28/10/2008 (Alibaba.com) - Indonesia's state oil firm Pertamina will increase the sale of palm-based biodiesel in a move to cut energy subsidies, a company official said on Monday.

In September, Indonesia issued a ministerial decree making the use of biofuel mandatory with effect from 2009.

The resource-rich nation has been pushing for the use of biofuels to cut the use of costly petroleum products and to help ensure the survival of its biodiesel industry.

"More pump stations in Indonesia will have biodiesel from November 1, with a biodiesel blend of 5 percent," Hanung Budya, Pertamina's marketing deputy director, told reporters.

He said Pertamina will expand the sale of biodiesel to industry and to the transportation sector, which currently use a blend of 5 percent palm-based biodiesel and 95 percent diesel oil.

"We are considering using a 10 percent biodiesel blend possibly by the end of next year, depending on the availability of the palm feedstock," he said.

Pertamina has been selling biodiesel since 2006, but has varied the blend in its biodiesel fuel in response to volatile palm oil prices and due to the lack of a mandatory policy.

Indonesia's combined capacity for biofuel using palm oil as a feedstock is 2 million kilo litres per year, but it is running at 20 percent of capacity, data from the national biofuel development team shows.

With the introduction of the mandatory policy, biodiesel capacity would rise to 5 million kilo litres a year by 2010, the government said recently, although it could also push up the price for palm oil.