Indonesia Eyes Gasoline From Coal as China Firms Offer Technology Partnerships

Indonesia wants to turn some of its abundant low-rank coal into something it still imports in large quantities: transportation fuel.

President Prabowo Subianto has instructed his energy team to explore producing gasoline, gas and other energy products from domestic coal as part of a wider effort to reduce Indonesia's exposure to imported fuel and global supply disruptions.

Energy and Mineral Resources Minister Bahlil Lahadalia said on September 21 that the required technology already exists and several companies have approached Indonesia about cooperation.

China was specifically mentioned as a country with experience in coal-based gas production.

But Indonesia has not yet approved a commercial coal-to-gasoline plant.

The initiative remains under evaluation.

Prabowo Wants More Domestic Energy

Prabowo publicly reiterated the idea on September 19 at an event marking the centenary of Pondok Modern Darussalam Gontor.

After discussing Indonesia's use of palm oil in diesel production, he said the government also intends to produce gasoline from coal.

The idea fits a broader energy strategy he has articulated repeatedly.

Earlier in 2026, Prabowo said Indonesia planned to develop downstream coal products including diesel and gas as part of its industrialization and energy-security program.

The policy objective is straightforward: the more fuel Indonesia can produce domestically, the less vulnerable it becomes to imported energy shortages and volatile global markets.

Coal Can Technically Become Gasoline

The technology is well established.

The International Energy Agency defines coal-to-liquids, or CTL, as a process that converts coal into liquid hydrocarbons.

One common route begins by gasifying coal into syngas, a mixture mainly composed of hydrogen and carbon monoxide.

That syngas can then be processed through Fischer-Tropsch synthesis or methanol-to-gasoline technology to produce synthetic liquid fuel.

Another route uses direct coal liquefaction, in which coal reacts with hydrogen.

So “gasoline from coal” is not a literal one-step conversion.

It requires a sophisticated chemical-processing chain.

Coal-to-Gas Uses a Related Route

Gas production follows a similar starting point.

Coal is first converted into syngas and can then be transformed into synthetic methane.

The IEA classifies this as coal-to-gas.

That distinction matters because synthetic gas, methanol and gasoline are different products.

Each requires a different plant configuration, market and investment model.

Bahlil's comments refer broadly to coal producing “gas or oil,” but the final product Indonesia intends to prioritize has not yet been specified in a detailed project announcement.

Low-Rank Coal Is the Main Feedstock Being Discussed

Indonesia has large quantities of low- and medium-calorific-value coal.

Low-rank coal generally contains more moisture and produces less heat per unit than higher-grade coal.

That often makes it less valuable for export.

A technical paper published through Indonesia's Energy Ministry research system noted that a large share of Indonesia's coal reserves falls into the lignite or low-rank category.

Indonesia's Geological Agency also identifies Kalimantan and Sumatra as the main regions for national coal resources and classifies deposits by calorific value and quality.

For policymakers, conversion technologies offer a potential way to extract more economic value from lower-grade coal.

Indonesia Has Studied Coal Conversion for Years

This is not Indonesia's first attempt to explore coal-derived fuels.

The Energy Ministry has studied technologies including brown-coal liquefaction, upgrading, coal-water mixtures and gasification for many years.

In 2013, officials inspected a pilot facility in Karawang producing JGC Coal Fuel from low-rank coal.

The fuel was designed as an alternative to heavy oil for certain industrial applications.

Those earlier projects show that the underlying concept has long been part of Indonesia's coal-downstreaming discussions.

What is changing now is the policy urgency around energy security.

Indonesia Already Has a Major Coal-Gasification Project

A more concrete example emerged in August 2026.

Indonesia launched the development of a coal-to-methanol project in East Kutai, East Kalimantan.

The project is designed to process around 7.70–7.78 million tonnes of 3,400 kcal/kg coal annually and produce approximately 2 million tonnes of methanol per year.

Commissioning is targeted for 2029.

The Energy Ministry says the project could replace part of Indonesia's methanol imports, which reached about 1.3 million tonnes worth Rp7.1 trillion in 2025.

Methanol Is Not Gasoline

The East Kutai project should not be described as Indonesia's coal-to-gasoline plant.

Its primary product is methanol.

Methanol is used in chemicals and can also serve as an intermediate for other fuel technologies.

Producing gasoline would require an additional conversion route or a different plant configuration.

Still, the project demonstrates that large-scale gasification of low-rank Indonesian coal is moving closer to industrial implementation.

Chinese Companies Have Approached Indonesia

Bahlil said several companies have submitted cooperation offers and cited China as a country where low-rank coal is already processed into gas.

He did not disclose the companies.

Neither project locations nor investment values were announced.

There is also no confirmed construction timetable.

That means it would be premature to say China has agreed to build a gasoline plant in Indonesia.

The verified fact is narrower: companies have offered cooperation and Indonesia is evaluating the proposals.

The Government Is Still Assessing the Options

Indonesia's director general for minerals and coal, Tri Winarno, said the ministry is evaluating technology and the country's coal potential.

He cited international experience with coal liquefaction, including South Africa.

That puts the program's current status into perspective.

There is political direction.

There is existing technology.

There are potential partners.

But there is not yet a finalized commercial project.

The Economics May Be Harder Than the Chemistry

A technology can work without being commercially competitive.

Coal-to-liquids facilities are complex and capital intensive.

Their economics depend on several variables:

coal costs, oil prices, hydrogen requirements, electricity and water consumption, financing, plant scale and operating efficiency.

If international oil prices fall, synthetic coal-derived gasoline can become less competitive.

If oil is expensive or global supplies are disrupted, domestic production may become more strategically valuable.

That means any Indonesian project will need both a technical feasibility study and a detailed economic case.

Cutting Imports Is Not Automatic

Producing domestic synthetic fuel could theoretically replace part of Indonesia's imported petroleum products.

But gross production volume does not equal foreign-exchange savings.

The government would need to account for imported equipment, catalysts, financing costs and any foreign inputs required by the plant.

It would also need to compare the final production cost with conventional fuels.

Only then can policymakers estimate the actual economic benefit.

Carbon Emissions Are Another Major Issue

Energy security is not the same thing as low-carbon energy.

Coal remains the most carbon-intensive fossil fuel.

The IEA estimates coal combustion was responsible for more than 40% of global energy-related and industrial-process CO? emissions in 2024.

Carbon capture, utilisation and storage can reduce emissions from some coal facilities, but deployment remains limited globally.

The IEA says operational CO? capture capacity at coal-using facilities represented only a very small fraction of total coal-related emissions as of 2025.

Indonesia's East Kutai methanol project is being designed with carbon capture and storage integration, indicating that emissions management is already part of the domestic coal-gasification discussion.

Coal-Derived Fuel Should Not Automatically Be Called “Clean”

Coal conversion can support domestic supply security and resource downstreaming.

That does not automatically make the resulting gasoline or gas a clean fuel.

Its environmental performance depends on the entire production process.

That includes energy inputs, methane emissions from mining, carbon released during conversion and whether carbon capture is used.

For Indonesia, this creates a policy trade-off between energy security, economic value and climate impact.

B50 Provides the Political Context

Prabowo has framed the coal proposal alongside efforts to expand domestically sourced fuels.

Indonesia launched its mandatory B50 biodiesel program in July 2026, increasing the palm-oil-based component in diesel fuel to 50%.

The government sees greater use of domestic raw materials as a way to lower import dependence.

But biodiesel and coal-derived gasoline have very different cost structures and emissions profiles.

Success in one technology does not guarantee success in the other.

Energy Independence Has Been a Long-Running Priority

Prabowo has emphasized energy self-sufficiency since the beginning of his administration.

In his 2024 inauguration speech, he argued that Indonesia must be prepared for a world in which international conflict could disrupt energy supplies.

The government is now pursuing multiple routes at once: upstream oil and gas, biofuels, solar power, coal gasification and other domestic resources.

Coal-derived fuel is one part of that wider portfolio.

What Comes Next?

Five details will determine whether the idea turns into a real industry.

First, which conversion technology Indonesia chooses.

Second, which investors or technology partners participate.

Third, where a plant would be built and how large it would be.

Fourth, the projected cost per litre of fuel.

And fifth, what emissions-control system would be required.

Until those questions are answered, the coal-to-gasoline plan should be described as a policy direction under technical and commercial evaluation.

Bottom Line

Indonesia is exploring ways to convert domestic low-rank coal into gas and synthetic liquid fuels as President Prabowo Subianto pushes for greater energy self-sufficiency.

Energy Minister Bahlil Lahadalia says the technology exists and several companies have offered cooperation.

Coal-to-liquids technology can indeed turn coal into synthetic hydrocarbons through processes involving gasification, syngas and chemical synthesis.

Indonesia also already has a coal-to-methanol project under development in East Kalimantan.

But a dedicated commercial coal-to-gasoline project has not yet been finalized.

The central question is therefore no longer whether the chemistry is possible.

It is whether Indonesia can make the technology economically competitive, strategically useful and environmentally manageable.