Indonesia needs EUR 20 bn investment in biofuels

Jul 14, 2007 02:00 AM

Indonesia needs 200 tn rupiah (EUR 20 bn) of investment to develop more biofuels so it can cut subsidised oil-product consumption by 10 % by 2010, the mines and energy minister said.
Indonesia, the Asia-Pacific's only OPEC member, is struggling to cut a hefty oil subsidy bill inflated by high global prices, and wants to encourage alternative sources of energy. It was net importer of crude oil in May and June this year. Output from the country's ageing oil fields is declining at an annual rate of 5 % or more, and new fields are not being tapped fast enough to offset this.

"We need investors, not only domestic but also from abroad, to accelerate the development of biofuels. The government is studying incentives for them," Purnomo Yusgiantoro told. He said Indonesia needed to plant about 6 mm hectares of biofuel plantations, such as jatropha and palm oil for biodiesel and sugarcane to produce bio-ethanol for gasoline.
"This will cut 10 % of subsidised oil-products consumption by 2010. We will accelerate the biofuel plantation projects," Purnomo said.

Biofuels are becoming more important as countries seek to cut greenhouse gas emissions and cut dependence on oil. An oil industry participant said the government plan to cut oil consumption by 10 % was ambitious because policy on biofuels was still largely undefined.
"Who will guarantee that they will buy the products and how about the price? Those need clarification or clear regulations. Is the government ready to press Pertamina to buy it in future?" asked the industry member.

Earlier this year, the government allowed retailers to blend 10 % of biofuels into fuel products. State oil and gas company Pertamina is retailing biodiesel, made up of 5 % crude palm oil blended with 95 % diesel oil, at five pump stations in Jakarta.
"Biodiesel retail is no problem so far but it is still very small," a Pertamina official told.

Pertamina has estimated Indonesia will consume around 62 mm kilolitres (1.07 mm bpd) of oil products in 2006, down 4.6 % from 65 mm kl last year.
Indonesia has 9 refineries with a combined capacity of around 1 mm bpd, but they supply only about 70 % of domestic oil products consumption. The rest is imported.
(1 kilolitre = 6.289 barrels)

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