An analyst has questioned the feasibility of President Prabowo Subianto’s instruction to the National Energy Resilience and Downstream Task Force to revive coal gasification of dimethyl ether (DME) projects in Sumatra and Kalimantan, which is aimed at reducing Indonesia’s reliance on liquefied petroleum gas (LPG) imports is questionable.

Ghee Peh, an energy finance analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), said the cost of building a 1.4-million-ton DME plant in Sumatra is estimated at $2.6 billion, with an additional $520 million in lost opportunity costs over 10 years.

“The total cost of this project would reach US$3.1 billion, but its benefits remain uncertain,” Peh said as quoted in a statement on Thursday, March 27, 2025.

He highlighted that DME production would be significantly more expensive than importing LPG.

“Indonesian consumers would end up paying 42 percent more per unit of energy compared to LPG,” he cited. “Even with heavy investment, the project would only replace 15 percent of Indonesia’s LPG imports, making its economic justification highly questionable.”

A key concern is the high production cost of DME. According to Peh, DME production costs in Indonesia would range between $614 and $651 per ton, far exceeding the energy-equivalent LPG price of $431 per ton. He pointed to China’s Shanxi Lanhua, a major coal and chemical company, which ceased its DME production in 2023 due to consistent financial losses.

“If a large-scale producer in China couldn’t make DME profitable, Indonesia will likely face similar struggles,” Peh warned.

To finance the project, the government plans to tap into Danantara, Indonesia’s new sovereign wealth fund, instead of relying on foreign investors. While this approach ensures project completion, Peh argues that it does not address the project’s fundamental economic flaws.

“Foreign investors withdrew from previous DME initiatives because they recognized the financial risks,” he noted.

Given the high costs, uncertain returns, and international examples of failure, Peh questions whether the DME project is the right solution for Indonesia’s energy security.

“With a price tag this high and no clear path to profitability, the government must reconsider whether DME is a sustainable investment,” he concluded.