Minister of Energy and Mineral Resources, Bahlil Lahadalia, proposes that the country's 2026 energy state budget be based on an Indonesian Crude Price (ICP) range of US$60–80 per barrel, citing declining global demand, oversupply, and geopolitical uncertainties.

“In the 2026 draft state budget, we propose an ICP assumption of US$60 to 80 per barrel. This is based on our January to May average of US$70.5, with May at US$62.75 and June falling further to US$59.33,” Bahlil told a hearing with Energy Commission XII of the House of Representatives (DPR) in Jakarta on Wednesday, July 2, 2025.

He said that global oil prices remain volatile due to tensions in the Middle East − home to over 30 percent of the world’s oil supply − yet sluggish global economic growth has softened demand, offsetting upward price pressure.

The minister reported that Indonesia’s oil lifting target for 2025 has been revised upward to 905,000 barrels per day (bpd), from the projected 580,000 bpd in 2024, following technical assessments and inter-ministerial coordination.

“With hard work and coordination across the board, including SKK Migas, we are optimistic we can reach 905,000 bpd by the end of December 2025,” Bahlil said. “However, 2026 will require even more intense efforts.”

On gas, Bahlil highlighted that several cooperation contract contractors (K3S), including bp, Medco, and Pertamina Hulu Mahakam, have exceeded their production targets, contributing positively to the national energy balance.

“While gas production is outperforming expectations, oil remains our main concern,” he admitted. “Even before sleep, I’m still thinking about how to lift oil output.”

For LPG, the government proposed a volume of 8.31 million metric tons for subsidized 3-kg cylinders in 2026. Additionally, the ministry is reviewing policies to equalize retail prices, particularly in remote areas, to reduce fiscal inefficiencies.

“We spend up to US$4.79 billion a year on LPG subsidies,” Bahlil said. “If we don’t streamline pricing, we risk continuous disparity between state expenditure and actual benefit.”

Electricity subsidy

Electricity subsidies in the 2026 draft budget are proposed at US$11.82 billion, with US$6.28 billion allocated for 23.1 million subsidized household customers, including micro-businesses, small factories, and public services, like village offices.

Diesel subsidies

The government also proposed keeping diesel fuel subsidies at 6 US cents per liter, while the subsidized retail price remains at 41 US cents per liter, despite a market value of 62 US cents. Diesel remains vital for marine and rural transportation, agriculture, and micro-enterprises.

Bahlil concluded by emphasizing that all budgetary assumptions are tied to macroeconomic indicators, including a rupiah exchange rate of Rp16,500–Rp16,900 per US dollar and inflation between 1.5–3.5percent.

Remote villages electrification

Bahlil also emphasized the importance of rural electrification, sharing his own childhood experience of living without electricity.

“I was born in a village where we used kerosene lamps. I understand what it means to live without electricity,” he said. “(Seventh) President Jokowi has directed us to prioritize these communities. There are around 546 villages still without access to power. We must act.”

He cited that some of these villages could be connected via existing networks with help from local governments, while others would need independent grid solutions.

“This is not a PLN budget issue − it’s national priority, part of our roadmap for energy sovereignty,” he stressed.

Bahlil expressed readiness to collaborate with legislators in finalizing the budget, noting that the proposals were in early stages and subject to further deliberation.

“We still have room to adjust, and I welcome all bright ideas from Commission XII. Together, we’ll refine this for the sake of our nation,” he said.