Indonesia is boosting B30 program utilization to improve palm oil consumption, slash fuel imports, and narrow a yawning current account gap - Photo: Privacy.

JAKARTA (TheInsiderStories) – Indonesian government claimed that it can save the cost of importing diesel fuel around Rp70 trillion (US$4.90 billion) by using 30 percent biodiesel (B30). Yesterday, energy and mineral resources ministry launched the program to improve palm oil consumption, slash fuel imports, and narrow a yawning current account gap.

By implemented B20, during January – May, the ministry reported the biodiesel consumption recorded at 2.46 million kiloliters and will improve with B30 use. On the other hand, diesel imports were recorded as one of the causes of the trade balance deficit.

In April, the oil and gas trade balance deficit reached $1.5 billion. That number increased by $1.1 billion compared to the previous month of $400 million, the ministry data shows.

Indonesia currently imports around 400,000 barrels per day of crude oil and a roughly similar amount of refined products, which makes Southeast Asia’s largest economy vulnerable to the sort of increases in global crude prices seen over the past year.

That’ why the ministry and other relevant institutions are working together to implement biofuel derived from palm oil (Fatty Acid Methyl Ester/FAME) with diesel fuel.

Last year, mixing B20 with diesel fuel has been running. The government has cut diesel imports by mandating that all diesel consumers, including power plants and railways, use B20. The program has increased domestic consumption of palm oil in the world’ largest producer of the edible oil, providing a market for output that has climbed by 35 percent over the past five years.

Indonesia has 26 FAME producers, including units of palm oil giants like Sinar Mas Group, Wilmar (WLIL.SI), and Musim Mas, according to the Indonesian Biofuels Producers Association.

FAME is supplied to fuel distributors including Pertamina, blended with petroleum-based diesel and sold to end-users. Currently, only around one-quarter of Indonesia’s FAME production capacity is utilized, and the new program could raise this to up to 50 percent, Indonesia Palm Oil Association data shows.

Rules introduced in 2015 make B20 mandatory in subsidized biodiesel up to January 2020, after which B30 is scheduled to become mandatory. The uses of B30 is expected to cut oil fuel imports by 55 million barrels. This number is equivalent to the volume of B30 which will be tested which is 9 million kiloliters.

Yesterday, the energy ministry began testing B30 in cars, as the nation pushes to boost local markets for its vast palm oil crop. The world’s top palm oil exporter aims to make it mandatory for all biodiesel to have a 30 percent bio-content from next year.

In the trial, the use of biofuels will be tested for its impact on vehicle emissions. In addition, it will also see the extent to which B30 efficiency can be produced by comparing the use of ordinary diesel fuel, the ability of lubricants to fuel and its effect on the engine.

The government targets the use of crude palm oil (CPO) for domestic fuel to reach 9 million kiloliters, equivalent to 7.8 million tons of palm oil. In the development of B20, CPO uptake is targeted at 6.2 million kiloliters, equivalent to 5.4 million tons.

Industry experts have said that could push consumption of bio-content made from palm oil to as much as 9 million kilolitres per year, up from an estimated 6.2 kilolitres in 2019.

The test will be conducted over the next four months with various passenger vehicles and trucks, Dadan Kusdiana, head of research and development at the energy ministry, told reporters on Thursday.

The passenger vehicles will cover 50,000 kilometers (31,000 miles) and trucks 40,000 km during the road test, Kusdiana said. The ministry also plans to start testing trains, ships and heavy machinery in the mining sector using the fuel.

To offset slowing global demand for palm oil, Indonesia has been pushing to increase domestic consumption of the commodity, used in products ranging from fuels to soap. Nearly all the country’ biofuels are made from palm.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com