Indonesia insists B40 biodiesel execution to proceed on Jan. 1
Industry participants looking for phase-in period anticipate steady intro
Industry faces technical challenges and cost concerns
Government financing issues occur due to palm oil price variation
JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has fuelled concerns it could suppress worldwide palm oil supplies, looks progressively likely to be implemented slowly, analysts stated, as market participants look for a phase-in duration.
Indonesia, the world's greatest producer and exporter of palm oil, plans to raise the mandatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually set off a jump in palm futures and may push costs further in 2025.
While the federal government of President Prabowo Subianto has actually stated consistently the plan is on track for full launch in the brand-new year, industry watchers say expenses and technical difficulties are most likely to result in partial implementation before complete adoption across the sprawling archipelago.
Indonesia's most significant fuel seller, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to blend and keep B40, which will be finished throughout a "shift duration after government establishes the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without providing information.
During a conference with federal government authorities and biodiesel producers recently, fuel retailers requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in participation, informed Reuters.
Hiswana Migas, the fuel merchants' association, did not immediately react to an ask for remark.
Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be implemented gradually, which biodiesel producers are all set to supply the greater blend.
"I have actually confirmed the readiness with all manufacturers last week," she said.
APROBI, whose members make fat methyl ester (FAME) from palm oil to be combined with diesel fuel, said the government has not issued allowances for producers to sell to sustain sellers, which it generally has done by this time of the year.
"We can't perform without order files, and order files are obtained after we get contracts with fuel business," Gunawan told Reuters. "Fuel business can only sign contracts after the ministerial decree (on biodiesel allotments)."
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 estimate of 16 million kilolitres.
FUNDING CHALLENGES
For the government, funding the greater blend might also be an obstacle as palm oil now costs around $400 per metric load more than petroleum. Indonesia utilizes proceeds from palm oil export levies, handled by a firm called BPDPKS, to cover such gaps.
In November, BPDPKS estimated 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, sustaining market speculation that a levy hike is imminent.
However, the palm oil industry would object to a levy walking, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would hurt the market, consisting of palm smallholders.
"I believe there will be a hold-up, due to the fact that if it is implemented, the subsidy will increase. Where will (the money) originate from?" he said.
Nagaraj Meda, handling director of Transgraph Consulting, a commodity consultancy, stated B40 application would be challenging in 2025.
"The application might be slow and progressive in 2025 and most likely more fast-paced in 2026," he stated.
Prabowo, who took office in October, campaigned on a platform to raise the required further to B50 or B60 to attain 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.)
