Indonesia’s Energy and Mineral Resources Minister has signed a decree allocating 15.6 million kilolitres (KL) of biodiesel for distribution in 2025. This move comes as the country prepares to increase the mandatory biodiesel mix from 35% to 40% palm oil fuel starting January 1, 2025.
Key Highlights:
Biodiesel Mix Increase:
The government aims to raise the biodiesel mix to 50% in the following year.
Minister Bahlil Lahadalia announced the signing of the ministerial regulation, emphasizing the need for the industry to adapt to the new B40 mix by February 28.
Challenges and Delays:
The delay in implementing the B40 mix is attributed to technical challenges related to fuel subsidies.
Fuel retailers and biodiesel producers have expressed difficulties in establishing contracts for biodiesel distribution without the official decree.
Market Impact:
The postponement of the B40 requirement resulted in a 2.6% drop in the Malaysian palm oil benchmark contract, which partially recovered by 1% the following day.
Biodiesel Consumption Estimates:
The allocation for 2025 marks an increase from the estimated consumption of 12.98 million KL in 2024.
Of the total allocation, 7.55 million KL is designated for the public service obligation (PSO), which includes sectors like public transportation, subsidized by the palm oil fund.
The remaining 8.07 million KL will be sold at market prices.
Subsidy Requirements:
The BPDPKS, the agency managing palm oil funds, projected that implementing the B40 mix would necessitate a 68% increase in subsidies.
To support this, Indonesia plans to raise its export levy on crude palm oil (CPO) from 7.5% to 10%, pending further official regulations.