Indonesia turning to biofuel as alternative energy

Antara, 30 July 2006:

News Focus: Indonesia turning to biofuel as alternative energy

Jakarta (ANTARA News) - In the face of its depleting oil reserves

and fluctuating world oil prices, Indonesia has launched an

intensive biofuel production program aimed at cutting its fossil oil

consumption by 10 percent in 2010.

President Susilo Bambang Yudhoyono showed serious attention to

development of bio-energy when he convened a limited cabinet meeting

in Magelang, Central Java, this month, to discuss national energy

policies and bio-energy action plans.

"We will continue with the preparations and planning in 2006, and

implement (the program) in 2007," the President said after the

cabinet meeting.

Besides reducing dependence on fossil fuels, the cultivation of

biofuel crops such as oil palm, cassava, sugar cane and jatropha

curcas crops was also seen as a way to help boost local economies.

"The development of biofuel or bio-diesel will create more jobs,

reduce poverty, develop cooperatives and small businesses and re- green denuded land," the President said.

In order to carry out the program, the Indonesian government decided

to set up a national team in charge of formulating policies for the

development of bio-diesel or biofuel program.

Chaired by former manpower minister Al Hilal Hamdi, the national team

will formulate policies, including on matters relating to cultivation

of land, infrastructure, processing, marketing and funding.

With the program, Indonesia expects to be able eventually to reduce

the use of fossil fuel oils by 10 percent in 2010, namely using bio- fuel to replace premium, kerosene, diesel oil and fuel oils used to

generate electricity.

According to Al Hilal Hamdi, the kind of plantations which would be

developed to produce bio-fuel would include oil palm, jatropha

curcas, cassava and sugar cane.

He said some 6.5 million hectares would be made available for the

development of bio-fuel. Thus it would provide employment for about

three million workers and boost rural economies.

Of the 6.5 million hectares, three million hectares will be developed

for oil palm, 1.5 million hectares for jatropha curcas, 500,000

hectares of sugarcane and 1.5 million hectares for cassava.

The investment per hectare was estimated at Rp30 million for oil

palm, Rp15 million for sugarcane, Rp3 million for jatropha curcas and

Rp3.5 million for cassava.

Hilal said that the program needed an estimated investment of Rp100

trillion (US$10.8 billion) in the sector within the next five years.

The government also unveiled a crash program to build 11 biofuel

plants, with production targets of 187 million liters next year and

1.3 billion liters by 2010, or equivalent to 3 percent of the

country`s total fuel consumption of 41 million kiloliters in 2005.

Therefore, up to 2010, the use of fossil oils for the transportation

sector is expected to be cut by 10 percent and by 50 percent in the

power generation sector.

With the reduction in the use of fossil oils, the foreign exchange

that could be economized would reach some 10 billion dollars, Hilal

said.

Besides, he added, Indonesia would also export some 10 to 12

kiloliters of bio-fuel. "With this program, arid lands could be

cultivated and self-reliant villages could be developed," he added.

Funding

In order to make the program a success, the government called on the

banking world to help provide funds for bio-energy development,

including the cultivation of jatropha curcas, cassava and sugarcane.

"Banks are requested to invest in the cultivation of jatropha

curcas, cassava, sugarcane so as at the same time green arid land

and help boost rural economic growth," Minister/State Secretary

Yusril Ihza Mahendra said after a meeting held at his office to

discuss the development of alternative energy.

The government said it was optimistic that banks are potential

institutions to provide funding. The government was seeing the

possibility of raising Rp100 trillion from general banks to be

allocated as loans to oil palm farmers.

"The funds are also available for cassava and sugar cane farming if

it is commercial while the fund for development of jatropha curcas

oil plantation will be made available by the government," Al Hilal

Hamdi said.

According to the chief of the National Team for Bio-energy

Development, the banks have asked for a government subsidy for the

loans so that the farmers would only be required to pay around 10

percent interest.

Besides, the government is preparing fiscal incentives for

investment, trade and research to expedite bio-energy development.

"We are preparing fiscal incentives such as tax holidays, tax

allowances and reductions for research activities and value-added

taxes," Hamdi said.

He said there were many companies that had expressed an interest to

develop bio-energy including Sinar Mas, Argo Lestari, Molindo and PT

HM Sampurna besides state-owned agro-companies and cooperatives.

Among foreign investors interested in it are CITIC from China, Itochu

from Japan, Greenenergy from India and companies from the US and

Italy. Japanese oil company Nippon Oil Corporation has also expressed

interest to develop a bio-diesel plant in Jambi.

Besides, the Indonesian Cooperatives Board (Dekopin) was planning to

construct jatropha curcas processing plants. Dekopin Chairman Adi

Sasono said Dekopin would build the processing factories in an effort

to produce an energy source that can replace fossil fuel oils.

"We are considering the building of jatropha curcas oil factories

for instance in Sukabumi, West Java, which is near Jakarta," Adi

Sasono said.

To make its program a success, the government called on the public

not to hesitate to cultivate biofuel crops. It gave the assurance

that it would absorb biofuel production no matter how much.

"We have two major stand-by buyers, namely state-owned Pertamina for

the transportation sector and state power firm PLN for the

electricity sector," Research and Technology Minister Kusmayanto

Kadiman said.