JAKARTA (TheInsiderStories)—The Indonesian Palm Oil Producers Association and the budget airlines Lion Air Group sign memorandum of understanding on reducing the using of fossil fuel in the aviation industry.
Following the agreement, both parties will conduct research, development, and trial test on the biofuels for aviation or bioavtur for the commercial aircraft.
“We hope this agreement will optimize the using of palm oil for eco-friendly fuel because it reduces the carbon emission,” said Counsel of the Indonesian Palm Oil Producers Association Franky Widjaja in a press statement received by TheInsiderStories on Tuesday (10/04).
Furthermore, he added, the agreement will bring positive multiplier effect on the palm oil downstream industry.
Co-founder of Lion Air Group Rusdi Kirana explained the using of bioavtur will bring impacts to the millions of farmers in palm industry. According to the Ministry of Agriculture data in 2016, there are around 8.2 million employment in palm industry.
The using of palm oil in the aviation industry will also bring a benefit for the farmers amid the threat of palm oil ban by European Union. Previously The European Parliament voted earlier this year to prohibit sales of biofuels made from the vegetable oils by 2021 in order to prevent deforestation and meet their ambitious climate goals.
Indonesia’s government targets to start using 0.01 per cent blended bioavtur by 2018. By 2020, the target to improve the mixed biofuel on the aviation fuel by 3 per cent and gradually increased by 5 per cent by 2025.
However, a small number of national courier currently already use the biovtur. But it mostly imported with a value of Rp1.48 trillion (US$108.02 million) per year. This import is an irony since Indonesia is the biggest palm oil exporter in the world.
Last year, the country exported a total of 28 million tonnes (Mt) of crude palm oil (CPO), valued $23 billion. CPO contributed to 12 per cent of the total’s export. While Malaysia in the same year produced around 19.5 Mt of CPO with an export value of $25 billion.
Indonesia import the bioavtur since there is no large-scale bioavtur plant in Indonesia. State-owned energy producer PT Pertamina actually has planned to construct a bioavtur plant in 2017 located near an international airport in Java or Sumatra. The company planned to invest around $450 million with a production capacity of 260 million liters per year.
However, this project has not seemed to be running as expected. Probably because the cost production of bioavtur is very high, around five times more expensive than the regular aviation fuel cost.
Not only for bioavtur, the government previously implemented the biofuels mandatory policy of 20 percent of B-20 for the small and medium enterprises, fishing industry, agriculture, transportation, and other industries.
Based on government data, in 2017, Indonesia recorded use biodiesel of 3.1 million kiloliters. This year, the Indonesian Biofuel Producers Association estimated the using of biodiesel will increase by 3.5 million kiloliters.