Indonesia s Higher Biodiesel Mandate Rollout May Be Gradual

Indonesia insists B40 biodiesel application to proceed on Jan. 1


Industry individuals looking for phase-in duration expect progressive introduction


Industry faces technical difficulties and cost issues


Government financing issues emerge due to palm oil rate variation


JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has sustained issues it could suppress worldwide palm oil products, looks significantly most likely to be executed slowly, experts stated, as industry participants seek a phase-in period.


Indonesia, the world's greatest manufacturer and exporter of palm oil, prepares to raise the necessary 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 pressure rates further in 2025.


While the federal government of President Prabowo Subianto has actually said consistently the strategy is on track for full launch in the new year, market watchers say costs and technical difficulties are likely to result in partial application before full adoption across the stretching archipelago.


Indonesia's most significant fuel seller, state-owned Pertamina, said it needs to customize a few of its fuel terminals to blend and save B40, which will be completed throughout a "shift duration after government develops the required", representative Fadjar Djoko Santoso informed Reuters, without supplying details.


During a conference with government authorities and biodiesel manufacturers last week, fuel merchants asked for a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in presence, told Reuters.


Hiswana Migas, the fuel sellers' association, did not right away respond to a demand for comment.


Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate walking would not be implemented slowly, which biodiesel manufacturers are ready to supply the higher mix.


"I have validated the readiness with all producers last week," she said.


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


"We can't deliver the products without order files, and order files are acquired after we get contracts with fuel companies," Gunawan informed Reuters. "Fuel companies can just sign agreements after the ministerial decree (on biodiesel allowances)."


The 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 estimate of 16 million kilolitres.


FUNDING CHALLENGES


For the government, funding the higher blend could also be a challenge as palm oil now costs around $400 per metric ton more than unrefined oil. Indonesia uses earnings from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.


In November, BPDPKS approximated it required a 68% boost in aids to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike looms.


However, the palm oil industry would object to a levy hike, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the industry, 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 cash) originate from?" he stated.


Nagaraj Meda, managing director of Transgraph Consulting, a product consultancy, said B40 implementation would be challenging in 2025.


"The execution might be sluggish and gradual in 2025 and most likely more busy in 2026," he said.


Prabowo, who took office in October, campaigned on a platform to raise the required even more to B50 or B60 to achieve energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)