Indonesia insists B40 biodiesel implementation to proceed on Jan. 1
Industry individuals seeking phase-in period expect progressive introduction
Industry faces technical challenges and expense concerns
Government financing problems arise due to palm oil price disparity
JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel required from Jan. 1, which has actually fuelled concerns it might suppress international palm oil products, looks progressively most likely to be executed slowly, experts said, as industry individuals look for a phase-in period.
Indonesia, the world's biggest manufacturer and exporter of palm oil, plans to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has triggered a dive in palm futures and might press rates even more in 2025.
While the government of President Prabowo Subianto has actually stated consistently the strategy is on track for full launch in the new year, industry watchers say expenses and technical obstacles are likely to result in partial application before complete adoption across the sprawling island chain.
Indonesia's most significant fuel merchant, state-owned Pertamina, stated it needs to modify a few of its fuel terminals to mix and store B40, which will be completed during a "shift duration after government establishes the required", representative Fadjar Djoko Santoso informed Reuters, without supplying details.
During a meeting with government officials and biodiesel producers recently, fuel sellers asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in participation, told Reuters.
Hiswana Migas, the association, did not immediately react to a demand for comment.
Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate hike would not be carried out gradually, which biodiesel manufacturers are prepared to provide the greater blend.
"I have actually validated the readiness with all producers recently," she stated.
APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the government has actually not released allowances for manufacturers to offer to fuel merchants, which it usually has done by this time of the year.
"We can't perform without order files, and purchase order files are obtained after we get agreements with fuel companies," Gunawan informed Reuters. "Fuel companies can just sign contracts after the ministerial decree (on biodiesel allowances)."
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 preliminary price quote of 16 million kilolitres.
FUNDING CHALLENGES
For the government, moneying the higher blend could likewise be a challenge as palm oil now costs around $400 per metric lot more than petroleum. Indonesia uses proceeds from palm oil export levies, handled by an agency called BPDPKS, to cover such gaps.
In November, BPDPKS approximated it required a 68% boost in subsidies to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy hike looms.
However, the palm oil market would challenge a levy hike, said 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 delay, since if it is implemented, the aid will increase. Where will (the money) come from?" he said.
Nagaraj Meda, handling director of Transgraph Consulting, a product consultancy, said B40 implementation would be challenging in 2025.
"The execution might be slow and steady in 2025 and probably more fast-paced in 2026," he stated.
Prabowo, who took office in October, campaigned on a platform to raise the required 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
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Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,
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