports of RON 92, 95 and 98 gasoline and introducing a mandatory 10% ethanol blend.