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Jakarta Post

Economy in brief: New pricing scheme to boost biofuel use

  • The Jakarta Post

    The Jakarta Post

Jakarta   /   Tue, March 3, 2015   /  06:24 am

The Energy and Mineral Resources Ministry has issued a regulation that changes the pricing scheme for biofuel makers used in tenders as part of the move to boost the use of biofuel and reduce dependence on fossil fuels.

The ministry'€™s director general for new and renewable energy, Rida Mulyana, said that the energy and mineral resources minister had signed a ministerial decree on the biodiesel market index price (HIP) changing the benchmark from diesel fuel (Mean of Platts Singapore) prices to crude palm oil (CPO) prices.

The new price formula was set up following recent complaints from biofuel makers that the old pricing scheme did not compensate for production costs, given the decline in oil prices last year, hence discouraging the industry from boosting output.

'€œUnder the new price formula, the CPO price will be the benchmark for our own export reference price [locally called HPE] as announced by the Trade Ministry,'€ Rida said on Monday, adding that the new price would be used in procurement tenders for biofuel after March 1.

Rida expected that the new price would help state-owned PT Pertamina secure supplies of fatty acid methyl ester (FAME) from CPO to be blended into diesel fuel distributed by the company. Last year, Pertamina failed to secure sufficient supplies to be mixed into diesel fuel partly because of the unfavorable pricing scheme complained of by producers.

The mandatory 10 percent mix of biofuel in diesel fuel was implemented in late 2013, as the government struggled to decrease the country'€™s ballooning imports of petroleum products.

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