Malaysian palm oil futures fell to a three-week low on Thursday on concerns that demand could take a hit from a European Union move towards banning the use of palm oil in biofuels.
JAKARTA: Indonesia will make it mandatory for biodiesel to have a bio-content of at least 25 percent from 2019, an energy ministry official said on Thursday, as the country pushes to boost local consumption of palm oil.
New and Renewable Energy Director Rida Mulyana sent a text message saying the policy would start in 2019 in response to questions on the matter from Reuters.
Indonesia is the world's top producer of palm oil, the raw ingredient for fatty acid methyl ester (FAME), which can be used to make biodiesel.
Mulyana later said he estimates the B25 programme, for which guidelines are currently being discussed by the energy ministry, would bring Indonesia's FAME consumption to between 5.5 million and 6 million kilolitres (kl) in 2019. That
would be more than double the last year's consumption of FAME.
The government is pushing to increase domestic biodiesel usage to reduce oil imports and soak up excess palm oil supply. It is also considering expanding mandatory biodiesel use to include trains and the mining sector.
Rules introduced in 2015 require a 20 percent bio-content in biodiesel for land transportation from January 2016 to January 2020, after which a 30 percent bio-content would be mandatory.
Fadil Hasan, Executive Director of the Indonesian Palm Oil Association (GAPKI), said the B25 mandate would require the additional production of 750,000 kl of FAME annually.
Last month, Mulyana said Indonesia was targeting consumption of between 3.28 million and 3.52 million kl of FAME this year, up from 2.57 million kl in 2017.
Indonesian palm oil producers are facing increasing pressure in markets such as Europe due to concerns over environmental damage related to deforestation.
In the United States, Indonesian biodiesel faces steep anti-subsidy measures, as well as anti-dumping duties. - Reuters
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