Indonesia to boost palm, sugar cane output to promote biofuel

Bloomberg, 3 July 2006:

Indonesia to boost palm, sugar cane output to promote biofuel

JAKARTA (Bloomberg): Indonesia plans to boost output of palm oil,

sugar cane and vegetable oils used in making biofuels that will help

the nation reduce the use of petroleum products, Agriculture Minister

Anton Apriyantono said in an interview.

President Susilo Bambang Yudhoyono decided that Indonesia should

focus on making biofuels from four commodities, including castor oil

and cassava oil. The decision was taken at a cabinet meeting held

Sunday in Magelang in Central Java.

"We will boost production of these commodities quickly," Anton said

in a phone interview from Magelang on Monday. "Currently, the top

priority is palm oil and sugar cane. We are most prepared on these

two now."

Indonesia, Southeast Asia's biggest oil producer and consumer, wants

to use more fuel that's derived from plants to reduce imports of

expensive petroleum and refined products. Even with refineries

running at full capacity, Indonesia needs to import a third of the

country's fossil fuel requirements.

The government expects to prepare by August a so-called "blue print"

on boosting production of the four selected commodities for use as a

cheaper, alternative source of energy, Anton said.

"We will then meet with Indonesia's 33 provincial governors and the

regency heads to ask them to support this program," Anton said.

Growers of vegetable oils said biofuels won't sell as long as the

government artificially keeps diesel prices lower by subsidizing the

fuel.

Using palm oil as a source of energy "is technically feasible, but

not economically, because the government is subsidizing prices of

diesel," said Derom Bangun, chairman of Indonesia's palm oil

producers' association. "It would only make biodieselcommercially

feasible if the government cut those subsidies" on diesel.

Indonesia's rising production of vegetable oils will ensure adequate

supplies for the production of biofuels, Bangun said. Indonesia's

palm oil output is expected to rise to between 14.7 million metric

tons and 15 million tons this year, from 13.6 million tons in 2005,

Bangun said.

The government expects Indonesia will have an additional two million

hectares to 3 million hectares of oil palm plantation by 2010, Anton

said. He didn't give target figures for sugar cane and other

plantations.

Indonesia had about 5.6 million hectares of registered oil palm

plantations at the end of 2005, in addition to unregistered

plantations, Sofyan Basir, president of PT Bank Rakyat Indonesia,

said on June 22. BRI Extends loans to Indonesian oil palm farmers.

The government may develop eight plants, four of which are capable of

producing as much as 6,000 metric tons a year, Industry Minister

Fahmi Idris was cited as saying in Investor Daily Indonesia on

Monday. Indonesia may spend about Rp 10 trillion ($1.1 billion) to

develop biodiesel, the newspaper said.