P

ertamina may begin exporting diesel fuel next year as the state-owned oil and gas company is experiencing oversupply with a concurrent production increase and domestic demand slump due to mandatory biodiesel blending.

Pertamina marketing director Ahmad Bambang said that the company expected around 400,000 surplus barrels of diesel fuel monthly next year if the government increases the percentage of biofuel in the mandatory-fuel blending policy.

'€œThe operation of the RFCC [Residual Fluid Catalytic Cracking] facility in Cilacap refinery [Central Java] has increased diesel fuel production. At the same time, we are also seeing a decline in consumption. The increase in bio-content will also reduce the demand of diesel fuel,'€ Ahmad said on Friday.

The government is currently implementing a mandatory biofuel and diesel blending fuel policy. The move is aimed at reducing the usage of fossil fuel in the country. The mandatory bio-content is currently 15 percent and is likely to be increased to 20 percent next year.

'€œWe are still awaiting the government'€™s decision. If there is an increase in the mandatory mix, we will have to sell the extra output, possibly to other fuel companies in the domestic market or to the export market,'€ Ahmad added.

The biofuel and diesel blending policy was started in 2009, when Pertamina started delivering diesel fuel with 7.5 percent bio-content. The bio-content was increased to 10 percent in 2013 as the government began implementing the mandatory policy as part of efforts to cut the country'€™s growing consumption of fossil fuels.

Last year, the distribution of fatty acid methyl ester (FAME) '€” both for subsidized and non-subsidized fuel '€” reached 1.5 million kiloliters.

This year, the bio-content was increased to 15 percent as the government is expecting a further reduction in fossil fuel imports. However, changes in regulatory and procurement mechanisms have delayed the implementation of the 15 percent mandatory mix and affected the realization of the policy.

Figures from Pertamina, showed that as many as 300,000 kiloliters of FAME was blended from January to the end of October. The company is aiming for a total of 966,785 kiloliters blended by year end.

After the implementation of higher bio-content of 20 percent in diesel fuel, Pertamina is expecting that as many as 5.14 million kiloliters will be mixed into diesel fuel.

The figure will consist of 2.7 million kiloliters for subsidized fuel, 1.26 million kiloliters to be blended into diesel fuel for electricity generation and 1.12 million kiloliters for non-subsidized fuel.

The company signed agreements with 11 fatty acid methyl ester producers for the procurement of 1.84 million kiloliters of the substance on Friday. FAME, which is the main substance used to produce biofuel, will be blended into diesel-fuel for a six-month-period starting from this month until April next year.

The contract, valued at Rp 11 trillion, was signed by PT Musim Mas Batam, PT Musim Mas Medan, PT Wilmar Bioenergi Indonesia, PT Wilmar Nabati Indonesia, PT Pelita Agung Agri Industri, PT Darmex Biodiesel, PT Cemerlang Energi Perkasa, PT Ciliandra Perkasa, PT Energi Bahari Lestari, PT Anugerah Inti Gemanusa, PT Primanusa Palma Energy and PT Bioenergi Pratama Jaya.

According to Pertamina Lubricants president director Gigih Wahyu Hari Irianto, Pertamina has prepared 63 fuel terminals in 31 cities to store fuel and serve as distribution points to support the mandatory biodiesel blending. The company has also prepared a new lubricant product that will support the utilization of biodiesel with 20 percent bio-content.

Some users are currently still worried that due to its corrosive effects, biodiesel with high bio-content will damage engines.

'€œWe will launch a new lubricant product next month. It is expected to settle the issue,'€ Gigih said.