Indonesia is advancing plans to deploy modular oil refineries as part of an effort to cut reliance on imports and process more crude domestically, including supplies from the United States. Backed by an US$8 billion agreement between the country’s sovereign wealth fund and U.S. engineering firm KBR Inc., the initiative envisions a network of small, prefabricated refineries that can be built faster and at lower upfront cost than conventional mega-facilities. Priority sites include Natuna and Surabaya, regions positioned to strengthen Indonesia’s refining base.
The strategy reflects Jakarta’s push to address persistent vulnerabilities in its energy system. Indonesia, Southeast Asia’s largest economy, has long struggled with a refining deficit that forces it to import significant volumes of fuel despite being a crude producer. Modular refineries are seen as a way to expand processing capacity incrementally while avoiding the long timelines and financing challenges of large-scale projects. By focusing on domestic and U.S. crude feedstock, the government also aims to deepen ties with Washington as part of its energy security agenda.
Skepticism remains over whether modular refineries can deliver at scale. Analysts warn that while they may be suitable for local markets and quick deployment, they are less efficient for petrochemical integration and carry higher per-unit operating costs compared to traditional refineries. Even so, the government views the program as a pragmatic step toward reducing import dependence, with potential to strengthen regional fuel supply resilience while advancing strategic partnerships with the U.S.