Indonesia has introduced a new formula to lower the cost of biodiesel in a move to support its domestic industry and reduce imports of petroleum products.
(Friday, 27 March 2015) Indonesia has introduced a new formula to lower the cost of biodiesel in a move to support its domestic industry and reduce imports of petroleum products.
Under a new formula introduced by the Energy and Mineral Resources Ministry, the biodiesel index price will be calculated based on the crude palm oil (CPO) base price plus US$125/tonne, according to the Jakarta Post.
The added US$125 is the cost of converting CPO into fatty acid methyl ester (FAME), which is used to produce biodiesel. The conversion cost is lower than the previous US$188/tonne level.
“Producers have agreed to lower the conversion cost,” said Rida Mulyana, the ministry’s director general for new and renewable energies and energy conservation.
This would help users, such as state-owned oil and gas company Pertamina, as it would be able to buy FAME at a cheaper price, resulting in lower biodiesel prices.
The move would help distributors comply with the government’s mandatory biodiesel blending policy amid the ongoing decline in the price of crude petroleum oil, which makes fossil fuel more attractive than biofuels.
The government also plans to increase the mandatory biodiesel blending rate from 10% to 15% this year.
The Jakarta Post report said several advantages were expected from the implementation of the 15% mandatory mix, including savings of up to US$2.5bn in foreign currency and the additional employment of around 300,000 people, If the 15% rate was fully implemented, the country would need to blend 5.3M kiloliters of biodiesel, equivalent to 4.8M tonnes of CPO.
Apart from lowering the biodiesel price, the government was also considering imposing a levy of US$50 on every tonne of CPO shipped, with the funds used to help the biofuel industry, the report said. Technical details of the levy scheme were still being discussed.
Indonesian palm oil producers association GAPKI said the country produced 31.5M tonnes of CPO last year, of which 21.7M tonnes were exported.