Indonesia will use bio-fuel as alternative energy

The Jakarta Post, Jakarta

As the fuel shortage has hit the country and global oil prices have reached US$61 per barrel, the government plans to use crude palm oil (CPO) and other bio-mass fuel as an alternative energy source.

State Minister of Research and Technology Kusmayanto Kadiman said to overcome the recent fuel shortage, Indonesia would need cheap and renewable alternative energy in the future.

"We need to reduce fossil-fuel consumption and look for alternative sources which are more environmentally friendly," he told participants of an international conference on Indonesia's automotive industry and the global environmental challenge on Monday.

The minister said the government would issue regulations to support the production and use of alternative fuel.

"Government intervention is needed to meet the target of reducing the country's oil consumption to only 30 percent by 2025," he said.

Kusmayanto named several energy sources -- coal, water, solar, nuclear power and green fuel or bio-mass -- as energy sources that would supply the remaining 70 percent for domestic consumption by 2025.

But he pointed to CPO, which will be refined as bio-diesel, as the most feasible option due to its advantages.

"If 2 percent of diesel fuel consumption in 2010 can be fulfilled by bio-diesel, it would require 800,000 tons of CPO," he said.

"The figure (of the CPO) can only be produced by having 230,000 hectares of oil palm plantation, which needs 100,000 plantation workers as well as 5,000 people in the biodiesel plant," he said, explaining the snowball effect.

Indonesia is the second largest CPO producer in the world. Together with Malaysia, it controls 85 percent of the global CPO production. Last year, there was a total of 4.1 million hectares of oil palm plantations in the country.

Kusmayanto encouraged the private sector, particularly automotive manufacturers, to invest in developing bio-diesel to advance its mass production.

Secretary-general of the Ministry of Trade Hatanto Reksodipoetro said his ministry would formulate several incentives for firms interested in investing in alternative energy.

"So far, we haven't done anything. But the trade ministry could provide support by reducing tax for imported capital goods needed by the industries," he told The Jakarta Post on the sidelines of the conference.

Separately, Coordinating Minister for the Economy Aburizal Bakrie said the government would launch a diversification and conservation campaign aimed at reducing the country's crude oil consumption.

"The government won't any longer use energy (sources) that are expensive and not widely available in Indonesia," he was quoted by Dow Jones news wires as saying.

He said the government would offset the reduction by doubling LNG and coal consumption from the current level of between 5 percent and 15 percent within 10 years. (006)