mission-newenergy-ltd

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

Indonesia insists B40 biodiesel execution to proceed on Jan. 1

Industry individuals seeking phase-in period expect progressive introduction

Industry faces technical obstacles and cost concerns

Government funding problems emerge due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel required from Jan. 1, which has fuelled concerns it might suppress international palm oil supplies, looks progressively most likely to be implemented gradually, analysts said, as industry participants look for a phase-in period.

Indonesia, the world's biggest manufacturer 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 activated a dive in palm futures and might pressure prices further in 2025.

While the federal government of President Prabowo Subianto has said repeatedly the plan is on track for complete launch in the brand-new year, market watchers say expenses and technical challenges are most likely to result in partial application before complete adoption across the sprawling island chain.

Indonesia's biggest fuel seller, state-owned Pertamina, said it requires to customize some of its fuel terminals to mix and keep B40, which will be finished throughout a "shift period after federal government develops the required", representative Fadjar Djoko Santoso informed Reuters, without offering information.

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

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

Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate walking would not be executed slowly, and that biodiesel manufacturers are prepared to provide the higher mix.

"I have actually verified the preparedness with all producers recently," she said.

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

"We can't provide the goods without purchase order documents, and purchase order documents are acquired after we get agreements with fuel business," Gunawan told Reuters. "Fuel business can only sign agreements after the ministerial decree (on biodiesel allocations)."

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

FUNDING CHALLENGES

For the federal government, moneying the higher blend could also be a challenge as palm oil now costs around $400 per metric heap more than unrefined oil. Indonesia utilizes earnings from palm oil export levies, managed by a firm 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, fuelling market speculation that a levy walking looms.

However, the market would challenge a levy hike, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the industry, consisting of palm smallholders.

"I believe 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, managing director of Transgraph Consulting, a commodity consultancy, said B40 implementation would be challenging in 2025.

"The execution may be sluggish and gradual in 2025 and most likely more hectic in 2026," he stated.

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