Biodiesel producers are urging the government to come up with a new pricing arrangement for purchases of their output by state energy firm PT Pertamina, saying they are no longer able to bear the losses brought on by the recent steep drop in the fuel’s price.
The amount Pertamina pays for biodiesel, which is based on the Singapore Mid-Platts benchmark crude oil price, has been declining since October, in line with weakness in crude oil.
Speaking on the sidelines of the Indonesia Biofuel Conference 2009 in Jakarta on Thursday, Paulus Tjakrawan, chairman of the Indonesian Biofuel Producers Association, or Aprobi, said it was essential that a pricing benchmark be established to save producers from further losses.
He said producers were very unhappy with the current price as it was grossly inadequate to cover production costs.
According to figures from the Indonesian Chamber of Commerce and Industry, or Kadin, Pertamina is paying producers Rp 4,020 (36 cents) per liter this month, while the average production cost currently stands at Rp 6,600 per liter.
“Many biodiesel producers are up in arms,” Paulus said. “So we are going to talk to officials at the office of the coordinating minister for the economy tomorrow.”
He said that a number of producers had already decided to reduce biodiesel deliveries to Pertamina. He declined to name the producers involved.
“The prices paid for biofuels have an important bearing on the future of the industry,” he said, “so we urgently need a biofuel reference price as an incentive to encourage the expansion of the industry here.”
Roy Hendroko Setyobudi, Kadin’s third deputy chairman for market development, said Pertamina’s biodiesel purchase price had dropped precipitously, matching the fall in crude oil prices. This arrangement, Roy said, was unacceptable because the cost of producing biodiesel was more closely linked to the price of crude palm oil, its principal raw material. While CPO prices have fallen, he said, they have not collapsed to the same extent as oil prices.
Evita Legowo, director general for oil and gas at the Ministry of Energy and Mineral Resources, said the ministry would seriously consider the producers’ complaint as the government was determined to help promote the biofuel industry.