Indonesia firmly insists B40 biodiesel implementation to continue on Jan. 1
Industry participants looking for phase-in duration expect steady intro
Industry deals with technical obstacles and expense concerns
Government funding issues occur due to palm oil price disparity
JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel required from Jan. 1, which has fuelled issues it might curb global palm oil materials, looks progressively likely to be implemented slowly, experts stated, as market individuals look for a phase-in duration.
Indonesia, the world's biggest producer and exporter of palm oil, prepares to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually activated a dive in palm futures and may push costs even more in 2025.
While the federal government of President Prabowo Subianto has actually stated repeatedly the strategy is on track for full launch in the new year, market watchers say costs and technical obstacles are likely to result in partial implementation before full adoption throughout the stretching archipelago.
Indonesia's greatest fuel seller, state-owned Pertamina, said it needs to modify some of its fuel terminals to blend and keep B40, which will be finished during a "transition duration after government establishes the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without providing details.
During a conference with government authorities and biodiesel producers recently, fuel sellers requested a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in presence, informed Reuters.
Hiswana Migas, the fuel sellers' association, did not immediately react to a request for comment.
Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate walking would not be implemented slowly, which biodiesel producers are ready to supply the greater blend.
"I have actually verified the preparedness with all manufacturers recently," she said.
APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, said the government has actually not released allowances for producers to offer to fuel sellers, which it usually has done by this time of the year.
"We can't perform without purchase order files, and purchase order documents are acquired after we get contracts with fuel business," Gunawan informed Reuters. "Fuel companies can just sign agreements after the ministerial decree (on biodiesel allotments)."
The government prepares to designate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its preliminary estimate of 16 million kilolitres.
FUNDING CHALLENGES
For the government, funding the higher mix might also be a challenge as palm oil now costs around $400 per metric load more than petroleum. Indonesia utilizes proceeds from palm oil export levies, managed by a firm called BPDPKS, to cover such gaps.
In November, BPDPKS approximated it required a 68% boost in aids to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike looms.
However, the palm oil market would object to a levy walking, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would hurt the market, consisting of palm smallholders.
"I believe there will be a delay, due to the fact that 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, said B40 application would be challenging in 2025.
"The application may be sluggish and gradual in 2025 and probably more hectic in 2026," he stated.
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.)
