Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,
Indonesia insists B40 biodiesel application to continue on Jan. 1
Industry participants seeking phase-in period expect steady intro
Industry deals with technical obstacles and expense issues
Government financing concerns develop due to palm oil price disparity
JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel required from Jan. 1, which has sustained issues it could curb global palm oil products, looks progressively most likely to be carried out gradually, experts stated, as industry participants look for a phase-in period.
Indonesia, the world's greatest producer and exporter of palm oil, prepares to raise the compulsory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually set off a jump in palm futures and may push prices further in 2025.
While the government of President Prabowo Subianto has said repeatedly the strategy is on track for full launch in the new year, industry watchers say costs and technical obstacles are most likely to result in partial execution before complete adoption throughout the stretching archipelago.
Indonesia's biggest fuel seller, state-owned Pertamina, stated it needs to modify a few of its fuel terminals to mix and store B40, which will be completed throughout a "transition duration after federal government establishes the required", representative Fadjar Djoko Santoso told Reuters, without providing details.
During a meeting with government authorities and biodiesel manufacturers last week, fuel sellers asked for a two-month transition duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in participation, informed Reuters.
Hiswana Migas, the fuel sellers' association, did not instantly react to an ask for comment.
Energy ministry senior main Eniya Listiani Dewi told Reuters the required walking would not be executed slowly, which biodiesel producers are ready to supply the greater mix.
"I have actually verified the preparedness with all producers recently," she stated.
APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be with diesel fuel, said the federal government has not released allowances for manufacturers to sell to sustain merchants, which it normally has actually done by this time of the year.
"We can't perform without purchase order files, and purchase order files are obtained after we get agreements with fuel companies," Gunawan told Reuters. "Fuel business can just sign contracts after the ministerial decree (on biodiesel allotments)."
The 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 price quote of 16 million kilolitres.
FUNDING CHALLENGES
For the federal government, funding the higher mix could also be an obstacle as palm oil now costs around $400 per metric load more than crude oil. 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% increase in aids to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy hike is imminent.
However, the palm oil market would challenge a levy hike, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would injure the industry, including palm smallholders.
"I think there will be a hold-up, because if it is carried out, the aid will increase. Where will (the cash) come from?" he said.
Nagaraj Meda, handling director of Transgraph Consulting, a product consultancy, stated B40 application would be challenging in 2025.
"The application might be slow and steady in 2025 and most likely more fast-paced in 2026," he said.
Prabowo, who took workplace 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; Editing by Tony Munroe and Lincoln Feast.)