lndonesia removes ethanol ban but its appetite for gasoline remains doubtful

Indonesia’s removal of a ban on pre-blended fuel has opened the way for US ethanol to enter the country but industry figures remain doubtful that the move will directly impact gasoline trade flow in the near term, S&P Global Platts reported on 4 June.

With the lifting of the ban, imports of 88 RON gasoline and 92 RON gasoline by state-owned Pertamina would be allowed to contain ethanol at a blend rate of up to 3% and 7%, respectively, according to a statement released by the US Grains Council (USGC) on 28 May.

The move had created a potential market of more than 200M gallons (757M litres/71M bushels in corn equivalent), according to the USGC, but sources were sceptical about its impact.

"There are too many factors working against using [US ethanol] blended gasoline. One has to consider whether it is even workable to bring the cargo from the US," one Singapore-based gasoline source said.

"There are a lot of cargoes to buy in Asia. It is also cheaper to buy [gasoline] from the region given lower freights," another gasoline source was reported as saying.

The prospects of Indonesian imports of ethanol-blended gasoline were also dismissed by sources in the ethanol sector.

"With ethanol at a premium to gasoline, the only blending that will work is mandatory blending," one ethanol trader said. "Indonesia has had an ethanol blending policy for years but it was never enforced or fulfilled," the trader added.

The USGC, however, was confident about the potentially positive effect of lifting the ban.

“The removal of the ethanol ban in Indonesia is a tremendous development in this market and for our regional market development efforts to demonstrate the benefits of expanded ethanol use,” said USGC regional director for southeast Asia Manuel Sanchez.

“We have worked tirelessly with our colleagues to demonstrate ethanol’s benefit, and this change in Indonesia is in line with other countries in this region that already blend ethanol into their fuel.”

Fuel blends in Indonesia are controlled by a state-owned oil company, Pertamina. The Indonesian government has encouraged Pertamina to reduce petroleum imports, while setting goals of achieving 23% of its energy needs from renewable sources by 2025.