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Prospect of Developing Biodiesel Fuel in Indonesia

December 2012
By Dr. Abdul Rahman
Senior Consultant of MU-Research and Consulting Indonesia
email: rahman@murci.co.id.

Remark: MURCI in 2012 involved in the study related with biodiesel fuel. The article sited here is an excerpt from our findings about biofuel situation in Indonesia.

Foreword

Limited fossil based fuel resources and efforts for creating environment friendly fuel makes people put more attention to renewable energy resources. Biodiesel is one of promising renewable energy resources and regarded to be friendly for environment. It was invented and developed in 1890s by Dr. Rudolf Diesel and exhibited in Paris Worlds Fair. However biodiesel industry in Europe was not developed yet until the late 1980s.

In Indonesia, biodiesel development as fuel for industrial and transportation use was initiated in 1996 when Lemigas (Oil and Gas Institute) in collaboration with Pertamina (a state owned oil company) tested for the first time biodiesel that was mixed with automotive diesel oil in a commercial diesel engine vehicle. Since then, public as well as private sectors were more serious in developing biodiesel and biofuel in general as an alternative energy to substitute fossil fuel, especially in transportation sector. In 2006, Indonesia government set a roadmap[1] of Indonesia biofuel to provide step by step development direction to related stakeholders.

Biodiesel Production

Currently Indonesia biodiesel development is advancing and in 2012, Indonesia biodiesel production capacity has reached around 4.28 million ton. Actual production volume was around 1.8 million ton and 72.2% of the production or 1.3 million ton was for export and the remaining 500 million ton was for domestic market.

Biodiesel production, consumption and export (million liter)

Year 2006 2007 2008 2009 2010 2011 2012
Production Capacity 215 1,709 3,138 3,528 3,936 3,936 4,280
Annual Production 65 270 630 330 740 1,520 1,800
Domestic Consumption 5 22 23 60 220 304 500
Export 33 257 610 204 563 1,225 1,300

Source: USDA Foreign Agricultural Service

Indonesia biodiesel production

Source: USDA Foreign Agricultural Service

There are still more rooms to expand the production of biodiesel since biodiesel feedstock are available in a huge amount in Indonesia that is known as an agrarian country. Feedstocks of biodiesel which are widely known and suitable to be planted in Indonesia as a tropical country are palm oil and jatropha curcas. However, Indonesia biodiesel producers mostly utilized crude palm oil as their raw material as jatropha oil is not available yet for Industry scale production. Currently oil palm plantation in Indonesia is very common, where Indonesia is known as the largest producer of crude palm oil (CPO) in the world. In 2010[2]Indonesia CPO production volume was around 19.1 million ton with global market share 44.5%, exceeding Malaysia that produced around 17.7 million ton world secondly ranked with global market share 41.3%. Indonesia CPO production continued to increase and recorded 22.5 million ton in 2011 and estimated to be around 25.5 million ton in 2012.

Every single Ton of CPO said to be able to produce around 0.9 ton of biodiesel. Taking into account the production volume in 2012, and assume that 30% of the CPO are for biodiesel production then there will be a potency to produce around 7.65 million ton of biodiesel from CPO feedstock alone.

Export Market

Europe is the largest market for Indonesia biodiesel export in which was accounted for 93.4% of Indonesia overall biodiesel export to various countries. Share of Indonesia biodiesel among the overall Europe biodiesel import was also trending up from around 9% in 2008, increasing significantly to the figure 39% in 2011. The biodiesel export volume was once decreasing in 2009 to the level 204 million liter due to the low European demand affected by global economic crisis. However in 2010 the export gained again a momentum to rise up and reach the level 563 million liter and then drastically increased to more than 1.2 billion liter in 2011. There are still more opportunities to leverage biodiesel export to European countries since European biodiesel domestic production is decreasing due to lacking of biodiesel feedstock. USDA estimated that the production of European rapeseed (commonly used feedstock for biodiesel in Europe) will decline from around 20.76 million ton in 2010/2011 to only around 18 million ton in 2012/2013 due to a poor rapeseed crop results.

Indonesia biodiesel export and domestic consumption

Source: USDA Foreign Agricultural Service

Domestic market

As in export market, domestic market indicates a good prospect as the trend of consumption is increasing. In 2008, biodiesel domestic consumption was only around 60 million liter and drastically increased to around 304 million liter in 2011 or 5 times increase within only 3 years. Indonesia government endorsed as well the utilization of biodiesel to support the realization of 25/25 vision[3] in 2025. In February 2012, Pertamina increased biodiesel blending percentage in Biosolar[4] from 5% to 7.5% in responding the request of Kardaya Warnika, the General Director of EBTKE[5], Ministry of Energy and Mineral Resources. As a result, Pertamina increased the distribution of biodiesel from around 304 million liter in 2011 to the estimated volume around 500 million liter in 2012.

Based on biodiesel development roadmap as stipulated in the Presidential Regulation number 5 in 2006, the government actually targeted to achieve biodiesel domestic utilization around 4.52 billion liter by 2015 and 10.22 billion liter by 2025. Therefore there is a big potency as well lying on domestic market.


[1] Source: Presidential regulation number 5 in 2006

[2] Based on the data of Ministry of Agriculture

[3] 25/25 vision is the vision of Indonesia government to achieve the target in utilizing new and renewable energy for around 25% of the overall Indonesia energy mix in the year 2025.

[4] Biosolar is a fuel product of Pertamina which is a mix between fossil diesel and biodiesel.

[5] EBTKE: Energy Baru Terbarukan dan Konservasi Energi (New-Renewable Energy and Energy Conservation)