MARKET DEVELOPMENT
Indonesia 2016 Biodiesel Output to Miss Target: Industry Official
Indonesia 2016 Biodiesel Output to Miss Target: Industry Official
09/03/2016 (Jakarta Globe) - Indonesia may produce about 2.5 million metric tons of palm oil-based biodiesel in 2016, about a third of its targeted volume, because of the widening spread between biodiesel and gasoil, a Malaysian industry official said on Tuesday.
Indonesia, the world biggest palm oil producer, requires a 20 percent blend of biodiesel into gasoil in 2016 as it aims reduce its crude oil import bill, cut greenhouse gas emissions and create more demand for the edible oil.
The benchmark Malaysia palm oil futures climbed to their highest in almost two years in February at 2,648 ringgit ($648) a metric tons, driven by expectations of higher palm oil demand to meet the greater biodiesel output.
The market has lost about 4 percent since then due to weak demand and a stronger Malaysian ringgit.
"It will be difficult for Indonesia to fulfill its biofuel targets, given the fact that current differential between biodiesel and gasoil is well over $300 a tonne," U.R. Unnithan, deputy president of Malaysian Biodiesel Association told Reuters.
Prices for palm methyl ester, the raw component of biodiesel, in Southeast Asia are currently at $630 a tonne versus gasoil prices in Singapore, the regional benchmark, at $44.07 a barrel, or about $328 a tonne.
Last year, President Joko Widodo increased biodiesel subsidies and raised the minimum bio content in diesel fuel to 15 percent from 10 percent. It has been raised to 20 percent this year and 30 percent in 2020.
Indonesia consumed an estimated 1.5 million metric tons of biodiesel in 2015, which works out to a blend of about 7.5 percent if you take the nation's total gasoil consumption into account, said Unnithan, who is executive director at privately held palm oil producer Carotino.
B10 for Malaysia
For Malaysia, the official said the industry was pushing the government to implement B10, or 10 percent blend, from April onward.
"We are in active discussion with the government and we hope that government is able come up with some decision within the month of March," he said.
Malaysian is expected to produce 1 million metric tons of biodiesel in 2016 if the 10 percent blend is mandated, up from about 700,000 metric tons consumed last year under the B7 program.
He said cars in Malaysia had clocked 40 million kilometres using biodiesel with no complaint.
Unnithan, who has been promoting biodiesel use since 2007, said palm oil prices could rally if higher volumes of palm oil are used in making biofuels.
"For every 100 ringgit increase in palm oil prices, the income to the country is roughly 2 billion ringgit. The program more than pays for itself."
Indonesia, the world biggest palm oil producer, requires a 20 percent blend of biodiesel into gasoil in 2016 as it aims reduce its crude oil import bill, cut greenhouse gas emissions and create more demand for the edible oil.
The benchmark Malaysia palm oil futures climbed to their highest in almost two years in February at 2,648 ringgit ($648) a metric tons, driven by expectations of higher palm oil demand to meet the greater biodiesel output.
The market has lost about 4 percent since then due to weak demand and a stronger Malaysian ringgit.
"It will be difficult for Indonesia to fulfill its biofuel targets, given the fact that current differential between biodiesel and gasoil is well over $300 a tonne," U.R. Unnithan, deputy president of Malaysian Biodiesel Association told Reuters.
Prices for palm methyl ester, the raw component of biodiesel, in Southeast Asia are currently at $630 a tonne versus gasoil prices in Singapore, the regional benchmark, at $44.07 a barrel, or about $328 a tonne.
Last year, President Joko Widodo increased biodiesel subsidies and raised the minimum bio content in diesel fuel to 15 percent from 10 percent. It has been raised to 20 percent this year and 30 percent in 2020.
Indonesia consumed an estimated 1.5 million metric tons of biodiesel in 2015, which works out to a blend of about 7.5 percent if you take the nation's total gasoil consumption into account, said Unnithan, who is executive director at privately held palm oil producer Carotino.
B10 for Malaysia
For Malaysia, the official said the industry was pushing the government to implement B10, or 10 percent blend, from April onward.
"We are in active discussion with the government and we hope that government is able come up with some decision within the month of March," he said.
Malaysian is expected to produce 1 million metric tons of biodiesel in 2016 if the 10 percent blend is mandated, up from about 700,000 metric tons consumed last year under the B7 program.
He said cars in Malaysia had clocked 40 million kilometres using biodiesel with no complaint.
Unnithan, who has been promoting biodiesel use since 2007, said palm oil prices could rally if higher volumes of palm oil are used in making biofuels.
"For every 100 ringgit increase in palm oil prices, the income to the country is roughly 2 billion ringgit. The program more than pays for itself."