Palm mill effluent from South Sumatra will flow as biomethane to factories in Java through PGN's pipelines

A palm oil mill in South Sumatra is about to become a gas supplier to manufacturing plants in West Java. On Monday 5 October 2026, a groundbreaking ceremony marked the start of construction of a biomethane facility developed by Toyota Tsusho Indonesia (TTI) and PT KIS Biofuels Indonesia (KIS). The next day, state gas company PT Perusahaan Gas Negara Tbk (PGN) confirmed that it will act as both the main buyer and the transporter of the gas, moving it through its existing pipeline network to Toyota Motor Manufacturing Indonesia (TMMIN) and other industrial customers.

The plant will refine biogas captured from palm oil mill effluent (POME) into high purity biomethane. Its target is about 150,000 MMBtu of biomethane a year. Coverage on 6 October from detikFinance, CNBC Indonesia, Kumparan and Bloomberg Technoz described the project as the first effort of its kind in Sumatra, the island with the largest concentration of palm oil mills in the country.

Who does what in the new supply chain

The producer is PT KIS Toyota Tsusho Biomethane Indonesia (KTBI), a joint venture formed in September 2026. Bloomberg Technoz, citing Argus Media, reported that KIS Biofuels Indonesia holds 51 percent of the company and Toyota Tsusho Indonesia holds 49 percent. KIS Group brings technical depth: according to Toyota Tsusho and Bioenergy Business, the group has delivered more than 90 biogas projects in more than 20 countries, and its Indonesian arm previously launched the country's first commercial biomethane production operation.

PGN's role is twofold. As offtaker, it buys the biomethane. As transporter, it carries the gas through pipelines that already serve industry. TMMIN is the first named end user, and other factories can be supplied through the same network.

PGN Corporate Secretary Fajriyah Usman framed the company's readiness in practical terms. In remarks reported by Kumparan and CNBC Indonesia, she said PGN is prepared to support the project through its infrastructure and its commercial capability so that biomethane can be used by the industrial sector. She also described the project as an important step in bringing renewable gas from domestic sources into the national energy supply chain.

According to Toyota Tsusho's press release of 6 October, commercial operation is targeted for 2027, and KTBI plans to seek International Sustainability and Carbon Certification (ISCC) for its product.

The numbers behind the project

The headline figure is 150,000 MMBtu of biomethane a year. Bioenergy Business noted the company's own conversion that about 52 MMBtu is equivalent to one tonne of liquefied natural gas. On that basis, the plant's annual output corresponds to roughly 2,900 tonnes of LNG, delivered from a renewable, domestic source rather than from a fossil field.

That is a modest volume against the scale of Indonesia's gas market, and the partners present it as a first project. Its value lies less in the size of a single plant than in the model it proves: waste from one island, upgraded at the mill, moved through existing pipes, and burned in existing industrial equipment on another island.

The resource behind that model is large. In August 2026, the Indonesian Palm Oil Producers Association (GAPKI) published figures showing that Indonesia's 16.8 million hectares of oil palm plantations yield about 250 million tonnes of fresh fruit bunches a year. Each tonne of fruit bunches produces around 0.5 tonnes of POME, giving about 125 million tonnes of effluent annually. At roughly 28.8 cubic metres of biogas per tonne of POME, that implies a national biogas potential of about 3.6 billion cubic metres a year. The same report estimated that only around 15 percent of that potential is currently used.

Only around 15 percent of Indonesia's estimated 3.6 billion cubic metres a year of palm effluent biogas potential is in use today. Every project that connects that resource to industrial demand narrows the gap.

Why biomethane suits industrial decarbonisation

Factories that run on natural gas face a particular decarbonisation challenge. Boilers, furnaces and dryers are expensive to replace, and electrifying high temperature heat is not always practical in the near term. Biomethane offers a direct path. Once upgraded, it is chemically almost identical to pipeline natural gas, so it can flow through the same network and be used in the same equipment.

Toyota Tsusho made this point explicitly in its announcement. The company said users can advance their decarbonisation efforts while limiting capital investment, because biomethane can be used with existing gas fired equipment and pipeline networks. For an automotive manufacturer such as TMMIN, whose global customers and parent group are tightening supply chain emission expectations, access to certified renewable gas can support both sustainability targets and export competitiveness. Fajriyah Usman made a similar point, noting that once production begins, industries such as TMMIN will gain access to low carbon energy that supports their competitiveness as global supply chains demand greener inputs.

There is also a strong methane case. POME left in open ponds releases methane, a greenhouse gas far more potent than carbon dioxide over the short term. Capturing that biogas and putting it to productive use cuts emissions at the mill as well as at the factory that replaces fossil gas. The GAPKI report cited an estimate that a single biogas facility can reduce emissions by around 1,131 tonnes of CO2 equivalent a month.

Building on earlier groundwork

The project did not appear overnight. PGN reporting describes it as the realisation of a memorandum of understanding between PGN and Toyota Tsusho Indonesia on biomethane development signed in 2022. Bioenergy Business refers to a 2023 memorandum signed during the Asia Zero Emission Community (AZEC) Leaders Meeting. The two references may describe successive stages of the same partnership, and in either case the groundbreaking shows a multi year collaboration moving into construction.

It also fits a broader pattern. Earlier in 2026, a separate offtake arrangement in North Sumatra linked palm mill biomethane to the national gas network through a dedicated injection station. With South Sumatra now joining, Indonesia is building a small but growing portfolio of projects that treat palm effluent as an energy feedstock rather than as a waste stream to be managed.

PGN, CNBC Indonesia and Kumparan all linked the project to Indonesia's Nationally Determined Contribution and its Net Zero Emission 2060 target, as well as to national energy security. Domestic renewable gas, produced from a resource that is renewed every harvest, adds diversity to the supply mix without new import dependence.

Sirkularium's view

This project is a clear example of the circular economy applied to industrial energy. An agricultural residue that would otherwise emit methane becomes a certified fuel for manufacturing, delivered through infrastructure the country has already built. The partners deserve credit for structuring it so that each party does what it does best: a specialist biogas developer at the mill, a trading house connecting supply to buyers, and the national gas company providing the pipe and the commercial framework.

For government and public institutions, four points stand out. First, clear technical standards for injecting biomethane into the pipeline network, covering gas quality, metering and access tariffs, will make each subsequent project faster and cheaper to replicate. Second, a recognised system of guarantees of origin or certificates for renewable gas would let industrial users count biomethane purchases in their emission reporting, which strengthens demand and supports export oriented manufacturers. Third, mapping POME potential mill by mill against the existing pipeline network would show where the next clusters can be built at lowest cost, starting with mills already close to transmission lines. Fourth, the gap between current use of around 15 percent and the full resource is an opportunity that regional governments in palm producing provinces can help close, through permitting support and by linking mills with nearby industrial estates.

What to watch next: construction progress toward the 2027 commercial operation target, the outcome of the ISCC certification, the commercial terms PGN sets for renewable gas delivered through its network, and whether additional mills in South Sumatra and other provinces join the scheme. Sirkularium sees palm effluent biomethane as one of the most practical near term routes to lower carbon industrial heat in Indonesia, and stands ready to support public institutions in designing the standards, incentives and spatial planning that would allow it to scale.