mission-biofuels-sdn.-bhd

1 Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia firmly insists B40 biodiesel execution to continue on Jan. 1

Industry individuals seeking phase-in period expect gradual intro

Industry faces technical difficulties and expense issues

Government funding issues develop due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel required from Jan. 1, which has sustained concerns it could suppress international palm oil products, looks significantly likely to be executed gradually, analysts said, as market individuals look for a phase-in duration.

Indonesia, the world's most significant producer and exporter of palm oil, prepares to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually triggered a dive in palm futures and might press prices further in 2025.

While the federal government of President Prabowo Subianto has actually stated consistently the strategy is on track for complete launch in the new year, say expenses and technical challenges are likely to lead to partial application before full adoption across the sprawling island chain.

Indonesia's most significant fuel retailer, state-owned Pertamina, stated it needs to customize a few of its fuel terminals to mix and store B40, which will be finished throughout a "transition duration after government establishes the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without providing information.

During a conference with federal government officials and biodiesel producers recently, fuel sellers requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in presence, informed Reuters.

Hiswana Migas, the fuel merchants' association, did not right away react to a request for comment.

Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate walking would not be carried out gradually, and that biodiesel manufacturers are all set to provide the higher mix.

"I have confirmed the preparedness with all producers last week," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, said the government has not issued allowances for producers to offer to fuel sellers, which it usually has done by this time of the year.

"We can't perform without order files, and order files are gotten after we get agreements with fuel companies," Gunawan informed Reuters. "Fuel companies can just sign agreements after the ministerial decree (on biodiesel allocations)."

The federal government prepares to designate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its initial price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, funding the higher blend could also be an obstacle as palm oil now costs around $400 per metric heap more than petroleum. Indonesia utilizes profits from palm oil export levies, handled by a company called BPDPKS, to cover such gaps.

In November, BPDPKS estimated it required a 68% increase in aids to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy walking impends.

However, the palm oil industry would object to a levy hike, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would hurt the market, consisting of palm smallholders.

"I think there will be a hold-up, because if it is executed, the subsidy will increase. Where will (the cash) come from?" he stated.

Nagaraj Meda, handling director of Transgraph Consulting, a product consultancy, said B40 application would be challenging in 2025.

"The application might be slow and progressive in 2025 and probably more hectic in 2026," he stated.

Prabowo, who took workplace in October, campaigned on a platform to raise the mandate further to B50 or B60 to accomplish energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina