Indonesia’s Energy Transition and the Gulf Opportunity

Indonesia’s latest energy deals demonstrate that the Gulf Cooperation Council (GCC) and Gulf investors remain heavily focused on oil and gas, even as the region accelerates its transition to renewable energy. Houston-based SLB won multiple offshore drilling contracts from Abu Dhabi’s Mubadala Energy at the beginning of the year to work on the Tangkulo gas field in the Andaman Sea, with a target date of 2028 to start producing gas. Mubadala describes the project as central to Indonesia’s long-term energy security. Meanwhile, Kuwait Foreign Petroleum Exploration Company continues exploration in Natuna, Seram, Buton, and Anambas, and is in talks to develop the Natuna D-Alpha gas asset with global partners.

While these developments underscore the depth of Gulf–Indonesia hydrocarbon ties, they also highlight a strategic gap. As Indonesia accelerates its renewable energy expansion, Gulf states have an opportunity to broaden their footprint beyond traditional oil and gas and play a more significant role in the country’s energy transition.

From Hydrocarbons to Hybrid Cooperation

Indonesia aims to raise renewables to roughly 23 percent of its energy mix by 2030. Jakarta has major renewable potential, particularly solar, but unlocking it at scale requires capital and technical expertise. Gulf players already have a foothold in this space and are beginning to increase their presence through more comprehensive renewable investments.

Abu Dhabi’s renewable energy firm Masdar is working with Indonesia’s state utility PT PLN and its Nusantara Power unit on floating solar projects. A 92-megawatt floating solar plant on the Saguling reservoir is underway in West Java with Emirati involvement and is expected to cut carbon emissions while producing more than 130 gigawatt-hours of clean electricity annually. The project builds on Masdar’s earlier work on the Cirata Floating Solar Plant, now one of the largest in Southeast Asia with around 192 MWp capacity and the potential to expand beyond 1,000 MWp. Masdar has also partnered with PLN and Pertamina on broader renewable cooperation that explores solar, wind, and green hydrogen opportunities. Together, these initiatives demonstrate the potential of Gulf developers to anchor large-scale clean power in Indonesia.

Saudi Arabia’s ACWA Power is expanding its footprint as well. The company is partnering with PLN Indonesia Power to build the Saguling Floating Solar Power Plant and another floating plant at Singkarak in West Sumatra. These projects will total around 170 MWp and are set to come online by late 2026, bringing reliable, renewable generation to the grid. During a state visit to Riyadh, Indonesian and Saudi officials signed a memorandum of understanding under which Indonesia’s newly established sovereign wealth fund, Danantara, and ACWA Power will invest up to $10 billion in renewable energy. These investments include solar and green hydrogen, targeting multi-gigawatt development. These agreements directly link Gulf capital to Indonesia’s clean energy ambitions and strengthen the foundation for a more diversified electrical supply.

The Transition Imperative

Broader Gulf interest in Indonesia’s renewable transition is also emerging. Proposed collaboration between Danantara and Emirati partners could develop as much as 10 gigawatts of renewable capacity, though details remain under discussion. Gulf investors bring global experience in utility-scale solar, battery storage, and clean hydrogen—capabilities that could play a significant role in Indonesia’s energy transition.

These renewable collaborations, however, contrast with existing hydrocarbon commitments. Upstream oil and gas exploration ties Gulf investors to projects with long payback periods and heightened exposure to price volatility. Such assets face transition risks as global demand evolves and climate-related disclosure requirements and carbon costs on exports increase.

Indonesia’s policy direction reinforces the need for diversification. Jakarta aims to reduce coal’s share of the energy mix while boosting renewables as grid capacity expands. Solar and wind costs have fallen sharply, improving economic viability. Green hydrogen pilots can support heavy industry decarbonization, while long-term power purchase agreements offer predictable returns for investors who can finance and deliver projects at scale.

Opportunities for Gulf Capital

Gulf sovereign wealth funds and national energy companies have the resources to support Indonesia’s energy transition. Gulf companies and governments could partner with Indonesian firms to develop large solar parks in eastern provinces, where grid access is limited. They could also finance grid modernization, battery storage, and green hydrogen hubs in industrial corridors. Such investments would align Gulf capital with global energy trends, signaling a strategic shift from directing funds predominantly into oil and gas blocks toward enabling long-term clean energy infrastructure. This shift would be increasingly consequential in markets that are tightening climate policies and rewarding low-carbon products and services.

Natural gas will remain part of Indonesia’s energy mix, and projects like Tangkulo can help reduce coal dependence in the near term. However, gas alone cannot achieve the country’s long-term climate objectives. A diversified energy partnership, one that includes renewables alongside hydrocarbons, will deliver more stable returns while reducing emissions.

The Gulf built its wealth on hydrocarbons, but it now also possesses world-class renewable developers and substantial infrastructure capital. Indonesia’s growing renewable sector offers an opportunity to deploy that capital, enhance energy resilience, and help shape a future energy system that is less carbon intensive. For Gulf investors, the question is not whether to invest in Indonesia, but whether they intend to help build the next generation of energy or remain tied to traditional fossil fuels.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.