Indonesia confident palm oil production can be increased to meet biofuel demand

INDONESIA’S chief economic minister said on Thursday (Nov 7) he is confident palm oil production can be increased in coming years to meet the country’s rising demand for energy as the mandatory biodiesel blend is poised to expand.

Indonesia’s government plans to expand the mandatory blend of biodiesel to contain 40 per cent of palm oil-based fuel in 2025 – called B40 – from 35 per cent currently, and is expected to increase the mix further.

“Indonesia’s biodiesel policy is primarily aimed at reducing dependence on imported fossil fuels, fostering a more sustainable energy mix, and supporting the palm oil industry,” Airlangga Hartarto, the country’s coordinating minister for economic affairs told participants at the Indonesia Palm Oil Conference.

The plan by the world’s biggest exporter of the vegetable oil has propped up global palm oil prices as outbound shipments are seen dropping amid expectations of sluggish output.

Implementation of the B40 biofuel mandate may result in palm oil used for energy rising to 13.9 million tonnes in 2025, from the estimated 11 million tonnes needed this year with B35, Indonesia’s biofuel producers association Aprobi had previously estimated.

The government is looking to increase the biodiesel mix to 50 per cent in 2028, Edi Wibowo, a director at the energy ministry told the same conference, adding that the ministry is also eyeing a 1 per cent blending mandate in jet fuel in 2027.

Indonesia’s newly inaugurated president Prabowo Subianto has pledged to reach self-sufficiency in food and energy.

Replanting efforts

Production of the vegetable oil in Indonesia has stagnated in recent years due to ageing trees.

The government is pushing for improved farming practices to increase yields and enhancing the smallholders’ palm oil replanting programme to meet the higher demand, Airlangga said.

The replanting programme has been behind schedule. The launch target was to replant 180,000 hectares each year, but since 2017, Indonesia has only provided funds to replant 360,000 hectares, according to Airlangga.

Accelerating the programme is key to support the government’s bioenergy agenda without impacting supply for domestic food needs and exports, said Eddy Martono, chairman of the Indonesia Palm Oil Association.

Without tree rejuvenation, Indonesia’s crude palm oil output could drop to 44 million tonnes by 2045, from around 50 million tonnes currently, the country’s palm oil fund agency data showed.

If the replanting scheme can be done as targeted, CPO output may reach around 83 million tonnes by 2045. REUTERS