Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel execution to continue on Jan. 1

Industry participants seeking phase-in duration expect gradual intro

Industry faces technical difficulties and expense concerns

Government funding problems emerge due to palm oil price variation

JAKARTA, Dec 18 (Reuters) – Indonesia’s plan to expand its biodiesel required from Jan. 1, which has actually fuelled concerns it might curb global palm oil supplies, looks significantly most likely to be executed slowly, experts said, as market participants seek a phase-in duration.

Indonesia, the world’s most significant manufacturer 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 set off a jump in palm futures and might push costs even more in 2025.

While the government of President Prabowo Subianto has stated repeatedly the strategy is on track for full launch in the brand-new year, industry watchers say costs and technical obstacles are likely to lead to partial execution before full adoption throughout the sprawling island chain.

Indonesia’s biggest fuel merchant, state-owned Pertamina, said it requires to modify a few of its fuel terminals to mix and keep B40, which will be completed throughout a “shift period after government establishes the required”, representative Fadjar Djoko Santoso informed Reuters, without providing details.

During a meeting with federal government officials and biodiesel producers recently, fuel sellers asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in presence, informed Reuters.

Hiswana Migas, the fuel merchants’ association, did not right away react to an ask for remark.

Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate hike would not be implemented slowly, which biodiesel manufacturers are prepared to provide the higher blend.

“I have actually verified the preparedness 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 provided allotments for manufacturers to sell to fuel merchants, which it normally has done by this time of the year.

“We can’t perform without purchase order documents, and purchase order documents are obtained after we get agreements with fuel companies,” Reuters. “Fuel companies can only 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 informed Reuters, less than its preliminary quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the greater blend could likewise be a challenge as palm oil now costs around $400 per metric heap more than unrefined oil. Indonesia utilizes profits from palm oil export levies, managed by a company called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it needed a 68% increase 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 is impending.

However, the palm oil industry would challenge a levy walking, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would injure the industry, including palm smallholders.

“I believe there will be a delay, due to the fact that if it is carried out, the aid will increase. Where will (the cash) come from?” he stated.

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

“The implementation might be slow and steady in 2025 and most likely more busy in 2026,” he said.

Prabowo, who took workplace in October, campaigned on a platform to raise the mandate further to B50 or B60 to attain 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.)