Indonesia is ramping up its biofuels production capacity – a move intended to reduce the country’s reliance on imported petroleum products, particularly low-sulphur fuels.
The world’s fourth most populous nation with 250 million people, Indonesia imports 1.5 million barrels per day of refined products, 30% more than its domestic refining capacity.
According to the National Energy Policy in Indonesia, more than 5% of all energy must come from biofuel by 2025.
So Pertamina, the state owned oil and gas company, is building a greenfield biofuels plant with 20,000 barrels per day output at Plaju refinery. The biorefinery will process vegetable oils and fats to produce advanced biofuels such as renewable jet fuel, renewable diesel fuel and green liquefied petroleum gas.
Meanwhile at Palembang, South Sumatra, Pertamina will revamp the existing refinery at Cilacap to process 6,000 barrels per day of vegetable oils and fats to produce advanced biofuels.
Honeywell UOP will provide the technology and engineering for the two projects. ‘As one of the world’s top producers of biofuels, Indonesia is ramping up its investment in advanced biorefineries capable of producing fully fungible renewable fuel,’ said Jim Andersen, business development director of UOP’s Renewable Fuels business.
In August this year, Pertamina completed three-day trial production of 1,000 barrels per day (bpd) of D100 green diesel at its refinery in Dumai, Riau, which is Indonesia’s palm oil heartland.
Pertamina says that the additional biofuel production capacity provided by the Plaju and Cilacap refineries will help to reduce the nation’s reliance on imported petroleum products, particularly low-sulphur fuels, while supporting the local bio-economy and rural employment opportunities in agriculture.
Biofuels can make sense in nations like Indonesia with a large agricultural sector, rising energy demand and a growing maritime sector – inevitable in a nation made up of over 17,500 islands. The relatively small output of biofuel processers means that the market entry in the marine space is for smaller coastal and inter-island services located near to refineries or for use as ultra-low sulphur fuel in ports.
Most biofuel refineries have smaller capacity than mineral oil refineries. For instance, the world’s largest biofuel plant will soon be the Phillips 66 120,000 barrel per day refinery at Rodeo near San Francisco, which is being converted to biofuels, supported by Californian clean fuel credits. These can subsidise renewable diesel by up to $3.32 a gallon, according to a June 2020 report by Stratas Advisors. According to the US EIA, Ultra Low Sulphur diesel currently costs an average of $2.39 per gallon.
In Indonesia, biofuels are a key component of policy, under which fuel subsidies were abolished in 2015, except for biofuels which still receive state support. Since 2015, the Indonesian government has allocated the equivalent of around $195 million to subsidise biodiesel and make it competitive with mineral oil diesel at the pumps.
If Indonesia does not produce more transport fuels domestically, it will have to rely on imports to support the anticipated rapid growth in demand. The 2015 annual energy forecast from Indonesia’s Agency for the Assessment and Application of Technology, concluded that transport fuel consumption in Indonesia will increase on average almost 5% per year to 2050 and will represent 35% of all domestic energy demand.
Biofuels are expected to represent 30% of all transport fuel in Indonesia by 2025, helping to replace diesel which is 40% of transport fuel demand and is 40% imported.
To supply feedstock for biofuel refineries, Indonesian palm plantations have expanded from around eight million hectares in 2009 to around 12.5 million hectares in 2020. Indonesia and Malaysia are the world’s leading palm oil producers and are founder members of the Council of Palm Oil Producing Countries, with membership being extended to include Brazil, Colombia, Nigeria, the Philippines, and Uganda.
Indonesia has lodged a complaint with the World Trade Organisation against European Union restrictions on palm oil-based biofuels. The European Commission concluded in 2019 that palm oil cultivation leads to excessive deforestation and passed a law to phase out its use as transportation fuel between 2023 and 2030.