Indonesia’s government proposes new biofuel pricing

The Indonesian government is planning to propose a new provision that will fix biofuel prices for an imperative biofuel blending programme.

The programme, which is expected to come into effect in 2015, is being established in a bid to entice more producers to provide biofuel for the domestic marketplace.

Dadan Kusdiana, the Energy and Mineral Resources Ministry director for bioenergy, explains how the pricing proposal will be structured: 'For now, the price is below MOPS [the benchmark Mean of Platts Singapore], which is said to be unappealing for producers. We have been using MOPS while producers set the palm oil export reference price as their benchmark. [Under the new arrangement] we will combine them.'

Last September, in an attempt to decrease the amount of oil imported, the government set a 10% volume requirement for all biofuel in industry and transportation diesel.

The renewable energy directorate general anticipates Indonesia's diesel consumption to climb to 16.5 million kilolitres by the end of the year. The newly-implemented 10% blend suggests the total amount of biofuel blended into non-subsidised diesel fuel will reach 3.34 million kilolitres, and 1.6 million kilolitres for subsidised fuel.

Indonesia is hoping to save $3.9 million (€2.8 million) from the mandatory programme.

Currently, Indonesia has a total of 4.5 million kilolitres of biofuel all set for production, and has a potential biofuel production capacity of 5.6 million kilolitres per year.