Indonesia insists B40 biodiesel application to continue on Jan. 1

Industry participants seeking phase-in period expect progressive introduction

Industry deals with technical challenges and cost concerns

Government funding problems arise due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia’s strategy to expand its biodiesel required from Jan. 1, which has actually sustained issues it might curb worldwide palm oil products, looks significantly likely to be carried out gradually, analysts stated, as market participants look for a phase-in period.

Indonesia, the world’s most significant producer 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 set off a dive in palm futures and may push costs further in 2025.

While the government of President Prabowo Subianto has actually said repeatedly the strategy is on track for full launch in the brand-new year, industry watchers state expenses and technical difficulties are likely to lead to partial implementation before complete adoption across the sprawling island chain.

Indonesia’s greatest fuel retailer, state-owned Pertamina, stated it requires to customize some of its fuel terminals to mix and store B40, which will be finished throughout a “transition duration after federal government establishes the required”, spokesperson Fadjar Djoko Santoso informed Reuters, without offering details.

During a meeting with government authorities and biodiesel producers last week, fuel retailers requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in presence, informed Reuters.

Hiswana Migas, the fuel sellers’ association, did not right away react to a demand for remark.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required walking would not be carried out slowly, and that biodiesel manufacturers are ready to provide the greater blend.

“I have actually validated the readiness with all manufacturers recently,” she stated.

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

“We can’t perform without purchase order documents, and purchase order files are acquired after we get agreements with fuel business,” 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 preliminary estimate of 16 million kilolitres.

FUNDING CHALLENGES

For the government, moneying the greater mix could also be an obstacle as palm oil now costs around $400 per metric ton more than petroleum. Indonesia uses proceeds from palm oil export levies, handled by an agency called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it required a 68% boost in subsidies 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 industry would object to a levy walking, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would hurt the market, including palm smallholders.

“I think there will be a delay, since if it is carried out, the aid will increase. Where will (the cash) originate from?” he said.

Nagaraj Meda, managing director of Consulting, a product consultancy, said B40 application would be challenging in 2025.

“The execution may be slow and gradual in 2025 and most likely more hectic in 2026,” he stated.

Prabowo, who took workplace in October, campaigned on a platform to raise the mandate even more to B50 or B60 to achieve energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina