Low crude oil prices may hinder Indonesian B20 programme

The implementation of the Indonesian B20 biodiesel programme may be delayed due to low crude oil prices.

The Indonesian Palm Oil Association (GAPKI) suspects the B20 programme will not be fully implemented this year as was announced earlier in January.

According to executive director of GAPKI, Dr. Mohamad Fadhil Hasan, due to crude oil process going under $30 (€27.55) per barrel, the subsidy Indonesian industry needs to produce a litre of biodiesel has more than doubled from 2,230 rupiahs (€0.15) to 5,000 rupiahs.

"With the low crude oil prices, the total volume [of biodiesel] that can be subsidised will be less than planned under the B20 programme. If crude oil prices stay around $30 per barrel, the B20 programme cannot be sustained [if launched],” said Fadhil Hasan.

The Indonesian government gas set aside 16 trillion rupiahs to subsidise the country’s biodiesel production, but according to Fadhil Hasan another two trillion is required if the B20 programme is to be launched.

Indonesia implemented a B15 biodiesel programme in 2015 and had planned to increase this to B20 in order keep its palm oil inventory in check.

Crude oil prices plummeted to a 12-year low after international sanctions on Iran were lifted, which provided a boost to the global oil supply.

Despite the low crude prices, Fadhil Hasan still forecasts Indonesian palm oil production to increase to between 33 and 35 million tonnes from 32.5 million tonnes in 2015.