Indonesia plans to increase the biofuel mandate to B50
Indonesia is conducting tests to increase the proportion of biofuel produced from palm oil from 35% to 50%, which worries local exporters.
Indonesia, which is the world's largest producer of palm oil, has the world's highest mandate for biofuel blend - B35. The outgoing government of President Joko Widodo plans to increase the mandate to B40 next year. The next president, Prabowo Subianto, promises to increase the mandate to B50, which will reduce oil exports.
The current administration has instructed the Department of Energy, oil producers and other interested parties to conduct statistical tests of the composition of B50. This will be followed by transport trials, which usually last a year, while the Ministry of Agriculture assesses production and stocks. But this process will require investment in processing facilities.
The country's largest association of palm oil producers, GAPKI, warns that an increase in the share of biofuels will reduce exports and cause losses to the country's budget amid industry stagnation. Following the introduction of high biofuel requirements and mandatory sales of oil on the domestic market, palm oil consumption in the country has grown by an average of 7.6% since 2019, while production has grown by only 1%. The association does not see the need to increase the mandate against the background of low diesel fuel prices.
This year, within the scope of the B35 mandate, 11 million tons of crude palm oil will be used, while under B40, consumption will grow to 14 million tons, and under B50 will amount to 18 million tons, which will negatively affect domestic oil and export prices, as well as budget revenues.
Experts suggest increasing production and speeding up a reforestation program by small farmers, or creating a special zone for raw materials for biodiesel, before increasing the mandate.
We will remind that Indonesia plans to increase the production of biodiesel from palm oil from 13 to 16 million kiloliters.
