Global geopolitical tensions have once again raised concerns over the stability of the world’s energy supply. The conflict involving Iran, the United States, and Israel in the Middle East has shaken global oil markets and pushed energy prices sharply higher.
Amid this situation, Indonesia faces a relatively vulnerable reality: the country’s national oil storage infrastructure currently has the capacity to cover only about 20 to 25 days of energy demand.
Minister of Energy and Mineral Resources, Bahlil Lahadalia, emphasized that Indonesia’s oil storage capacity remains very limited. As a result, the government is accelerating the development of large-scale crude oil storage tanks in Sumatra so that national energy reserves can be extended to three months.
“Our storage must be built first. At least for three months. If we import a lot, where are we going to store it? That’s simply the reality, it’s no one’s fault,” Bahlil said during a press conference at the Ministry of Energy and Mineral Resources on March 9.
Indonesia Moves to Expand Strategic Oil Storage
The storage tank project is currently in the feasibility study stage and is targeted to begin implementation this year. The facility will be built in Sumatra, replacing the initial plan to develop it on Nipa Island, which was considered insufficient in terms of available land for such a large facility.
The government has placed the construction of storage facilities as a priority before building new refineries. With larger storage capacity, Indonesia is expected to accommodate greater volumes of crude oil imports while ensuring stable supply for domestic refineries.
The project will involve private investors with a blended financing scheme combining domestic and international funding sources, although the government has confirmed that the investment will not come from the United States.
“Yes, the investment is already there, the investors are already there. Everything is ready. The funding can be blended between domestic and foreign sources, but not from the U.S.,” Bahlil said at the Ministry of Energy and Mineral Resources office on March 4.
Preparing for Global Supply Disruptions
In addition to expanding storage capacity, the government is also diversifying its energy imports to anticipate potential global supply disruptions, particularly from the Gulf region.
One of the main vulnerable points is the Strait of Hormuz, the world’s most strategic energy shipping route. Any disruption in this corridor could significantly affect global oil supply.
As a mitigation measure, Indonesia is beginning to consider importing crude oil from a range of alternative sources, including limited imports from the United States, as well as gasoline imports from Southeast Asian countries.
The government currently assures that national fuel (BBM) and LPG stocks remain secure for around one to two months, while the construction of new storage tanks in Sumatra is expected to extend energy reserves to 90 days.
This project is part of the national priority for energy downstream development and strategic energy security. Beyond Sumatra, plans for refinery and storage development will be spread across 18 regions, from Lhokseumawe to Fakfak, with total investment reaching IDR 232 trillion (USD 13.73 billion).
Oil Prices Surge as Middle East Conflict Escalates
Global oil trading recorded a sharp surge on Monday (March 9), as the escalating war involving Iran against the United States and Israel triggered disruptions to energy supplies from the Middle East.
Benchmark Brent crude rose about US$15.24, or 16.4 percent, to US$107.93 per barrel, after previously reaching US$111.04 per barrel. Meanwhile, U.S. crude West Texas Intermediate (WTI) also jumped US$16.50, or 18.2 percent, to US$107.40 per barrel, with an earlier peak of US$111.24 per barrel.
The surge extends the strong rally seen over the previous week. Over the past seven days, Brent prices have climbed about 27 percent, while WTI has increased by 35.6 percent.
The rise has been driven by market concerns over potential oil supply disruptions from the Middle East, compounded by production cuts from several producers in the Gulf region.
Iraq and Kuwait are reported to have reduced oil production, while Qatar had earlier lowered its liquefied natural gas supply. In Iraq, the direct impact of the conflict has already been seen in major oil fields in the southern region, where production has dropped by 70 percent to around 1.3 million barrels per day.
The decline has occurred due to difficulties exporting oil through the Strait of Hormuz, the world’s main energy shipping corridor. The surge in prices and the growing supply risks further underline the urgency of building crude oil storage tanks in Sumatra to safeguard Indonesia’s national energy stability.
