TEMPO.CO, Jakarta - Indonesia's Energy and Mineral Resources Minister Bahlil Lahadalia has urged state-owned enterprises (SOEs) and private companies to build a liquefied petroleum gas (LPG) factory with a production capacity of 1.5 to 2.0 million tons per year.

This is aimed at reducing Indonesia's dependence on imported LPG.

"First, we encourage (state-owned energy company) Pertamina to build this factory. We will also invite the private sector to cooperate," Lahadalia said at a working meeting with Commission XII of the House of Representatives in Jakarta on Wednesday.

Currently, Indonesia is highly dependent on imported LPG to meet domestic needs. The national LPG subsidy costs the country Rp83 trillion (US$1 = Rp15,731) every year.

According to Lahadalia, LPG consumption in Indonesia has reached 8.0 million tons per year, but domestic LPG production can meet only around 1.9 million tons of the total need. Thus, the country has to import LPG to meet domestic needs.

He further said that even if an LPG factory with a capacity of 2.0 million tons is built, Indonesia will still experience an LPG deficit of around 4.0 million tons.

This is considering that the potential for natural gas used as raw material for LPG, namely propane (C3) and butane (C4), only reaches 1.5 to 2.0 million tons per year, he explained.

To overcome this deficit, the government will accelerate the construction of gas networks in several regions of Indonesia, such as West Java, Central Java, East Java, Banten, Jakarta, and Yogyakarta. Some areas of Sumatra have also begun the construction of gas networks.

To accelerate the project, Lahadalia proposed the use of non-tax state revenue funds. He said that if the project is handed over entirely to the private sector, it is feared that it may not be completed in one government period.

"And I have reported this (proposal) to the Finance Minister and the President," he added.

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