Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,
Indonesia firmly insists B40 biodiesel execution to proceed on Jan. 1
Industry participants looking for phase-in period expect gradual introduction
Industry faces technical difficulties and expense concerns
Government financing issues occur due to palm oil rate disparity
JAKARTA, Dec 18 (Reuters) – Indonesia’s plan to expand its biodiesel mandate from Jan. 1, which has actually fuelled issues it might curb international palm oil products, looks increasingly most likely to be carried out gradually, analysts stated, as industry participants seek a phase-in period.
Indonesia, the world’s greatest manufacturer and exporter of palm oil, prepares to raise the mandatory mix of palm oil in biodiesel to 40% – called B40 – from 35%, a policy that has set off a jump in palm futures and may push prices further in 2025.
While the government of President Prabowo Subianto has stated consistently the is on track for full launch in the new year, industry watchers say costs and technical challenges are most likely to result in partial execution before complete adoption throughout the stretching archipelago.
Indonesia’s greatest fuel retailer, state-owned Pertamina, stated it needs to modify some of its fuel terminals to mix and save B40, which will be finished throughout a « transition duration after government establishes the required », spokesperson Fadjar Djoko Santoso informed Reuters, without providing information.
During a meeting with government authorities and biodiesel producers recently, fuel retailers requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in attendance, informed Reuters.
Hiswana Migas, the fuel merchants’ association, did not right away react to an ask for remark.
Energy ministry senior official Eniya Listiani Dewi told Reuters the required hike would not be executed gradually, and that biodiesel manufacturers are all set to supply the higher mix.
« I have actually confirmed the readiness with all producers last week, » she said.
APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the federal government has not provided allowances for manufacturers to sell to fuel merchants, which it normally has actually done by this time of the year.
« We can’t deliver the items without order documents, and purchase order files are gotten after we get contracts with fuel companies, » Gunawan told Reuters. « Fuel business can only sign agreements after the ministerial decree (on biodiesel allotments). »
The government prepares to assign 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its initial quote of 16 million kilolitres.
FUNDING CHALLENGES
For the federal government, funding the greater blend might also be a challenge as palm oil now costs around $400 per metric ton more than crude oil. Indonesia utilizes profits from palm oil export levies, managed by a company called BPDPKS, to cover such spaces.
In November, BPDPKS approximated it needed a 68% boost in subsidies to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy walking looms.
However, the palm oil industry would object to a levy hike, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the industry, including palm smallholders.
« I think there will be a delay, due to the fact that if it is carried out, the aid will increase. Where will (the money) originate from? » he stated.
Nagaraj Meda, managing director of Transgraph Consulting, a product consultancy, said B40 application would be challenging in 2025.
« The execution might be sluggish and gradual in 2025 and probably more hectic in 2026, » he stated.
Prabowo, who took office in October, campaigned on a platform to raise the mandate even more to B50 or B60 to accomplish energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)
