Local news sources reported Iran would invest $3 billion to build oil refineries in West Java and Banten.
Deals were signed at the Indonesia-Iran Business Forum on Tuesday, the Jakarta Post said.
“The deal will require Iran to supply us with its crude oil before it sells to other countries,” Radjab reportedly said.
Indonesia – a former Opec member – is struggling to meet demand for oil, with this contract securing supply from Iran.
Growth in Indonesian oil production was dramatic, peaking in 1977 with 1.6 million barrels per day produced across the Archipelago.
Production peaked in 1995 and has since been on a steady decline.
In 2013, production dropped below 900,000 barrels of oil per day, according to the US Energy Information Administration.
With sanctions on Iran now eased, the countries are free to do business.
The refineries will be built by Kreasindo Resources Indonesia and Iranian Nakhle Barani Pardis.
Kreasindo president director Rudy Radjab reportedly said the companies were carrying out a feasibility study but construction was set to start in 2015.