Indonesia s Higher Biodiesel Mandate Rollout May Be Gradual

Indonesia firmly insists B40 biodiesel execution to proceed on Jan. 1


Industry participants seeking phase-in period anticipate progressive intro


Industry faces technical difficulties and expense concerns


Government funding concerns develop due to palm oil cost variation


JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has actually fuelled concerns it could curb worldwide palm oil supplies, looks significantly most likely to be executed slowly, experts said, as market participants look for a phase-in duration.


Indonesia, the world's biggest 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 actually activated a jump in palm futures and may push prices even more in 2025.


While the government of President Prabowo Subianto has said repeatedly the strategy is on track for full launch in the brand-new year, market watchers state costs and technical difficulties are most likely to result in partial execution before complete adoption throughout the sprawling archipelago.


Indonesia's most significant fuel seller, state-owned Pertamina, said it needs to modify a few of its fuel terminals to mix and save B40, which will be completed during a "transition duration after government establishes the mandate", representative Fadjar Djoko Santoso told Reuters, without providing details.


During a conference with federal government authorities and biodiesel manufacturers last week, fuel sellers asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in presence, told Reuters.


Hiswana Migas, the fuel retailers' association, did not right away react to an ask for comment.


Energy ministry senior main Eniya Listiani Dewi informed Reuters the required walking would not be carried out slowly, which biodiesel manufacturers are ready to supply the higher blend.


"I have actually confirmed the readiness with all producers last week," she stated.


APROBI, whose members make fat methyl ester (FAME) from palm oil to be with diesel fuel, said the federal government has actually not issued allowances for manufacturers to offer to fuel retailers, which it typically has done by this time of the year.


"We can't perform without order documents, and order documents are obtained after we get agreements with fuel companies," Gunawan told Reuters. "Fuel companies can only sign agreements after the ministerial decree (on biodiesel allocations)."


The government plans to assign 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 higher blend might likewise be a difficulty as palm oil now costs around $400 per metric heap more than petroleum. Indonesia utilizes proceeds from palm oil export levies, handled by a company called BPDPKS, to cover such gaps.


In November, BPDPKS estimated it required 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 walking impends.


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


"I think there will be a delay, because 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 application may be sluggish and progressive in 2025 and most likely more fast-paced 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; Editing by Tony Munroe and Lincoln Feast.)