Indonesia Plans Gradual Shift to B100 Biodiesel for Energy Security

November 04, 2024

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(Antara) The government is developing a concept design to produce biodiesel up to B100 as part of its efforts to achieve energy self-sufficiency. This was announced by Minister of Energy and Mineral Resources Bahlil Lahadalia during a press conference in Jakarta on Sunday.

"We are preparing concepts up to B100, but this will be done gradually. We will report the developments in due time," he said.

Currently, the required biodiesel product in Indonesia is B35, a blend of 35 percent fatty acid methyl esters from palm oil and 65 percent diesel fuel.

The implementation of B35 began on February 1, 2023.

The government is enhancing advanced biodiesel products by increasing the proportion of palm oil to 40 percent, known as B40.

The ministry has confirmed that the mandatory B40 program is ready to launch on January 1, 2025.

"God willing, it has been tested and is ready for implementation (by next January)," Lahadalia stated.

Meanwhile, Director General of New, Renewable Energy, and Energy Conservation, Eniya Listiani Dewi, expressed the ministry's readiness to implement mandatory B40 biodiesel next year.

She mentioned that the government is preparing various supporting infrastructures, including ports, shipping, and logistics, to ensure the smooth rollout of mandatory bioenergy products.

These preparations are expected to be completed by December.

In addition to B40, the government is also exploring the feasibility of implementing B50.

Eniya noted that a technical study on engine performance using B50 has already been conducted.

Minister of Agriculture Andi Amran Sulaiman has also conducted a trial of B50 biodiesel in South Kalimantan. READ MORE

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Excerpt from Antara: The Ministry of Energy and Mineral Resources has said that seven to nine additional plants for processing crude palm oil (CPO) into biodiesel are needed to produce B50 biodiesel.

“We need to build seven to nine more plants or increase the capacity of the existing plants,” the ministry’s bioenergy director Edi Wibowo said at the Indonesia Palm Oil Conference (IPOC) 2024 in Bali on Thursday.

He explained that the number of biodiesel plants needs to be increased to close the gap in the amount of biodiesel required for conversion to B50, which is 19.7 million kiloliters per year.

Meanwhile, currently, domestic production is only 15.8 million kiloliters per year.

Furthermore, Wibowo informed that the production needs could also be used as an investment opportunity, considering that realizing B50, which combines 50 percent palm oil and 50 percent diesel fuel, requires additional capital investment of US$360 million.

Regarding the B40 biodiesel implementation, which will be carried out in early January 2025, he noted that there is still a 0.3 million kiloliters shortage in production capacity.

However, the issue can be tackled by asking 24 biofuel business entities to step up production. READ MORE

Excerpt from World Energy News: Analysts predict that Indonesia's palm-oil production will recover next year after a drop expected this year. However, prices are likely to remain high due to a planned increase in the country's mandate for biodiesel, they said.

This year, the benchmark palm oil price in Malaysia increased by more than 35%. This is due in part to the slowdown of production, but also to plans by Indonesia to increase their biodiesel blend mandatory for domestic sales from 35% to 40% starting January. The biodiesel program aims to reduce fossil fuel imports.

Julian McGill of Glenauk Economics told the Indonesia Palm Oil Conference that production in Indonesia next year is expected to increase by 1.5 million metric tonnes compared to an estimated decrease of over one million metric tons last year.

Thomas Mielke of Hamburg's Oil World research firm predicted that Indonesian palm oil production would increase by up to 2 million tons in 2019 after dropping 2.5 million tons in 2024.

The supply of vegetable oil from other countries and Indonesia is expected to tighten.

The palm oil production of Malaysia's rival is expected to drop slightly next year after rising by approximately 1 million tons by 2024.

Mielke stated that the combined exports of sunflower, rapeseed and soya oils are decreasing.

He said that the price spike in palm oil over the past seven week has been "frightening". It may have reached its peak if Indonesia delays the implementation of B40 biodiesel.

Mielke stated that if Indonesia implemented the policy, then the price of palm oil would rise by 10%-15% between January and March. He added that the current palm oil premium had already led to palm losing some market share compared to other oils.

Indonesia Palm Oil Association says that additional feedstock in the amount of 3 million tonnes will be required for B40 implementation. READ MORE

Excerpt from Reuters/World Energy News: As part of its "quick win" programs, the Indonesian government confirmed to lawmakers that it will implement a mandatory 40% biodiesel blend with palm oil based fuel in January 2025.

The plan was presented by Energy Minister Bahlil lahadalia who told a hearing in parliament that the government expected to implement a mandate B50 by 2026.

Analysts have predicted that the plan to increase biodiesel from its current 35% blend is part of a reduction in fuel imports. This, they say, will increase palm oil demand and prices.

Malaysian palm futures have risen by about 35% in the past year. Thomas Mielke of Hamburg-based Oil World estimated that the introduction of B40 will push prices up by another 10%-15% at an industry conference held last week. READ MORE

Excerpt from Tempo.co: According to data from the Ministry of Energy and Mineral Resources, mandatory use of 35 percent biodiesel or B35, has saved foreign exchange amounting to IDR 120.54 trillion.

"This is in line with the President's vision (Prabowo), because we know that we are following his vision and mission. Next year, it might also reach B40," Alfon said during a discussion titled 'Collaboration in Energy Transition: Developing an Adaptive and Innovative Oil and Gas Downstream Ecosystem' at the BPH Migas office, South Jakarta, on Friday, December 6, 2024.

Alfon expressed his optimism that by 2025, the utilization of biodiesel will not only save foreign exchange but also reduce imports, which will consequently provide support for energy availability domestically.

"So that our energy availability can be achieved by ourselves or in terms of energy self-sufficiency," he said.

Furthermore, for this energy transition, Alfon said that there are several important steps to be taken, one of which is infrastructure development. He emphasized that the government needs to expand and build infrastructure to support the use of new renewable energy.

According to Alfon, innovation in technology is also necessary to increase energy efficiency. In addition, the government needs to implement policies that support the use of renewable energy, such as fiscal incentives, subsidies for clean energy, and carbon taxation. READ MORE

Excerpt from Reuters/Channel News Asia: Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has fuelled concerns it could curb global palm oil supplies, looks increasingly likely to be implemented gradually, analysts said, as industry participants seek a phase-in period.

Indonesia, the world's biggest producer and exporter of palm oil, plans to raise the mandatory mix of palm oil in biodiesel to 40 per cent - called B40 - from 35 per cent, a policy that has triggered a jump in palm futures and may pressure prices further in 2025.

While the government of President Prabowo Subianto has said repeatedly the plan is on track for full launch in the new year, industry watchers say costs and technical challenges are likely to result in partial implementation before full adoption across the sprawling archipelago.

Indonesia's biggest fuel retailer, state-owned Pertamina, said it needs to modify some of its fuel terminals to mix and store B40, which will be completed during a "transition period after government establishes the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without providing details.

During a meeting with government officials and biodiesel producers last week, fuel retailers requested a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in attendance, told Reuters.

Hiswana Migas, the fuel retailers' association, did not immediately respond to a request for comment.

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

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

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be mixed with diesel fuel, said the government has not issued allocations for producers to sell to fuel retailers, which it typically has done by this time of the year.

"We can't deliver the goods without purchase order documents, and purchase order documents are obtained after we get contracts with fuel companies," Gunawan told Reuters. "Fuel companies can only sign contracts after the ministerial decree (on biodiesel allocations)."

The government plans to allocate 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 government, funding the higher blend could also be a challenge as palm oil now costs around $400 per metric ton more than crude oil. Indonesia uses proceeds from palm oil export levies, managed by an agency called BPDPKS, to cover such gaps.

...

Prabowo, who took office in October, campaigned on a platform to raise the mandate further to B50 or B60 to achieve energy self-sufficiency and cut $20 billion of annual fuel imports.

($1 = 16,035.0000 rupiah) READ MORE

Excerpt from Reuters/World Energy News: Anilkumar bagani, head of commodity research at Mumbai's Sunvin group, explained that the price decline in crude palm oil continued from Wednesday, following a shift in sentiment on global vegetable oil markets.

This was mainly due to the insecurity over Indonesian and U.S. Biofuel policies, which led to higher subsidies for their respective programmes.

Analysts said that Indonesia's plan, which would expand its biodiesel requirement from January 1, and could reduce global palm oil supply, is more likely to be implemented slowly, since industry participants are seeking a gradual phase-in.

The U.S. Government funding bill, released on Tuesday, included a plan that would allow gasoline to be sold year-round with a higher blend of ethanol. This is known as E15. The traders had stated that a higher blend of corn-based biodiesel in the U.S. would reduce the demand for the soybean oil used to make biodiesel. READ MORE

Excerpt from The Star: The Indonesian Palm Oil Association (Gapki) has warned that a plan to increase the levy on crude palm oil (CPO) exports to 10% next year could render local producers less competitive in the international market.

The government currently imposes a 7.5% levy on CPO exports, while a lower rate of between 3 and 6% of the reference price applies to refined palm oil products.

...

Coordinating Economic Minister Airlangga Hartarto said on Dec 19 that increasing the CPO export levy would help the government push forward with its mandatory 40% palm oil-based biodiesel (B40) programme, which starts in January.

He added that the levy would be implemented once the Finance Ministry had issued the relevant regulation, Reuters reported. The biodiesel programme aims to reduce the country’s reliance on imported diesel while ramping up demand for domestically produced vegetable oils.

The government trialed the B40 biofuel in July to power trains, as well as cars and trucks using the currently available B35 biodiesel blend.

However, businesses are concerned that the upgraded biodiesel programme, coupled with a higher levy, would lower the overall volume of CPO exports, especially amid stagnant domestic production. READ MORE

Excerpt from Reuters/Channel News Asia: Indonesian companies will get a 1-1/2 month transition period to meet the new B40 biodiesel requirement, Deputy Energy and Mineral Resources Minister Yuliot Tanjung told reporters on Friday.

Indonesia had planned to launch the mandatory mix of 40 per cent palm oil fuel in biodiesel on Jan. 1, but industry players said they are still waiting for the technical regulations.

The world's largest exporter of palm oil currently imposes a mandatory biodiesel mix of 35 per cent.

The transition period started on Jan. 1, Yuliot said.

Market participants are waiting for the official decree detailing the volume of biodiesel that Indonesia will allocate to fuel retailers to gauge how much palm oil exports will be affected.

Meanwhile, fuel retailers and biodiesel producers have said they are not able to draw contracts for biodiesel distribution without the decree.

Yuliot declined to say when the decree will be released, adding that such details will be announced by the energy minister "hopefully soon".

Dadan Kusdiana, secretary general at the ministry, said the approval process for the biodiesel allocation is currently in the final stage.

Yuliot reiterated the government's plan to allocate 15.6 million kilolitres of biodiesel this year.

The delay caused the Malaysian palm oil benchmark contract to drop 2.6 per cent on Thursday. On Friday, it rebounded by around 1 per cent as of 0632 GMT. READ MORE

Excerpt from China View/Xinhua: The Indonesian government has officially implemented the B40 biodiesel regulation, effective Jan. 1, 2025, increasing the biodiesel fuel quota by 20 percent. This move is part of a broader strategy to enhance energy security and reduce diesel imports in line with President Prabowo Subianto's directives.

"The B35 rule allowed us to manufacture 12.98 million kiloliters of biodiesel, and the B40 regulation raised it to 15.6 million kiloliters," said Minister of Energy and Mineral Resources Bahlil Lahadalia during a press conference on Friday.

With this determination, Bahlil ensured that the government had prepared further steps for the use of biofuels while continuing to improve the water content and implementation of the biodiesel mixture.

To support the B40 policy, state energy company PT Pertamina has readied two key refineries in Palembang on Sumatra Island and Papua. Deputy Minister of Energy and Mineral Resources Yuliot Tanjung highlighted the importance of ensuring adequate raw materials and a robust supply chain, given Indonesia's vast and geographically diverse regions.

The government also plans to execute B50 in 2026 if the implementation of B40 is carried out properly this year. READ MORE

Excerpt from Biobased Diesel Daily: Eniya Listiani Dewi, Indonesia’s director-general of renewable energy and energy conservation, said the mandatory biodiesel program can reduce fuel imports, saving foreign exchange.

Foreign-exchange savings for B40 amount to 147.5 trillion Indonesian rupiahs (USD$9.1 billion), while for B35 it can save 122.98 trillion Indonesian rupiahs (USD$7.6 billion), according to the ministry of energy and mineral resources.

Thus, there is a foreign-exchange saving of around 25 trillion Indonesian rupiahs (USD$1.55 billion) by not importing diesel fuel.

In addition to providing economic benefits, the Indonesian government said the mandatory B40 biodiesel program itself has provided significant benefits in various social and environmental aspects including:

Increasing the added value of crude palm oil (CPO) into biodiesel by 20.9 trillion Indonesian rupiahs (USD$1.3 billion).
Absorbing more than 14,000 people (off-farm) and 1.95 million people (on-farm).
Reducing greenhouse-gas emissions by 41.46 million tons of CO2e per year.

In 2025, the government has set a B40 allocation of 15.6 billion liters (4.12 billion gallons) of biodiesel with 7.55 billion liters (approximately 2 billion gallons) allocated for Public Service Obligation and 8.07 billion liters (2.13 billion gallons) allocated for non-PSO.

The distribution of B40 biodiesel in Indonesia will be supported by approximately two dozen businesses. READ MORE