Indonesia president-elect Prabowo Subianto hopes to implement mandatory 50% palm oil-based biodiesel blending by 2025. (Photo: X / Prabowo Subianto)
To reduce fuel imports and carbon emissions, Indonesia’s incoming President Prabowo Subianto has recently announced that the country will enforce a mandatory B50 biodiesel policy by 2025.
This announcement has raised concerns in the industry about the rush to implement this policy, citing issues such as potential raw material shortages that could drive up prices and impact the production of other palm oil products. Additionally, the technology for B50 is not yet fully developed.
Prabowo pushes for B50 biodiesel by 2025
On August 18, the Indonesian Ministry of Agriculture announced that it would complete trials for a 40% palm biodiesel and 60% conventional diesel blend, known as B40, by December 2024 and implement it in 2025. However, just a week later, Prabowo, who will succeed President Joko Widodo in October, called for an acceleration in the development of biodiesel.
On August 24, Prabowo stated, ""With B50, 50% biodiesel made of palm oil, once we reach B50, that God willing by end of this year or early next year, we will save US$20 billion a year, we do not need to send this money overseas."
Currently, the biodiesel blend in Indonesia is 35%, and the Energy Ministry previously estimated that static and on-road testing for B50 would take at least one year.
The Ministry of Agriculture is also assessing whether the supply of palm oil can meet the demand, particularly given the decline in palm oil production due to aging trees and adverse weather conditions. It is projected that production will not recover in 2024.
The Indonesian Energy Ministry estimates that it will take at least another year to complete testing of B50 biodiesel. (Photo: iStock)
Biodiesel B50 competes with palm oil exports
According to the Indonesian Palm Oil Producers Association (GAPKI), domestic palm oil consumption has grown by an average of 7.6% annually since 2019, but production has increased by less than 1%. The gradual implementation of biodiesel policies has also impacted palm oil exports.
Moreover, biodiesel tends to produce deposits when exposed to oxygen, particularly during transportation and storage, which can lead to engine filter clogging and force vehicle manufacturers to make modifications, increasing production costs.
Tatang Hernas Soerawidjaja, a biodiesel expert at the Bandung Institute of Technology, noted that some biodiesel producers will need to install new equipment and will require a six-month transition period, with an additional six months for commercial testing. Therefore, he believes that B50 could only be implemented by the end of 2025 at the earliest.
To address shortages, the Ministry of Agriculture has proposed collaborating with private companies to develop degraded lands for palm tree cultivation specifically for the energy industry. Following Prabowo’s push to accelerate the biodiesel transition, Malaysian palm oil futures prices surged to a one-month high on August 26, before the gains tapered off, indicating the impact on palm oil market investors.
Source: Reuters、Vietnam+、Bloomberg
