Indonesia to Expand the Use of B20 in September

The Indonesian Palm Oil Association estimates that the crude palm oil price will be in the range US$850 to $900 per metric ton of CPO in this year supported by a number of positive catalysts - Photo: Privacy

JAKARTA (TheInsiderStories) – Indonesian government is serious to expand the use of 20 percent blended biodiesel (B20) to all diesel-engined vehicles in September, said one senior official last week. The use of B20 fuel is estimating would save around US$5.6 billion annually.

The recent increase in oil prices have brought fresh push to the biodiesel mix mandatory in the country. According to the Minister for Industry Airlangga Hartarto, the use of B20 expanded to save foreign exchange expenses, to optimize the utilization of local raw materials and also to reduce the import of fuel.

Previously B20 in diesel consumption is only required to subsidized vehicle or public service obligation (PSO) such as train. Later on, B20 will be mandatory for non-PSO vehicles such as heavy equipment in the mining, tractor or excavator sectors, as well as extended to private vehicles.

“Therefore, the government will revise Presidential Regulation No. 61 of 2015 on the Collection and Use of Oil Palm Plantation Funds, which only implies the obligation of B20 to PSO vehicles,” he told reporters after a limited meeting in Jakarta (27/07).

According to him, the amount of non-subsidized biodiesel is currently projected to reach 16 million tons. That means, he continued, there is an increase in demand for biofuels up to 3.2 million tons per year.

But, he added, Indonesia still sufficient to fulfill the raw materials for biodiesel production, namely CPO. In 2017, the national CPO capacity reached 38 million tons, which is a total of 7.21 million tons are for national exports and food needs of 8.86 million tons.

Previously, President Joko Widodo encouraged his staff to continue to optimize the use of biodiesel and renewable energy in the national energy mix. To that end, the he requested a mixture of biodiesel in fuel is increased.

“I get the information that every day if we can do it we will save about US$21 million per day,” he said in a limited meeting on July 20.

The government itself targets to increase biodiesel mix to 25 percent by 2019. In addition, the utilization of local raw materials can also reduce the import of fuel, said Hartarto.

“It means that this CPO can be used for energy without putting pressure on the food sector,” he noted.

Since being introduced in early 2016, the government has struggled to expand the use of B20 fuel, as only vehicles that used subsided Solar-branded diesel fuel were required to use it. The fuel is sold by state-owned energy company Pertamina and local fuel distributor PT AKR Corporindo.

In recent months, the government has intensified its efforts to have all vehicles in the transportation sector use B20 fuel. An official requirement will be issued after a revision of Presidential Regulation No. 61/2014 is completed, expected to be early next month.

The recent increase in oil prices have brought fresh push to the biodiesel mix mandatory, government targets to increase biodiesel mix to 25 per cent or “B25” by 2019 from the current mix of 20 per cent.

Energy and Mineral Resources Ministry director general for energy conservation and renewable energy Rida Mulyana on May 24 said the government optimist to increase the mandatory biodiesel mix to 25 per cent by 2019. This implementation is part of the government ambition to implement biodiesel mix of 30 percent by 2020.

The implementation of B25 in 2019 will benefit palm oil producers as it could be an alternative to export that is often disturbed by the anti-palm campaign in the international market.

The mandatory biodiesel mix has been launched since 2015. It started with 15 per cent biodiesel mix for small medium enterprises (SMEs), fisheries, agriculture, and transportation in April 2015. Then, 20 per cent mandatory biodiesel mix in January 2016.

The implementation B20 for transportation is relatively easy, but it faced many obstacles in the implementation for industries, especially for the factory machine. The use of B20 in factory machine has increased maintenance cost.

In addition, low oil price trend since 2014 disrupted the implementation of biodiesel mix. Low oil price made biodiesel price less competitive as diesel price are much cheaper. In the low oil price era, the gap between oil price and biodiesel price get bigger, which means higher subsidy by the government.

These obstacles made the National Energy Board proposed for a delay in the implementation of B20 to 2030. In addition, the National Energy Board proposed a standardization through Indonesia National Standard in the B30 implementation.

The National Energy Board member Sonny Keraf earlier said the institution needs to discuss with the automotive industry in order to prepare the B30 implementation. Keraf also requested the Ministry of Finance to provide a fiscal incentive for companies who implement biodiesel mix mandatory.

This coordination is important as many automotive manufacturers reject the B20 implementation. They considered B20 biodiesel mandatory policies as counterproductive to the government’s ambition to implement Euro 4 emission standard. The diesel fuel mixed with the 20 per cent palm oil is not in accordance with the designation of motor vehicles Euro 4 standard.

The Ministry of Energy and Mineral Resources calculated the implementation of biodiesel mix could save annual fuel import by Rp30 trillion and reduce emission by 9 million tonnes per year. Biofuel Producers Association targets biodiesel production of 3.5 million kiloliters this year.