Indonesia insists B40 biodiesel application to proceed on Jan. 1
Industry participants looking for phase-in duration expect steady intro
Industry faces technical challenges and cost issues
Government funding issues occur due to palm oil price variation
JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel required from Jan. 1, which has fuelled concerns it might curb worldwide palm oil products, looks progressively most likely to be implemented gradually, experts stated, as industry participants look for a phase-in period.
Indonesia, the world's greatest manufacturer 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 jump in palm futures and might push prices further in 2025.
While the federal government of President Prabowo Subianto has said consistently the strategy is on track for full launch in the new year, industry watchers say costs and technical difficulties are likely to lead to partial execution before complete adoption across the stretching island chain.
Indonesia's greatest fuel retailer, state-owned Pertamina, said it requires to customize some of its fuel terminals to blend and store B40, which will be finished throughout a "shift duration after government develops the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without supplying details.
During a conference with government officials and biodiesel manufacturers recently, fuel retailers asked for a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in presence, informed Reuters.
Hiswana Migas, the fuel retailers' association, did not immediately react to an ask for comment.
Energy ministry senior main Eniya Listiani Dewi told Reuters the required walking would not be carried out slowly, which biodiesel producers are all set to provide the greater blend.
"I have verified the preparedness 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 allocations for producers to offer to fuel sellers, which it usually has done by this time of the year.
"We can't deliver the products without purchase order files, and purchase order documents are acquired after we get agreements with fuel companies," Gunawan informed Reuters. "Fuel business can just sign agreements after the ministerial decree (on biodiesel allocations)."
The federal government plans to designate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its initial estimate of 16 million kilolitres.
FUNDING CHALLENGES
For the federal government, funding the higher blend might likewise be a difficulty as palm oil now costs around $400 per metric ton more than petroleum. Indonesia utilizes proceeds from palm oil export levies, managed by a company called BPDPKS, to cover such gaps.
In November, BPDPKS estimated it needed a 68% increase in aids to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy walking looms.
However, the palm oil market would challenge a levy walking, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the industry, including palm smallholders.
"I think there will be a delay, because if it is executed, the aid will increase. Where will (the cash) come from?" he said.
Nagaraj Meda, managing director of Transgraph Consulting, a commodity consultancy, said B40 application would be challenging in 2025.
"The execution might be slow and progressive in 2025 and probably more fast-paced in 2026," he stated.
Prabowo, who took workplace in October, campaigned on a platform to raise the mandate further to B50 or B60 to accomplish energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)
