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Indonesia to subsidize 765,000 kl of biodiesel through end of 2015: report

admin publish 2015/8/19 14:17:56

Indonesian fuel distributors Pertamina and AKR will purchase 765,000 kiloliters of subsidized biodiesel for the remainder of 2015, Bayu Krisnamurthi, the chief executive of the Indonesia Estate Crop Fund, was quoted by local media as saying Tuesday. 

The announcement comes as the world's top producer of palm oil officially starts its mandate to blend diesel with a minimum biodiesel content of 15%. 

The two companies will buy a combined amount of 339,000 kl from August 17 till October, according to Krisnamurthi, with Pertamina purchasing from five producers: Wilmar, Eterindo, Musim Mas, Pelita Agung and Darmex Agro. 

AKR has also inked a separate deal with Wilmar for the duration. 

Meanwhile, both Pertamina and AKR are currently in negotiations with various producers to supply an additional 426,000 mt of biodiesel for the rest of the year. 

The amount does not include purchases of unsubsidized biodiesel that fall outside the public service obligation remit. 

The Indonesia Estate Crop Fund, more commonly known as the CPO supporting fund, was established earlier this year to administer the collection and disbursement of levies imposed on palm oil exports. 

Krisnamurthi added that the CPO supporting fund had collected Rupiah 750 billion ($54.3 million) in levies during its first month of operation. 

The levy regime was implemented from July 16 onwards, with various palm oil products facing an export duty of between $10-$50/mt. 

Additionally, Krisnamurthi expected that the spread between crude palm oil prices and the Mean of Platts Singapore gasoil benchmark will diverge further in light of a recent downtrend in the oil complex, while the increase in biodiesel demand would likely support palm oil prices. 

Biodiesel end-users such as Pertamina purchase subsidized biodiesel based on MOPS pricing, while producers are paid at a premium of around $125/mt to prevailing CPO futures. 

"This means that the CPO supporting fund will have to provide more subsidies," Krisnamurthi added.

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