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tate-owned oil and gas giant PT Pertamina has secured only 45 percent of its biodiesel target to meet a government mandate that diesel fuel blends include a minimum of 10 percent biodiesel.

The company announced on Sunday that it had selected winners of the second phase of a tender to procure fatty acid methyl ester (FAME) '€” a component of diesel mixes.

Previously, in the first phase of the tender held last year, the company secured 1.24 million kiloliters (kl) of FAME. In the second phase of tender held in January, the company secured 1.14 million kl.

'€œFrom the two phases, we'€™ve ensured a supply of [about] 2.4 million kl, or 45 percent of 5.3 million kl needed for the 2014 to 2015 period,'€ Pertamina vice president for corporate communications Ali
Mundakir said.

He added that the company would continue holding the tender to meet the FAME target.

In the next phase, Ali continued, the company would seek supply for Sumatra, Nusa Tenggara, parts of Kalimantan, Sulawesi and Papua, with the total need amounting to 850,000 kl of FAME per year.

'€œHowever, we admit that there are hurdles to meet this target, particularly in procuring FAME for the eastern part of Indonesia, where producers usually cannot meet the pricing terms of the MOPS [the Mean of Platts Singapore],'€ he said.

MOPS is the benchmark for fuel oil pricing.

Pertamina did not disclose the price agreed on in the completed phases of the tender.

Biofuel Producers Association (Aprobi) secretary-general Paulus Tjakrawan has said biodiesel pricing would likely become a problem as Pertamina sought prices below the MOPS.

'€œProducers will still be able to supply the government [through Pertamina, which blends biodiesel into subsidized diesel fuel]. However, it will be like charity,'€ he said.

'€œThis creates concerns about sustainability as palm oil prices may end up higher than biodiesel'€™s MOPS level, as has been the case in previous years.'€

He has called on the government to intervene in the pricing mechanism to help industries maintain supply.

The government announced the biodiesel blending requirement in 2008 to cut the country'€™s dependence on imported oil, which has driven up the current-account
deficit.

The government decided to increase the mandatory biodiesel blending level from 7.5 percent to 10 percent in September last year as the deficit widened.

Pertamina said its FAME blending had reached 930,561 kl at the end of 2013, seven times higher than the 126,098 kl in 2009.

The country'€™s subsidized diesel fuel consumption is estimated to reach 16.5 million this year, according to figures from the Energy and Mineral Resources Ministry'€™s directorate general for renewable energy.

The implementation of the 10 percent mandatory blending nationwide will bring the total amount of biodiesel blended into subsidized diesel fuel to 1.6 million kl.

Meanwhile, for non-subsidized fuel, as much as 3.34 million kl is expected to be blended with biodiesel.

The country estimates it could save US$3.9 million by realizing the 10 percent biodiesel blending limit.

'€” JP/Raras Cahyafitri