oleovest-pl

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

Indonesia insists B40 biodiesel application to continue on Jan. 1

Industry participants looking for phase-in period anticipate gradual introduction

Industry faces technical obstacles and expense concerns

Government financing issues emerge due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has actually fuelled concerns it might suppress international palm oil materials, looks increasingly most likely to be implemented slowly, said, as market participants seek a phase-in duration.

Indonesia, the world's greatest producer and exporter of palm oil, plans to raise the mandatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually activated a dive in palm futures and may push rates further in 2025.

While the government of President Prabowo Subianto has actually stated consistently the plan is on track for full launch in the brand-new year, industry watchers say costs and technical difficulties are likely to result in partial implementation before full adoption throughout the sprawling island chain.

Indonesia's biggest fuel retailer, state-owned Pertamina, said it needs to customize a few of its fuel terminals to mix and keep B40, which will be completed throughout a "transition period after federal government establishes the mandate", representative Fadjar Djoko Santoso informed Reuters, without supplying information.

During a meeting with government authorities and biodiesel producers last week, fuel sellers requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in participation, told Reuters.

Hiswana Migas, the fuel retailers' association, did not instantly react to an ask for remark.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required walking would not be carried out gradually, which biodiesel manufacturers are ready to provide the higher blend.

"I have actually verified the readiness with all manufacturers last week," she stated.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the government has not provided allotments for producers to offer to sustain sellers, which it normally has done by this time of the year.

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

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

FUNDING CHALLENGES

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

In November, BPDPKS approximated it needed a 68% boost in aids to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy hike looms.

However, the palm oil market would challenge a levy walking, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the industry, including palm smallholders.

"I believe there will be a delay, because if it is carried out, the subsidy will increase. Where will (the cash) come from?" he stated.

Nagaraj Meda, managing director of Transgraph Consulting, a commodity consultancy, stated B40 execution would be challenging in 2025.

"The implementation may be sluggish and steady in 2025 and probably more busy in 2026," he said.

Prabowo, who took office in October, campaigned on a platform to raise the required even more to B50 or B60 to attain energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina