Indonesia firmly insists B40 biodiesel application to proceed on Jan. 1
Industry individuals looking for phase-in duration expect gradual intro
Industry faces technical challenges and expense concerns
Government financing concerns develop due to palm oil cost disparity
JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has actually fuelled issues it could suppress global palm oil supplies, looks increasingly likely to be carried out gradually, experts stated, as market participants look for a phase-in duration.
Indonesia, the world's biggest producer and exporter of palm oil, plans to raise the necessary 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 costs further in 2025.
While the government of President Prabowo Subianto has said repeatedly the strategy is on track for complete launch in the brand-new year, market watchers say expenses and technical challenges are likely to result in partial application before full adoption across the sprawling archipelago.
Indonesia's biggest fuel retailer, state-owned Pertamina, stated it requires to customize some of its fuel terminals to mix and store B40, which will be completed throughout a "shift duration after federal government establishes the mandate", representative Fadjar Djoko Santoso informed Reuters, without providing information.
During a meeting with federal government officials and biodiesel manufacturers recently, fuel sellers asked for a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in participation, told Reuters.
Hiswana Migas, the fuel merchants' association, did not right away respond to a demand for comment.
Energy ministry senior main Eniya Listiani Dewi informed Reuters the required hike would not be carried out slowly, and that biodiesel producers are prepared to provide the greater mix.
"I have actually validated the readiness with all manufacturers last week," she said.
APROBI, whose members make fat methyl ester (FAME) from palm oil to be mixed with diesel fuel, stated the federal government has not provided allowances for manufacturers to sell to sustain merchants, which it typically has actually done by this time of the year.
"We can't perform without purchase order documents, and order files are obtained after we get contracts with fuel companies," Gunawan told Reuters. "Fuel business can only sign contracts after the ministerial decree (on biodiesel allowances)."
The federal government prepares to allocate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its preliminary price quote of 16 million kilolitres.
FUNDING CHALLENGES
For the federal government, funding the greater mix could likewise be a challenge as palm oil now costs around $400 per metric load more than petroleum. Indonesia uses earnings from palm oil export levies, handled by a company 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 approximated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike is imminent.
However, the palm oil market would challenge a levy hike, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would injure the market, including palm smallholders.
"I think there will be a hold-up, due to the fact that if it is executed, the aid will increase. Where will (the cash) originate from?" he said.
Nagaraj Meda, managing director of Transgraph Consulting, a product consultancy, stated B40 would be challenging in 2025.
"The implementation may be slow and gradual in 2025 and most likely more fast-paced in 2026," he stated.
Prabowo, who took workplace in October, campaigned on a platform to raise the mandate even more 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
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Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,
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