Indonesia adds biodiesel capacity ahead of B40 mandate

Indonesia will increase biodiesel capacity by 2.2mn kl/yr in the first quarter of 2021 and by 3.6mn kl/yr by the end of next year, Paulus Tjakrawan, vice chair of the Indonesian Biofuel Producer Association, said at the Indonesian Palm Oil Conference.

The expansions, which have been delayed from this year because of the Covid-19 pandemic, will raise capacity from the current 11.6mn kl/yr and pave the way for Indonesia's domestic biodiesel mandate to rise to B40 from B30.

The current B30 mandate requires around 9.6mn kl/yr of biodiesel but B40 is projected to require 12.8mn kl/yr, raising the need for the additional capacity especially given current utilisation rates of around 85pc.

Indonesia produced 6.47mn kl of biodiesel in January-September, of which 6.33mn kl was consumed domestically.

More work needs to be done before B40 can be implemented, including further tests on whether such a heavy biodiesel mixture can run safely through transportation vehicles, Tjakrawan said.

Market participants also hope that the additional hydrotreated vegetable oil capacity coming on line will help meet higher mandates, but even then headwinds remain in funding the programme.

High feedstock costs have led to a surge in biodiesel's premium to gasoil this year. The price difference is plugged by funds drawn from crude palm oil export levies. A higher mandate will require more funding, which is likely to lead a rise in the levies charged.

Regardless, Tjakrawan said he hoped B40 could be implemented at the end of next year or in 2022.

By Amandeep Parmar