Indonesia's DME Initiative: Balancing Energy Security and Economic Challenges

Background on DME Development

Indonesia is pursuing the development of Dimethyl Ether (DME) as a substitute for Liquefied Petroleum Gas (LPG), with PT Bukit Asam Tbk (PTBA) leading the initiative ¹

. The project involves producing DME through coal gasification, aiming to reduce dependence on LPG imports and enhance energy security.

Financial and Economic Challenges

The primary challenge facing the DME project is its financial feasibility. Eko Prayitno, Corporate Secretary Division Head at PTBA, highlighted that the economic price of DME is currently higher than LPG, making it less competitive ¹

. The production costs and pricing of DME are critical factors that need to be addressed to make the project viable.

Policy and Subsidy Considerations

The Indonesian government is considering providing incentives and subsidies to support the DME project. Minister of Finance, Purbaya Yudhi Sadewa, has indicated potential financial support to bridge the price disparity between DME and LPG ¹

. However, experts like Wijayanto Samirin from Universitas Paramadina have expressed concerns that diverting LPG subsidy funds to DME could adversely affect low-income households who rely on subsidized LPG ²

Source 2

https://industri.kontan.co.id/news/pakar-kebijakan-publik-tentang-keras-pengalihan-subsidi-lpg-3-kg-untuk-proyek-dme

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Alternative Funding Options

To address the financial challenges, alternative funding mechanisms are being explored. Hadi Ismoyo, a practitioner in the oil and gas sector, suggested establishing a Petroleum Fund to finance the DME project ³

. This approach could provide a dedicated financial resource without directly diverting existing LPG subsidies.

Implications and Future Outlook

The success of the DME project hinges on balancing energy security goals with economic and social considerations. While the initiative promises to reduce LPG imports, it requires careful policy design to ensure that the benefits are equitably distributed and do not unduly burden vulnerable populations.