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Hit by oil crash, Indonesia set to delay B40 biodiesel, stay with B30 for now

JAKARTA (Reuters) - Indonesia is likely to delay plans to raise bio-content in palm oil-based biodiesel to 40%, and keep going with an already ambitious 30% content, a senior official said, amid speculation that low crude prices could force a government re-think.

The biodiesel programme is a key part of the government’s strategy to soak up excess supplies of palm oil and curb expensive fuel imports, one of the main contributors to the country’s current account deficit problem.

Some traders had questioned whether it was still viable for the government to continue its programme following the historic drop in crude oil prices earlier this year.

But Musdhalifah Machmud, a deputy minister at the Coordinating Ministry of Economic Affairs said on Friday the policies were under discussions and would soon be disclosed by President Joko Widodo.

“It will not be a single policy, but there will be several policies that are interrelated to one another,” Machmud said.

Late last year, Indonesia raised the bio-content in its biofuel mandate to 30% (B30), the highest palm-based content in biodiesel ever used.

Machmud said the policies are aimed at keeping B30 going until 2021, while the plan to increase the bio-content to 40% (B40) will likely be delayed to 2022 due to disruption to world fuel demand caused by the coronavirus pandemic.

“We were preparing for B40, but the current situation is not conducive for investment in processing B40,” she said. “B40 will be delayed to 2022.”

In January, the energy ministry had planned to start road tests for B40 in April and had looked at rolling out the upgrade as early as next year.

“The schedule has been disrupted by work-from-home and movement restriction policies. We are waiting for conditions to return to normal to resume testing,” Dadan Kusdiana, head of research and development at the energy ministry, told Reuters.

Indonesia reported its first COVID-19 cases early in March and since then many areas, including the capital Jakarta, has imposed movement restrictions.

In February, the government has said it was planning to raise palm oil export levies to support the biodiesel programme as the price gap between biodiesel and standard gasoil - as diesel is called in Asia - had widened.

Indonesia collects levies to help finance its palm oil programmes, including biodiesel subsidies and replanting programmes for smallholders.

The Estate Crop Fund, an agency in charge of collecting and managing the levies, disburses funds to subsidise biodiesel makers.

Additional report by Wilda Asmarini; Writing by Fransiska Nangoy; Editing by Ed Davies & Simon Cameron-Moore

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