mission-newenergy-limited

1 Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel execution to continue on Jan. 1

Industry individuals seeking phase-in period anticipate progressive intro

Industry deals with technical obstacles and cost concerns

Government funding issues develop due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has fuelled issues it might suppress worldwide palm oil supplies, looks significantly most likely to be implemented slowly, analysts said, as market individuals look for a phase-in duration.

Indonesia, the world's biggest manufacturer and exporter of palm oil, prepares to raise the compulsory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has set off a dive in palm futures and may push prices even more in 2025.

While the federal government of President Prabowo Subianto has said consistently the plan is on track for full launch in the new year, industry watchers state and technical difficulties are likely to result in partial application before full adoption throughout the sprawling archipelago.

Indonesia's biggest fuel seller, state-owned Pertamina, said it requires to modify some of its fuel terminals to blend and keep B40, which will be completed during a "shift duration after federal government develops the required", representative Fadjar Djoko Santoso informed Reuters, without providing details.

During a conference with federal government officials and biodiesel producers last week, fuel merchants requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in participation, told Reuters.

Hiswana Migas, the fuel merchants' association, did not right away respond to an ask for remark.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required walking would not be carried out gradually, and that biodiesel producers are prepared to provide the higher mix.

"I have verified the preparedness with all manufacturers last week," she said.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be mixed with diesel fuel, stated the government has not issued allotments for manufacturers to sell to fuel sellers, which it generally has done by this time of the year.

"We can't deliver the products without purchase order documents, and order documents are gotten after we get agreements with fuel business," Gunawan told Reuters. "Fuel companies can only sign agreements after the ministerial decree (on biodiesel allotments)."

The federal government prepares to designate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its initial price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, funding the greater mix could likewise be a difficulty as palm oil now costs around $400 per metric load more than petroleum. Indonesia uses earnings from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it needed a 68% increase in subsidies to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike impends.

However, the palm oil industry would challenge a levy hike, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would hurt the industry, including palm smallholders.

"I believe there will be a delay, because if it is carried out, the aid will increase. Where will (the cash) originate from?" he said.

Nagaraj Meda, managing director of Transgraph Consulting, a product consultancy, stated B40 application would be challenging in 2025.

"The implementation may be sluggish and gradual in 2025 and most likely more busy in 2026," he stated.

Prabowo, who took workplace in October, campaigned on a platform to raise the required further to B50 or B60 to attain energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina