Is ethanol the answer to fuel shortage?

Harold Koh, Jakarta

If last week's nationwide fuel shortage is anything to go by, Indonesian motorists may have a lot more queuing up to do at petrol kiosks in the future.

Increased demand for power, a growing population of motor vehicles and escalating industrial output are all factors that contribute to the steadily increasing fuel consumption, so much so that in spite of having one of the region's largest energy reserves, Indonesia has become a net importer of oil.

This can't be a good thing for Indonesia or Indonesians, especially at a time when the price of oil is at historical highs. According to government reports, Indonesia may experience a net oil import of about 61,000 barrels a day in 2005. This could potentially mean an oil import expenditure of more than US$1.1 billion in 2005, assuming a price of $50 a barrel.

If Indonesia wants to look for a sustainable solution, the answer could be very close in the form of an ethanol economy, and especially in the use of ethanol as a supplementary fuel for motor vehicles.

The use of ethanol as a fuel is nothing new. It is a common knowledge that major U.S. car manufacturers recommend ethanol fuels. In fact, every car manufacturer in the world approves ethanol blends in their warranty coverage. U.S. auto manufacturers themselves began producing flexible fuel cars and pickup trucks that can use ethanol or gasoline, beginning with the 1997 model year.

General Motors, the biggest car manufacturer in the world, is a good example. Ethanol-fueled vehicles are not new to GM which approves the use of 10 percent ethanol-blended gasoline in all of its vehicles. Today, GM produces almost five million ethanol- capable vehicles annually.

A country where ethanol has been used successfully is Brazil. Brazil first introduced the use of ethanol in the early 1970s and today, all fuel used there contains at least 24 percent ethanol, and much of it is 100 percent ethanol. By 2007, 100 percent of all new Brazilian cars may be able to run on 100 percent ethanol. According to research, the use of fuel ethanol between 1975 and 2002 has helped Brazil replace around 210 billion liters of petrol, saving the country around $52 billion in foreign exchange.

Brazil's success in ethanol use is due primarily to its strong sugar industry. Sugar from sugarcane, grains, and even biomass from other crops provides the raw material to produce ethanol through a very simple process.

Likewise, Indonesia too has a substantial sugar industry which can provide the feedstock for a viable ethanol program. And the adoption of an ethanol program can provide Indonesia with significant socio-economic benefits.

The first is obviously in the area of savings at both national and consumer level.

In Indonesia, the Technology Research and Application Agency (BPPT) recently conducted its own research on the use of ethanol in automobiles. Using a blend of ethanol and gasoline called BE10, which is a mixture of 10 percent ethanol and 90 percent petrol, the Agency successfully trialed a number of vehicles currently sold in the Indonesian market such as the Chevrolet Blazer, Toyota Kijang and some other brands, and concluded that there is no loss of performance compared to premium grade gasoline.

For every $1 billion Indonesia spends on fuel imports, the use of BE10 can save the country $100 million in foreign exchange, even before factoring in the savings from fuel subsidies. At the consumer level, motorists can expect to benefit from fuel cost savings, and the money saved can be spent on other forms of expenditure.

The second benefit is employment. The production of feedstock for ethanol will require large and sustainable supplies of sugar cane. Indonesia is perfectly placed to achieve this, thanks to the large tracts of fertile agricultural land, a year long growing climate, and abundant labor force in the rural areas. The building of ethanol plants and the growing of sugar cane for feedstock will create thousands of new jobs at a time when Indonesians need them.

Thirdly, Indonesia can benefit environmentally from the use of ethanol. Ethanol is one of the most environmentally friendly fuels in existence. Ethanol significantly cuts poisonous exhaust emissions and is better for the environment. And because ethanol is a renewable fuel made from plants, not fossil fuel, manufacturing it and burning it does not increase the greenhouse effect. This means that Indonesia also stands to benefit from cleaner air if there is an adoption of ethanol as a fuel additive.

Of course, the use of ethanol is not going to solve all of Indonesia's energy problems, which will call for an integrated approach involving new and better fuel technologies. But if nothing else, it could save you many hours of waiting for your turn at the petrol station.

The writer is President Director, PT General Motors Indonesia.