Indonesia s Higher Biodiesel Mandate Rollout May Be Gradual

Indonesia firmly insists B40 biodiesel execution to proceed on Jan. 1


Industry individuals seeking phase-in duration anticipate progressive introduction


Industry deals with technical obstacles and expense issues


Government financing concerns occur due to palm oil rate disparity


JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel required from Jan. 1, which has sustained concerns it could curb global palm oil products, looks significantly most likely to be implemented gradually, analysts stated, as market individuals look for a phase-in duration.


Indonesia, the world's greatest manufacturer and exporter of palm oil, plans to raise the mandatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has triggered a jump in palm futures and might pressure rates even more in 2025.


While the government of President Prabowo Subianto has said repeatedly the plan is on track for complete launch in the brand-new year, industry watchers say costs and technical challenges are most likely to lead to partial application before full adoption across the stretching archipelago.


Indonesia's biggest fuel merchant, state-owned Pertamina, stated it requires to modify some of its fuel terminals to mix and save B40, which will be completed during a "shift period after government develops the required", Djoko Santoso informed Reuters, without offering information.


During a meeting with government officials 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 attendance, told Reuters.


Hiswana Migas, the fuel merchants' association, did not instantly react to an ask for remark.


Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate walking would not be implemented slowly, which biodiesel manufacturers are ready to provide the greater blend.


"I have confirmed the preparedness with all producers recently," she stated.


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


"We can't perform without purchase order documents, and order documents are obtained after we get agreements with fuel business," Gunawan informed Reuters. "Fuel companies can just sign agreements after the ministerial decree (on biodiesel allotments)."


The government prepares to allocate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its preliminary quote of 16 million kilolitres.


FUNDING CHALLENGES


For the federal government, funding the greater blend might likewise be a challenge as palm oil now costs around $400 per metric lot more than crude oil. Indonesia uses earnings from palm oil export levies, managed by a firm called BPDPKS, to cover such gaps.


In November, BPDPKS approximated it needed a 68% increase 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 walking looms.


However, the palm oil market would object to a levy hike, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would injure the market, including palm smallholders.


"I think there will be a delay, because if it is carried out, the subsidy will increase. Where will (the cash) originate from?" he said.


Nagaraj Meda, handling director of Transgraph Consulting, a product consultancy, said B40 implementation would be challenging in 2025.


"The application might be sluggish and steady in 2025 and most likely more busy 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.)