Indonesia firmly insists B40 biodiesel execution to continue on Jan. 1
Industry individuals seeking phase-in duration expect steady intro
Industry faces technical obstacles and cost concerns
Government funding concerns occur due to palm oil price variation
JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has sustained issues it could curb international palm oil materials, looks significantly likely to be implemented gradually, experts said, as industry individuals seek a phase-in duration.
Indonesia, the world's greatest producer 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 actually triggered a jump in palm futures and might push costs further in 2025.
While the government of President Prabowo Subianto has actually stated repeatedly the strategy is on track for full launch in the new year, market watchers say expenses and technical difficulties are most likely to lead to partial application before complete adoption throughout the sprawling island chain.
Indonesia's most significant fuel retailer, state-owned Pertamina, said it needs to customize some of its fuel terminals to blend and save B40, which will be finished during a "shift duration after federal government develops the mandate", representative Fadjar Djoko Santoso told Reuters, without providing information.
During a conference with government officials and biodiesel producers recently, fuel merchants asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in participation, told Reuters.
Hiswana Migas, the fuel merchants' association, did not immediately react to an ask for remark.
Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate walking would not be implemented gradually, which biodiesel manufacturers are ready to supply the higher blend.
"I have actually confirmed the readiness with all manufacturers recently," she said.
APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, said the government has not issued allowances for manufacturers to sell to sustain sellers, which it generally has done by this time of the year.
"We can't perform without purchase order files, and purchase order documents are acquired after we get contracts with fuel companies," Gunawan informed Reuters. "Fuel business can just sign contracts 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 told Reuters, less than its initial price quote of 16 million kilolitres.
FUNDING CHALLENGES
For the government, the greater blend might also be an obstacle as palm oil now costs around $400 per metric ton more than petroleum. Indonesia utilizes proceeds from palm oil export levies, managed by a company called BPDPKS, to cover such gaps.
In November, BPDPKS estimated it needed a 68% increase in subsidies to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy walking impends.
However, the palm oil market would challenge a levy walking, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the industry, including palm smallholders.
"I think there will be a delay, due to the fact that if it is carried out, the subsidy will increase. Where will (the cash) originate from?" he said.
Nagaraj Meda, managing director of Transgraph Consulting, a product consultancy, stated B40 implementation would be challenging in 2025.
"The execution may be sluggish and progressive in 2025 and most likely more hectic in 2026," he said.
Prabowo, who took office in October, campaigned on a platform to raise the required 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
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Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,
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