INDONESIA: October 9, 2008


JAKARTA - Indonesia may consume 1 million to 1.2 million tonnes of biodiesel using palm oil as feed stock in 2009, following the introduction of a mandatory biofuel policy, a government official said on Wednesday.


The resource-rich nation has been pushing for the use of biofuels to cut the use of costly petroleum products and to help ensure the survival of its fledgling biodiesel industry.

Last month, the government issued a ministerial decree that makes the use of biofuel mandatory from 2009.

"That will need crude palm oil supply of about 1.2 to 1.5 million tonnes," Bayu Krisnamurthi, deputy to the chief economic minister, told reporters. He said biodiesel use in 2010 may double the amount consumed in 2009 due to the increase in the mandatory blend.

Krisnamurthi also said the biodiesel use may reduce the portion of the country's palm oil production destined for export, starting from next year.

Indonesia's combined capacity for biofuel using palm oil as a feedstock is 2 million kilolitres per year, but it is running at 20 percent of capacity, data from the national biofuel development team shows.

For biodiesel, the decree states the transport sector must use a blend of 1 percent palm-based biodiesel and 99 percent diesel oil, while industry and power plants must use a blend of 2.5 percent and 0.25 percent palm-based biodiesel respectively.

By 2010, the palm biodiesel content will be increased to between 2.5 percent and 3 percent for transportation, 5 percent for industry, and 1 percent for power plants.

For bioethanol, the use of a 1-5 percent blend of bioethanol and 99-95 percent of gasoline for transportation will become mandatory in 2009.

Industry will have to use a 5 percent blend of bioethanol -- which is made from cane molasses and cassava feedstock -- and 95 percent gasoline next year, increasing to 7 percent by 2010.

With the introduction of the mandatory policy, biodiesel capacity would rise to 5 million kilolitres a year by 2010, the government said recently, although it could also push up the price of palm oil.

Palm oil futures have tumbled around 40 percent since the start of the year, and have fallen more than half since hitting a record high of 4,486 ringgit a tonne in March.

Indonesia produced 17.18 million tonnes of crude palm oil in 2007, of which 3.8 million tonnes was used in the domestic market, mostly for food. Production this year is expected to rise to 18.6 million tonnes.

The grain and oilseed-based biofuel sector has come under attack from green groups for accelerating the destruction of forests, while some analysts blame it for contributing to soaring world food prices by diverting crops that could be used for food, but biofuel industry officials deny this. (Reporting by Yayat Supriatna; Writing by Aloysius Bhui; Editing by Sugita Katyal)


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