Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,
Roland Brose hat diese Seite bearbeitet vor 6 Monaten


Indonesia insists B40 biodiesel implementation to proceed on Jan. 1

Industry participants looking for phase-in period anticipate progressive introduction

Industry faces technical difficulties and cost concerns

Government financing concerns develop due to palm oil cost variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has actually fuelled issues it might palm oil products, looks progressively most likely to be implemented gradually, analysts stated, as market individuals look for a phase-in period.

Indonesia, the world's greatest producer and exporter of palm oil, plans to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually triggered a dive in palm futures and might pressure rates further in 2025.

While the federal government of President Prabowo Subianto has said repeatedly the strategy is on track for full launch in the new year, market watchers say costs and technical obstacles are most likely to result in partial implementation before complete adoption across the sprawling island chain.

Indonesia's most significant fuel retailer, state-owned Pertamina, said it needs to customize a few of its fuel terminals to mix and store B40, which will be completed during a "shift duration after federal government establishes the mandate", representative Fadjar Djoko Santoso told Reuters, without providing information.

During a meeting with government authorities and biodiesel producers last week, fuel sellers requested a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in attendance, informed Reuters.

Hiswana Migas, the fuel retailers' association, did not immediately react to an ask for comment.

Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate hike would not be executed gradually, and that biodiesel producers are ready to supply the higher mix.

"I have actually validated the readiness with all producers last week," she said.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, stated the government has not released allotments for producers to offer to fuel sellers, which it normally has done by this time of the year.

"We can't provide the products without order files, and order files are gotten after we get contracts with fuel companies," Gunawan informed Reuters. "Fuel companies can just sign contracts after the ministerial decree (on biodiesel allowances)."

The federal 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 price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the greater mix might also be a difficulty as palm oil now costs around $400 per metric ton more than petroleum. Indonesia uses earnings from palm oil export levies, managed by an agency called BPDPKS, to cover such gaps.

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 market would challenge a levy hike, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would hurt the industry, consisting of palm smallholders.

"I believe there will be a hold-up, since if it is implemented, the aid will increase. Where will (the cash) originate from?" he said.

Nagaraj Meda, managing director of Transgraph Consulting, a product consultancy, stated B40 implementation would be challenging in 2025.

"The implementation may be slow and progressive in 2025 and most likely more fast-paced in 2026," he said.

Prabowo, who took office in October, campaigned on a platform to raise the required further to B50 or B60 to achieve energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina