Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,
Indonesia firmly insists B40 biodiesel implementation to continue on Jan. 1
Industry individuals seeking phase-in period anticipate gradual intro
Industry deals with technical obstacles and cost issues
Government financing issues occur due to palm oil price variation
JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to its biodiesel mandate from Jan. 1, which has fuelled concerns it might curb worldwide palm oil products, looks increasingly likely to be implemented slowly, experts said, as industry participants seek a phase-in duration.
Indonesia, the world's most significant producer and exporter of palm oil, prepares to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually triggered a jump in palm futures and may press prices even more in 2025.
While the federal government of President Prabowo Subianto has actually stated repeatedly the strategy is on track for complete launch in the new year, industry watchers say costs and technical challenges are most likely to lead to partial execution before complete adoption across the stretching island chain.
Indonesia's biggest fuel merchant, state-owned Pertamina, stated it needs to modify a few of its fuel terminals to blend and save B40, which will be finished throughout a "transition period after federal government establishes the mandate", representative Fadjar Djoko Santoso informed Reuters, without providing information.
During a meeting with government authorities and biodiesel manufacturers last week, fuel retailers requested a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in participation, informed Reuters.
Hiswana Migas, the fuel retailers' association, did not right away respond to an ask for comment.
Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate hike would not be executed slowly, which biodiesel manufacturers are ready to provide the greater mix.
"I have actually verified the readiness with all producers last week," she said.
APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the government has not issued allocations for producers to offer to sustain retailers, which it usually has done by this time of the year.
"We can't provide the goods without order files, and purchase order documents are obtained after we get contracts with fuel business," Gunawan told Reuters. "Fuel business can only sign agreements after the ministerial decree (on biodiesel allocations)."
The government prepares to designate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its initial quote of 16 million kilolitres.
FUNDING CHALLENGES
For the federal government, moneying the greater blend could also be an obstacle as palm oil now costs around $400 per metric ton more than crude oil. Indonesia uses earnings from palm oil export levies, managed by a company called BPDPKS, to cover such gaps.
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 is imminent.
However, the palm oil market would object to a levy hike, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would injure the industry, consisting of palm smallholders.
"I believe there will be a hold-up, due to the fact that if it is executed, the aid will increase. Where will (the money) come from?" he stated.
Nagaraj Meda, handling director of Transgraph Consulting, a product consultancy, said B40 execution would be challenging in 2025.
"The implementation might be sluggish and progressive in 2025 and most likely more fast-paced 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 yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)