Biofuel use soon to become mandatory in Indonesia

Biofuel use soon to become mandatory in Indonesia

Alfian ,  The Jakarta Post ,  Jakarta   |  Thu, 07/10/2008 10:14 AM  |  Business

The government will impose a new regulation in October demanding manufacturing companies use at least 2.5 percent biofuel in their fuel consumption to reduce their dependency on fossil fuel.

“The regulation is expected to be issued in September and will come into effect one month after that,” said the national team for biofuel development head, Al Hilal Hamdi, in a hearing with law makers in Jakarta on Wednesday.

Implementation of the regulation, he said, would be carried out in two phases. In the first phase, the law will apply to Java and Sumatra. It will apply to the rest of the islands across the country in the second phase.

Al Hilal said the upcoming regulation would also give a degree of certainty for biofuel producers through the creation of demand for their products such as biodiesel and bioethanol.

To prepare for the implementation, he said, the government would cooperate with fuel producer-retailers such as Pertamina, Shell and Petronas to work on securing the supply of biofuel.

“These companies will blend the 2.5 percent biodiesel fuel with diesel fuel before they sell it to the industries,” Al Hilal said.

According to team member Evita H. Legowo, the policy will not hurt manufacturing companies as the price of mixed diesel-biodiesel fuel per liter will not be higher than pure diesel.

“The main purpose of the regulation is not to provide a cheaper fuel source, but to diversify sources of energy and to support the biofuel industry,” she said.

Al Hilal said the committee expected the minimum biofuel content requirement for industries would continue to increase in the future.

As of June 2008, the country’s annual bioethanol production capacity reached 192,349 kiloliters a year. This figure is expected to increase to 4 million kiloliters in 2010.

Based on production capacity by the end of last month, the country’s annual biofuel production is currently at 2 million kiloliters and is expected to grow to 5 million in 2010.

As of March 2008, the investment commitment for the bio energy development reached Rp 31.47 trillion and Rp 246.14 billion of which have came into realization.

Indonesia has produced two types of biofuel-bioethanol. One is made from cassava, sugarcane and sweet sorghum. And the other, biodiesel, is made from castor and crude palm oil.

Biofuel is currently being sold to retail customers. State oil and gas company PT Pertamina has 279 petrol stations selling biofuel. The state power firm PT PLN also has used biofuel to power nine of its power stations. These nine stations have a total capacity of 96 megawatt.

Also speaking at the hearing, lawmaker Burhanuddin Bur Maras expressed his concern about the biofuel development. He said that the usage of the crude palm oil for biofuel materials would push the price of the commodity further up and lead to overall food price inflation.

Al Hilal, however, said that such a case was improbable as domestic CPO consumption for food only stood at 3.8 million tons a year out of the total production of 17.5 million tons.

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