Indonesia to Switch 10 Pct Petroleum to Biofuel

PlanetArk 15 Jan 08;

JAKARTA - Indonesia plans to substitute around 10 percent of its fossil fuel transport consumption with biofuel products by 2010, a senior government official said on Monday.

The resource-rich tropical nation has been pushing the use of biofuels made from various resources such as palm oil, sugar cane and cassava to cut the use of costly petroleum products.

The move aims at easing burden of hefty subsidy on petroleum products without raising the price of subsidised fuel sold on domestic market.

"We can't increase prices of subsidised fuel as it will hurt consumers. But we may be able to cut consumption and replace it with biofuel," Evita Legowo, secretary at the National Biofuel Development Team said at the Reuters Global Agriculture and Biofuel Summit.

By 2010, biofuel products are expected to account for 3.8 million kilolitres of total petroleum consumption for transportation at estimated 34.75 million kilolitres.

Indonesia is Asia Pacific's only OPEC member but it is one of the smallest producers in terms of production and relies on fuel imports as it has failed to tap new oilfields fast enough.

The country has to spend billions of dollars on oil subsidies and importing oil products.

For that, the government plans to increase bioethanol blend in gasoline to 5 percent by 2010 from 3 percent, using cassava and cane molasses--thick syrup produced from sugar cane during the sugar extraction process--as feedstock, she said.

Production capacity for bioethanol using both cassava and cane molasses is expected to reach 3.77 million kilolitres per year, from 135,000 kilolitres per year by the end of December 2007, data from the biofuel team showed.

As for biodisel, Legowo said the government may keep the biodiesel blend in diesel oil at 2.5 percent due to soaring palm oil prices while trying to boost output of jatropha, a non-edible oil that grows in arid land and needs little care.

"Biodiesel blend will stay at 2.5 percent..maybe less because we are still waiting for jatropha that we planted last year," Legowo said.

Indonesian state-owned oil firm Pertamina which retails biodiesel at home, has cut the biodiesel blend in diesel fuel to 2.5 percent as rising palm oil prices and lack of incentives cut margins.

Malaysian crude palm oil futures hit a record on Monday with the benchmark March contract ending at 3,414 ringgit a tonne after hitting 3,420 ringgit, surpassing a high of 3,280 ringgit reached on Friday.

Palm oil prices, up nearly 12 percent since the start of the year, were also supported by prospects of Malaysia introducing palm oil-blended diesel at home this year and Indonesia's plans to double biodiesel production.

There are also plans for 12 special biofuel zones by 2010 where investors could develop an integrated biofuel industry, if approved by the government, said Legowo.

Indonesia is developing other raw materials to ensure feedstock supplies for biodiesel and biofuel production. It plans to plant 5.25 million hectares of unused land with palm oil, jatropha, sugar cane and cassava by 2010.

By that time, biofuel products will account for 2 percent of the country's total energy mix of 5.29 million kilolitres.

(For summit blog: http://summitnotebook.reuters.com/)

(Editing by Peter Blackburn)