Energy Ministry Overhauls Subsidized LPG Distribution and Tests Domestic CNG Canisters as Import Demand Surges to 8.6 Million Tons

JAKARTA, Investortrust.id — The Ministry of Energy and Mineral Resources is moving aggressively to dismantle the open-distribution system for subsidized 3-kilogram (6.6-pound) liquefied petroleum gas, targeting tighter socioeconomic restrictions while piloting domestic compressed natural gas (CNG) cylinders to stem costly imports.

With national LPG consumption projected to reach 8.6 million metric tons (9.48 million US tons) in 2026 and expand further in 2027, state energy regulators told lawmakers that universal open access is creating unsustainable fiscal leaks.

Ballooning LPG import bills pose a structural drain on Indonesia's sovereign trade balance and foreign exchange reserves, with the overall state energy subsidy burden proposed to jump 20.1% to Rp 272.9 trillion ($17.16 billion) in the 2027 draft budget.

Restricting subsidized canisters to verified low-income households while commercializing abundant domestic gas reserves through modular CNG cylinders offers the government a dual mechanism to protect fiscal stability and strengthen national energy self-sufficiency.

Tightening Access via National Socioeconomic Registry

Testifying before House of Representatives Commission XII in Jakarta on Wednesday, Aug. 26, 2026, Director General of Oil and Gas Laode Sulaeman underscored that the legacy distribution model allows unauthorized middle- and high-income consumer tiers to purchase subsidized fuel.

"Distribution remains completely open today, meaning these three-kilogram canisters can still be purchased by all economic classes; this is precisely what we are going to regulate," Sulaeman told lawmakers on Wednesday.

To enforce targeted distribution, the energy ministry is pairing web-based registration logs with civil identity registries from the Directorate General of Population and Civil Registration (Dukcapil) and the National Socioeconomic Single Data (DTSEN) registry.

The targeted reform is built to safeguard the state's proposed Rp 142.84 trillion ($8.98 billion) allocation for specific fuel and 3-kg LPG subsidies in the 2027 draft state budget, representing a 22.2% increase from the 2026 projection of Rp 116.85 trillion ($7.35 billion).

Deploying Domestic CNG as Import Substitution

Alongside distribution caps, energy authorities are accelerating technical trials to substitute imported propane and butane with indigenous natural gas via lightweight CNG canisters.

Speaking at the Jakarta International Convention Center (JICC) on Wednesday, Aug. 19, 2026, Sulaeman confirmed that pilot testing is underway across micro, small, and medium enterprise (MSME) food vendors within the Lemigas research institute in South Jakarta.

"We are finalizing the implementation scheme to ensure upstream and downstream systems are ready, and end-users feel safe and comfortable utilizing the gas," Sulaeman explained on Aug. 19. "The test cylinders have already arrived at Lemigas facilities for evaluation."

Once operational testing clears government standards, designated state-backed industrial manufacturers will initiate mass assembly runs ranging from 10,000 to over 30,000 CNG canisters to supply regional commercial corridors and reduce import reliance.