6/6/06 (The Jakarta Post, Jakarta) - The price of oil continues to increase and the International Monetary Fund (IMF) has predicted the trend will persist for the next two decades. The Jakarta Post's Benget Simbolon Tnb. examines how the Indonesian government is dealing with the energy issue in this special report.

Imagine this: Biofuel is widely used in Indonesia. It is available everywhere in all the big cities of the archipelago, with millions of hectares of palm oil, castor oil, cassava, sugar cane, corn, sunflower plantations to support its production.

As a result, the economy has improved because cluster biofuel industries have created millions of new jobs. And the people are healthier as the air around them is much cleaner.

Don't get to excited though -- this is all just a dream, albeit one that could be materialized by the year 2025. Many success stories started as dreams, the results of efforts to change painful conditions.

Indonesia's oil production hit its lowest level in 35 years last year, reaching only 942,000 barrels a day. The continued drop in oil production due to the depletion of oil reserves and the decline in fresh investments in exploration, combined with an increase in local consumption has turned the country into a net oil exporter.

At the international level, the International Monetary Fund said in a report last year the world was facing "a permanent oil shock". It predicted high oil prices would persist for at least the next two decades.

The oil price has neared US$80 per barrel on the international market over the past several weeks.

The unrelenting increase in oil prices has seriously affected the state budget. This is the reason why the Indonesian government vowed recently to diversify its energy use away from the dominant fossil-based fuels to plant-based fuels such as bio-diesel, bio-ethanol, bio-oil and bio-gas.

President Susilo Bambang Yudhoyono has rung the starting bell by issuing a Presidential instruction and a Presidential regulation to intensify efforts to increase the use of biofuels as a way to replace the use of fossil-based fuels, which reached a total of over 70 million kiloliters last year.

His ministers echoed his intentions, designing the necessary policies concerned with their ministries so that the nation's dream could be realized.

Energy and Mineral Resources Minister Purnomo Yusgiantoro said recently the government was considering offering incentives for investors to develop biofuels. The incentives would be related to taxation, customs duties and the simplification of licensing procedures for new businesses and land uses.

Research and Technology Minister Kusmayanto Kadiman said there were 60 plants with the potential to produce biofuels, ranging from cassava and sugarcane for bio-ethanol and castor oil, palm oil, sunflowers and soybeans for bio-diesel.

The biofuels consist of bio-diesel, bio-ethanol, bio-oil and bio-gas.

Biodiesel, an alternative to the fossil-based diesel, can be produced from palm oil and castor oil (jatropha curcas and ricinus). Bio-ethanol, which can replace gasoline, can be produced from sugarcane and cassava. Bio-oil, one kerosene equivalent, can be made from vegetable oil and bio-gas, another kerosene replacement, can be produced from liquid waste; poultry droppings; and the stalks of plants such as corn, grains, rice, sunflowers.

Indonesia has taken its time in diversifying its energy sources. The world has face several oil crises since the 1970s, but only the current crisis has apparently held enough of a threat to motivate the country to seriously pursue the development of biofuels.

China, for example, the world's third biggest biofuel producer, has produced gasohol -- a mix of petrol and ethanol, the use of which is mandatory in some of its main farming provinces. Farmers in the country have also expanded their production of wheat, corn, sugarcane, and potatoes to feed China's alcohol production plants.

Thailand, which has promoted the use of gasohol for two years, has seen its gasohol use rise to a quarter of all premium petrol consumption as it is much cheaper.

Brazil is the best example. Now the world's leader in biofuel production and use, the Latin American country has been developing biofuel since the 1970s. It uses sugarcane to produce bio-ethanol, which now accounts for 40 percent of the fuel sold in Brazil.

As matters stand, we can see the potential for Indonesia to surpass those countries or at least emulate them in developing the biofuel industry.

All the 60 plants that can be used to produce biofuels can be grown across the archipelago, and some, such as palm oil, are already widely cultivated. Others, like castor oil, are not popular, although the plant was used by Japan for biofuel during its occupation of Indonesia.

Indonesia, now the largest producer of palm oil in the world after Malaysia, is more than capable of growing palm oil for biofuel. Indonesia's crude palm oil production is predicted to surpass that of Malaysia in the next two years.

Castor is also a versatile plant that can be planted on fertile or dry land. The jatropha curcas, a type of castor oil, can even be grown on unproductive and derelict land, and is particularly suited to Indonesia's eastern areas.

Kusmayanto said Indonesia had about 40 million hectares of unproductive and derelict land. "If 10 million hectares of it are planted with the crops to produce biofuels, some 40 percent of our fuel consumption could be met," he told the Jakarta Post recently.

Biofuels are environmentally friendly, he said, as they emitted zero carbon dioxide, which has long been blamed as a source of air pollution. He added the growing biofuel industry could generate economic growth and strengthen the country's economic basis as the use of cheaper energy alternatives would create a more efficient economy.

Purnomo said Indonesia could reduce its oil consumption, currently about 55 percent of its total energy sources, to between 15 and 20 percent over the next several years if it utilized its biofuel potential.

He said Indonesia had the potential to produce 720,000 kiloliters of biofuel per year between 2005 and 2010, 1.5 million kl per year over the five years after and 4.7 million kl per year over the following ten years up to 2025.

But even more importantly, if the nation succeeds in optimizing its potential, many believe it could become the Saudi Arabia of the biofuel industry.