Wed, 09 Aug 2006

Foreign oil firms to be allowed to buy, sell biofuel

The Jakarta Post, Jakarta

A regulatory package will soon be put in place to allow foreign oil firms such as Petronas of Malaysia and Shell of the Netherlands to distribute biofuel so as to boost competition on the domestic market, it was revealed Tuesday.

The coordinating minister for the economy's deputy for agriculture and marine affairs, Bayu Krisnamurti, said foreign firms would be allowed to buy biofuel from growers/producers and sell it back to the public as long as it was being sold for transportation purposes.

"That way, consumers will benefit from fair prices due to the competition, while on the other hand investors and growers will continue to be interested in biofuel production," he said on the sidelines of a seminar organized by the Indonesian Biodiversity Foundation.

The government had earlier appointed state oil and gas firm PT Pertamina and state power firm PT PLN to serve as standby buyers of biofuel.

Derom Bangun, executive chairman of the Indonesian Palm Oil Producers Association, said that the proposal to allow firms other than Pertamina to purchase biofuel would encourage investors to construct biofuel plants.

"Many firms are reluctant to build biofuel plants because they are afraid that Pertamina will be given the exclusive right to buy their products at low prices. With competition, the oil companies will have to purchase the biofuel at fair prices," he said.

He hoped that with a large number of biofuel plants in the pipeline, the country would be able to achieve its biofuel production target of 13 million tons per year by 2009.

According to the Investment Coordinating Board (BKPM), 15 companies have applied for licenses to produce a total of one million tons of bio-diesel per year.

The companies include PT Wahana Abdi Tirta, PT Anugrah Inti Gemanusa, PT Sari Dumai Sejati, PT Indo Bio fuels, PT Artha Trans Jaya, PT Asanagro Agung Jaya, PT Wilmar Bioenergi Indonesia, a joint venture between PT Bakrie Sumatera Plantation and PT Rekayasa Industri, PT Musimas, PT Karya Prajona Nelayan, PT Biodiesel Indonesia, a joint venture between PT Rekayasa and Pertamina, PT Astra Agro Lestari (2), PT Eterindo Jawa Timur, and PT Energi Alternatif Indonesia.

As for the government, it plans to construct eight bio-diesel plants, with each having a production capacity of between 3,000 and 6,000 tons per year.

Last week, President Susilo Bambang Yudhoyono held meetings with Malaysia's top energy companies to encourage them to invest in the Indonesian bio-energy sector.

Speaking after the meetings, Minister for Energy and Mineral Resources Purnomo Yusgiantoro said that a committee would soon start work on drawing up regulations that would ease the way for foreign companies to invest in the bio-energy sector.

The rapid increase in global oil prices, which reached more than US$70 per barrel recently, in part on account of political uncertainties in the Middle East, has prompted the government to turn to the much cheaper and more environmentally friendly biofuel.

The use of biofuel is expected to account for 10 percent of the country's energy consumption by 2009, enough to significantly reduce the burden on the national budget arising from fuel subsidy spending.

Biofuel is a renewable energy resource and is produced from such crops as the castor-oil plant, oil palm, cassava and sugarcane, all of which can easily be grown in Indonesia. (05)