The Current Status and Prospects of Biodiesel Development in Indonesia : a review 1 Soni Solistia Wirawan a, *, Armansyah H.

Tambunan b
a

Institute for Engineering and Technology System Design, BPPT (Engineering Center BPPT) * Corresponding author : Fax : (021) 3915535, Email : soni@webmail.bppt.go.id b Department of Agricultural Engineering, Bogor Agricultural University 1 Presented on the Third Asia Biomass Workshop, November 16, 2006, Tsukuba, japan

ABSTRACT

Energy consumption in Indonesia increases rapidly in line with economic and population growth. Currently, Indonesia is very much dependent on fossil fuel for its energy source. Data of fossil energy reserves from Department of Mine and Energy Resources shows that around 63% of the Indonesians final energy demand still depend on oil, on the other hand the national oil production facilities is limited and the capacity decreasing gradually. Therefore, to satisfy domestic energy consumption, Indonesia still has to import crude oil and finished petroleum products, such as gasoline and diesel fuel. Indonesia becomes very dependent on overseas oil supply to fulfill the increasing demand. The increase of the international crude oil and fuel price may worsen the security of fuel supply. Developing biofuel is a must for Indonesia due to various reasons including the abundance availability of raw material, an alternative renewable fuel to strengthen the country energy security and a solution to improve local air pollution in several Indonesian major cities. One alternative is converting plant oil to methyl esters or famously called biodiesel. This paper gives a review of the background, historical, current and future development of biodiesel in Indonesia. It also highlights the prospects, opportunities and challenges lie ahead to accelerate the biodiesel commercialization program. Keywords: Energy, Biodiesel, alternative fuel, renewable

I. BACKGROUND
Energy has a significant role in achieving social, economic and environmental objectives to establish a sustainable development and to support national activities. Energy consumption in Indonesia increases rapidly in line with economic and population growth. Currently, Indonesia is very much dependent on fossil fuel for its energy source and the non fossil alternative renewable energy has not been utilized optimally. Data of fossil energy reserves from Department of Energy and Mineral Resources (DESDM, 2005) shows that the proven reserve of oil is about 9 billion barrels and with an average production rate of 500 million barrels per year, the reserve will be exhausted in 18 years.

The data also shows that around 63% of the Indonesians final energy demand is still depend on oil. On the other hand, the national oil production facilities are limited and the capacity decreasing gradually. Therefore, to satisfy domestic energy consumption, Indonesia has to import crude oil and finished petroleum products, such as gasoline and diesel fuel. Indonesia becomes very dependent on overseas oil supply to fulfill the increasing demand. This situation may worsen the security of fuel supply. The increase of the international crude oil and fuel price has become a burden to the state budget, due to the subsidizing policy of fuel products. If the current crude oil price stays at around US$60 per barrel, for example, Indonesia has to provide around IDR 89 trillion just for fuel subsidy (Prihandana, 2006). This will result in reduced government capacity to finance development programs in needed sectors such as health, education, basic human services, and infrastructures either in rural or in urban areas. It means the government has very limited resources to stimulate and maintain productivity and economic growth. In addition, air quality of major cities in Indonesia has been deteriorating especially in the city of Jakarta (Wirahadikusumah, 2003). Ambient air quality monitoring results suggest that NOx, CO and THC are a serious problem in almost all areas of Jakarta. PM10 may be considered as a problem in certain areas and motor vehicles are a major contributor of NOx, PM10, CO and THC emission (more than 70% of each parameter) (Syahril et al., 2002) . To reduce the high dependency on oil and to meet the global environment requirement, there is no choice that the maximum utilization of environmental friendly alternative fuel should be developed. One alternative is converting plant oil to methyl esters or famously called biodiesel.

II. RESEARCH AND TECHNOLOGICAL DEVELOPMENT

2.1. DEFINITION OF BIODIESEL Biodiesel by definition is a compound of methyl ester derived from the esterification/trans-esterification process of various types of vegetable oils or animal fats. Biodiesel definition has become important since many misleading definitions of biodiesel have been interpreted so as to define biodiesel as a substitute of diesel fuel from any vegetable oil without esterification/trans-esterification process. Biodiesel production technology has referred to the reversible transesterification reaction, in which triglyceride molecule with methanol (methanolysis) is converted to alkyl methyl ester and glycerol. Although higher alcohols (ethanol) can be used in the transesterification, however, methanol is more advantageous since the two main products, fatty acid methyl ester (FAME) and glycerol, is hardly miscible and thus form separate phases an upper ester phase and a lower glycerol phase. Moreover, the price of methanol is cheaper than ethanol which makes it preferable for commercial biodiesel production. The chemical and physical properties of biodiesel closely resemble those of diesel fuel. Biodiesels cetane number, energy content and viscosity are similar to those of petroleum-based diesel fuel. Biodiesel is essentially sulfur free. Engines fueled by biodiesel emit significantly fewer particulates, hydrocarbons and less carbon monoxide

than that operating conventional diesel fuel. Therefore, the utilization of bio-diesel fuel that can be produced domestically will reduce the dependency on overseas diesel fuel import that currently has reach about 9.6 million kiloliters or 39.7% of total diesel oil product (Dewi et al., 2005). Bio-diesel production and consumption will provide significant contribution for job creation and economic growth due to involvement of farmers and other small scale enterprises in bio-diesel value chain. Some raw material plants that can be cultivated on marginal soil will improve the soil environmental condition. One very important factor resulted from utilization of bio-diesel is the availability of domestic knowledge and skills to set up bio-diesel development capacity from raw materials, processing, up to distribution. However, some challenges must be addressed to maximize the benefit of utilizing biodiesel fuel, among others, i.e. selection of most effective raw materials, sustainable raw material supply, reliable production process, bio-diesel fuel specification, pricing policy, fiscal policy, etc. 2.1. BIODIESEL R&D ACTIVITY IN INDONESIA The effort of biodiesel development in Indonesia has in fact been made since more than ten years ago. However, the activity was not given priority due to the cheap oil price in the country. Research activity was limited only in laboratory scale and performance test. Several Indonesian research institutions have been pioneering worked on biodiesel development including Lemigas (Oil and Gas Technology), PPKS Medan (Indonesian Oil Palm Research Institute, Department of Agriculture), ITB (Bandung Institute of Technology), and BPPT (Agency for the Assessment and Application of Technology). By that time, biodiesel developments are mainly focused on production process technology, engineering, biodiesel property and performance test, standardization and promotion. To accelerate the information exchange among biodiesel stakeholders and to promote biodiesel development, a national forum for biodiesel called Forum Biodiesel Indonesia (FBI) was founded in 2002. The forum members comprise of scientists from universities and research institutes, automotive industry associations, palm oil association, engineering industries, biodiesel producers, relevant government offices (Ministry of Transportation, Ministry of Energy and Mineral Resources, Ministry of Agriculture) and several non governmental organizations. The following are some activities of several research institutions that work on biodiesel. LEMIGAS (Oil and Gas Institute), in cooperation with Pertamina (a state own oil company), has tested biodiesel blended with automotive diesel oil (ADO) at a ratio of 30:70 for commercial diesel engine vehicle in 1996 (Legowo, 2005). The program was intended to support the national policy on energy conversion and diversification. This early research unfortunately has showed that biodiesel gave negative impact on the engine performance despite of its positive results on the engines emission. Currently, Lemigas specializes in the testing methods for biodiesel fuel properties. Department of Agriculture has worked on biodiesel for several years. Its BBMektan (Agricultural Mechanization Research Center) has tested the performance of various blending of biodiesel and ADO on the 5.5 KW stationary diesel engines

(Handaka and Agung Hendriardi, 2005). PPKS Medan has also carried out research on biodiesel production from palm oil. In cooperation with ITB, they have conducted road test Java-Sumatra in 2004 which covered a total distance of 2,020 km (Reksowardojo et al., 2005). ITB (Bandung Institute of Technology) has focused its research and development on macroeconomic studies of biodiesel, developing technology for jatropha oil extraction and its conversion to methyl ester. The institute is also focusing on standardization of fuels and on diesel engine test series. The pilot scale biodiesel plant with the capacity of 150 L product per batch was developed by ITB. Engineering CenterBPPT has been developing biodiesel since 2000 and the center has focused its work on the process technology and engineering of biodiesel production. The center uses various raw materials, such as various CPO grades, Palm Fatty Acid Distillate (PFAD) and Coconut Fatty Acid Distillate (CFAD). The property and performance tests of the biodiesel produced are carried out in Thermodynamics and Propulsion Engine Research Center (BTMP), another BPPT laboratory, that focusing its work on diesel engine bench and non-stationary operation tests for performance and emissions of fuels include biodiesel. Until now, the Engineering CenterBPPT has constructed and been operating a pilot plant with daily capacity of 1.5 tons since 2003. In cooperation with the Riau provincial government, the Engineering CenterBPPT has completed the construction of a biodiesel plant with daily capacity of eight tons. The continuous system three ton per day capacity plant now still under constructing at the Science and Technology Research Center in Serpong, Banten.

Figure 1. Front view of 1500 L/day EC BPPT prototype biodiesel plant

Figure 2. Front view of an 8 tones/day biodiesel pilot plant in Pekanbaru Riau

In addition to the development of biodiesel production, Engineering Center-BPPT has also carried out two road tests (BRDST, 2003). The first one is the Java Sumatra road test carried out in 2002, that covered a distance of 5,000 km. The second one is Java - Bali road test in 2004 that covered a total distance of 20,000 km. Both tests were carried out in cooperation with leading automotive companies in Indonesia. The first one was PT. Toyota Astra Motor that supplied the vehicle and emission testing facilities. In the second road test, PT. Pantja Motor worked actively in the vehicle performance test along with BTMP-BPPT while JIF Japan Indonesia Science and Technology Forum, provided a sponsorship. As a promotion activity,

Engineering Center-BPPT also conducted similar road test for the BPPTs 23 diesel buses for three months (BRDST, 2005). The test has received a warm response from the bus drivers and the qualitative test has shown that the biodiesel is responsible for the reduction in the quality of engine exhaust; the engines noise were less and the acceleration was much better. As a response to the government seriousness in supporting the biofuel development as a national priority program, a number research institution such as IPB (Bogor Institute of Agriculture, BPPT Biotechnology Center, Puslitbangbun (Center for Plantation Research and Development, Department of Agriculture) now have actively started on biodiesel development, especially in the field of farming technology. Several private and state companies such as PT. Energi AIternatif Indonesia, PT. Rekayasa Industri, PT. Eterindo Wahanatama, PT. Rajawali Nusantara Indonesia, etc, now have also actively started on biodiesel business.

III. DOMESTIC POLICY ON BIODIESEL

3.1. NATIONAL ENERGY POLICY Observing the continuously soaring fuel price and increasingly diminishing Indonesias oil reserves, Indonesian government shows its seriousness in developing alternative energy, include biofuel. Various policies which are supporting the development of this energy have been made. Among of them are Presidential Regulation No. 5/2006 regarding the National Energy Policy (Perpres, 2006), and Presidential Instruction No. 1/2006 regarding the utilization of biofuel (Inpres, 2006) which is released formally on 25 January 2006. Generally, the National Energy Policy is intended to secure national energy supply and to support the sustainable national development, and becomes the guidance of the national energy management in efforts the fulfillment of national energy security. To achieve the targets, the National Energy Policy implementing the main and supporting energy policy as shown on Table 1. Table 1. National Energy Policy
No. 1 Category Supply Side Utilization Side Energy Efficiency Production exploration Energy Diversification Energy Conservation Production Optimization Energy price will gradually change to the economical price Consider the environmental factor Energy infrastructure development Subsidy policy for poor people Government and private sector partnership scheme Public empowerment Research and development promotion Coordination between related stakeholders

Main Policy

2 Supporting Policy

Source : DESDM, 2006

Beside the geothermal, biomass, wind, solar and other renewable energy sources that have been already stated in the previous energy policy, the current National Energy Policy has also clearly stated biofuels as a part of renewable energy sources targeted to contribute at least 5% of the total national energy consumption in 2025 and the energy

elasticity would be less than one. Table 2 shows the targeted contribution of each energy type on 2025 (for comparison it also shows the 2004 energy mix data). Table 2. Target of contribution to Indonesia energy mix
No. 1 2 3 4 5 6 Energy Contribution on energy mix 2004 Targeted 2025 52.50% 20% 19.04% 30% 21.52% 33% 0% 5% 3.01% 5% 3.93% 5% 0% 2%

Oil Gas Coal Biofuel Geothermal Others renewable energy (Biomass, Solar, Wind, Nuclear, Hydro) 7 Coal Liquefaction Source: Perpres, 2006

Referring to the National Energy Policy, the Minister of Energy and Mineral Resources has issued the National Energy Management Blueprint (DESDM, 2005). The Blueprint covers the national strategy in managing and utilizing various energy resources including the roadmap of each alternative energy sector. Detail of biodiesel road map is presented in Figure 3. The goal of biodiesel utilization is set by 1.5 million kilo liter in 2010 (10% of national transportation diesel oil consumption) and will be increased up to 6.4 kilo liter in 2025 (20% of national transportation diesel oil consumption or 5% of total national diesel oil). The map also sets all the stages from R&D to marketing. 3.2. LOSARI CONCEPT To accelerate the development and utilization of biofuels in Indonesia, President of Indonesia has called for a meeting on 2 July 2006 in Losari, Magelang, Central Java, attended by related Ministers and stake holders. Background of the president concept on the biofuel is that the economic growth has risen from 3.7% (2002) to 5.6% (2005), the unemployment number has increased from 9.1% (2002) to 10.8% (2005). This fact in turn has changed the government micro policy (which is attached to the macro policy) to directly deal with the problems related to unemployment, poverty and economic growth. The uprising world oil prices approaching US$ 80 per barrel has also added to the already limited government fiscal problem so that the government needs innovative strategies to improve job/employment availability, basic education and health, and increase public income standard. Therefore, he so-called Triple Track Strategy become relevant in the economic development, which covers: PRO-GROWTH : Economic growth through export and investment PRO-JOB : Job creation PRO-POOR : Poverty reduction in rural areas

Year Market Product

2006-2010
Biodiesel Supply 1.5 Million kL 10% of ADO

2011-2015
Biodiesel Supply 3 Million kL 15% of ADO

2016-2025
Biodiesel Supply 6.4 Million kL 20% of ADO

NATIONAL BIODIESEL STANDARD

Palm/Jatropha Biodiesel Biodiesel Low Production Cost High Quality Biodiesel High Cetane Number Low Cloud Point

Technology

Commercial Plant (5000 20.000 Tons/Year)

Commercial Plant (20.000 100.000 Tons/year)

Commercial Plant of High Quality Biodiesel

Research And Development

Biodiesel Process Intensification Updating of Standard & Performance Test

Design & Engineering Plant

Performance test
Optimization & Modification of Plant D i

Blending Technology

Fuel Additive Technology

Figure 3. : Biodiesel Development Roadmap

Related to the biofuel program, President has announced a New Deal Program aimed at increasing job creation and income standard and reducing poverty. The targets of the program in 2006-2010 are: Additional job creation will be set for 3.6 million people. Poverty level will be reduced by 16%. Subsidized value for palm oil mill will be cut by IDR 9 trillions. Imported oil will be decreased as much as US$ 4.96 billions. Millions hectares of non-productive land can be utilized.

Four kind of plantation (palm, cassava, sugarcane and jatropha curcas) will be the focus of the 2006-2010 program. One national biofuel working group with a members consist of various organization has been established. The groups have special tasks to formulate the national biofuel blue print, roadmap and detail steps of action plan to realize the national biofuel program. Various regulations related to all aspects of the fuel chain including, plantation, plant oil mill, biofuel production, distribution, include the biofuel funding and marketing has been discussed. The blue print would address fuel substitution for gasoline by bioethanol, automotive diesel oil by biodiesel (FAME), and kerosene and diesel fuel for electricity (PLN use) by Pure Plant Oil (PPO). The implication of the target set by the president specific to biodiesel is a creation of around 900 thousand new jobs which mostly in the plantation sector. If the raw material for biodiesel should be supplied from a combination of palm and Jatropha oil, the total biodiesel produced for such a program could reach around 2.36 million kL per year by 2010. The available land required for new plantations could reach 1.2 million ha and around 100 plants of various capacities including 3,000 tons/year, 30,000 tons/year and 100,000 tons/year need to be built. The locations of the plantations and the biodiesel plants would be suited to the places according to the kind of raw materials used. For example, palm oil plantations should be opened in Sumatra provinces and Jathropa plantations

should be in NTT and Sulawesi. Table 3 shows milestone of Biodiesel Program for Losari Concept. Table 3. Milestone for Biodiesel Program (Losari Concept)
ADO Consumption (Million Kl) Comm. Biodiesel Prod. (thousand kL) Biodiesel Production (thousand kL) Supply of CPO (Thousand Tons) Supply of Jatropha (Thousand Tons) Land for Palm (Thousand Ha) Land for Jatropha (Thousand Ha) Biodiesel Plants (Unit @ 3.000 ton/yr) Biodiesel Plants (Unit @ 30.000 ton/yr) Biodiesel Plants (Unit@ 100.000 ton/yr) 2006 11.9 40 40 40 25 2007 11.0 240 200 200 110 125 12 6 2008 12.2 640 400 400 80 250 15 10 2009 12.3 1536 896 440 456 285 15 13 2 2010 12.4 2360 824 320 504 315 9 15 2 Total

2,360 760 1,600 190 1,000 51 44 4

Source : Presentation of Department of ESDM in Losari (Dept. of Finance, 2006)

The crucial aspect being discussed in the National biofuel working group is how to finance this project and how to give the incentives for investors to open their plantations and biofuel plants in general. These range from tax incentives to biofuel subsidy over fossil fuel and streamlining procedure in getting the license permits. 3.3. BIODIESEL STANDARDIZATION POLICY Utilization of biodiesel especially as one alternative of automotive diesel fuels requires certain quality standard in order to be sold in the fuel market. To protect both biodiesel consumers and producers as well as to support the development of biodiesel industries, the biodiesel standard so called SNI 04-7182-2006 has been approved by the National Standardization Agency (BSN) through a decree No. 73/KEP/BSN/2006 on 22 February 2006. The biodiesel standard has been formulated by technical committee of new and renewable energy in order to assure that the norm is accommodative to the interest of all parties involved in biodiesel issues. The member of committee consist of all related biodiesel stakeholder include of the government institution, private institutions and academicians. The committee has performed a series of discussion, procedural processes and finalized in the Consensus Forum XXIV on 6-7 December 2005 in Jakarta. The content of SNI 04-7182-2006 has partially adopted the existing European and US standard (ASTM D6751 and EN 14214:2002) and other values were set based on several considerations including: The plant oil resources in Indonesia have wider range of carbon components compared to the plant oils from European and US. For example, coconut oil has a range of fatty carbon chains of C8 to C18. Some of Indonesian plant oil resources have unique fatty acids that their existence in a biodiesel fuel may have negative effect in the diesel engine. As biodiesel plants may be located dispersedly and operated by medium and large enterprises, all level of enterprises should be able to afford the testing methods. Hence such methods should be designed for the local condition without disregarding the quality assurance. The detail SNI 04-7182-2006 is shown in Table 4.

Table 4. Characteristic comparisons of Fossil Diesel Fuel (FDF) and Biodiesel

No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Parameter Density Kinematic viscosity (40 C) Cetane number Flash point Cloud point Pour point Copper strip corrosion Carbon residue - in undistilled sample, or - in 10 % distillation residue Water and sediment 90% (v/v) recovered at distillation temperature 95% (v/v) recovered at distillation temperature Ash content (sulfated ash) Sulfur content Phosphorous content Acid number Free glycerol Total glycerol Ester content Iodine number Halphen test Unit kg/m3 Mm2/s (cSt) C C C Rating (3 hours at 50C) % (m/m) % (m/m) %-vol. C C % (m/m) ppm-m (mg/kg) ppm-m (mg/kg) mg-KOH/g % (m/m) % (m/m) % (m/m) % (m/m) (g-I2/100g) FDF (1) 820 - 870 (15C) 1.6 - 5,8 min. 45 min. 60 Max. 18 max. no 1 max. 0.1 max. 0,05* max. 370 max.0,01 max. 5000 max.0,6 Biodiesel 850 890 (40C) 2,3 6,0 min. 51 min. 100 max. 18 max. no 3

max 0,05 max. 0,30 max. 0,05* max. 360 max.0,02 max. 100 max. 10 max.0,8 max. 0,02 max. 0,24 min. 96,5 max. 115 Negative

Note : can be separately tested as long as sediment content maximum 0.01 %-vol 1. Automotive Diesel Oil, www.pertamina.com (accessed 19 June 2006) 2. SNI Biodiesel No. 04-7182-2006, based on ASTM D 6751 & EN 14214.

On 17 March 2006, the Oil and Gas Directorate General of Department on Energy and Mineral Resources has been formally issued the decree No. 3675K/24/DJM/2006 regarding the quality and specification of diesel oil type Solar 48 and Solar 51. This decree regulates the use of FAME (fatty acid methyl ester) up to the maximum of 10 percent of the volume of automotive diesel fuel with which it is to be blended. The biodiesel to be mixed has to meet the biodiesel standard SNI 04-7182-2006.

IV. PROSPECT AND CHALLENGES OF BIODIESEL MARKET IN INDONESIA

Global biodiesel production capacity in 2001 was 900,000 tones (approximately 1,000 million liters). Of this amount, Europe supplied 850,000 tons and the United States 50,000 tones. In Europe, Germany, France, and Italy are major producers with Germany contributing about 400,000 tones of biodiesel whilst France and Italy produced 330,000 and, 75,000 tones of biodiesel respectively during that year. Within the last few years, biodiesel production capacity is expanding worldwide due to the soaring oil price and greater concern on environment protection which turns the enthusiasm of the individuals and nations to find the alternative and more environment-friendly fuel; that makes biodiesel attractive. Year 2005 shows global biodiesel production capacity has been quadrupled from the one of 2001 capacity.

The world biodiesel production by country for 2005 with Germany keeps the leading role as a major producer. It is interesting to observe that a number of countries other than the big four in 2001 are start playing a significant role. Currently, many Asian countries such as Malaysia, India and Indonesia have taken the initiative and start contributing to the world total biodiesel production. To assess the potential of worldwide biodiesel market, one can consider 2001 world fossil diesel consumption that reached 637,405.8 million liters for transportation only. Based on the increase of world middle-distillate oil consumption, the aforementioned number is estimated to have grown up to at least 700,000 million liters at the beginning of 2006. Considering of only 5% biodiesel substitution into fossil diesel (B5), the required biodiesel capacity would be 35,000 million liters and that is for transportation only. Hence, there is still more than 30,000 million liters of worldwide biodiesel potential market open to grab, again it is only for transportation. Moreover, a huge more of biodiesel productions are envisaged since B20 is foreseen by many countries as their future target. Considering the abundance of raw material, the increasing domestic consumption of diesel oil and to satisfy the target as projected on the National Energy Policy and losari concept, developing biodiesel in Indonesia has a good prospect. As stated on the National Energy Policy that biofuels as a part of renewable energy sources targeted to contribute at least 5% of the total national energy consumption in 2025. According to the biodiesel roadmap as can be shown in figure 3 above, the total biodiesel should be produced for such a program could reach around 1.5 million kL per year by 2010, 3 million kL per year by 2015 and at least 6.4 million kL per year by 2025. 4.1. PROJECTED BIODIESEL CONSUMPTION 2010 Transportation Sector From the renewable energy policy, especially biofuels, it is stated that the target of biodiesel use in 2010 is 10% of the total diesel oil for transportation consumption. Table 5 shows the potential biodiesel for the substitution of transportation sector. The figure of 10% equals to an amount of 1.337.000 million tones biodiesel per year. To meet this target, Indonesia should develop 15 to 40 units biodiesel plant at commercial scales with the plant size of 30,000 to 100,000 tones per year. Table 5. Potential Biodiesel Substitution in the transportation sector
Automotive Diesel Oil Biodiesel Total (Thousand kL) (Thousand kL) (Thousand kL) 2005 11,791 0 11,791 2006 14,411 87 14,498 2007 12,669 167 12,836 2008 13,101 377 13,478 2009 12,949 1,203 14,152 2010 13,522 1,337 14,859 Source : Presentation of Department of ESDM in Losari (DESDM, 2006) Year

Industrial Sector To fulfill the industrial demand of biodiesel, the regulation is not restricted to the blending regulation of 10% biodiesel. As a result, industries are different types of

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market which has the magnitude of almost unlimited number. Thus, pure biodiesel can be marketed without any trade limit. The price of biodiesel will compete with the market price of any types of industrial fuels. Department of Energy and Mineral Resources (July 2006) released that the price of industrial diesel fuel is in the range of IDR 6,014.91 per liter to IDR 6,227.27 (DESDM 2006). Meanwhile, the price of crude palm oil (CPO) per kg is about IDR 3,628 per January 2006 (Meneg BUMN, 2006), and the real potential price can reach IDR 4,000 per kg. The price of CPO processing to produce biodiesel is approximately at IDR 1,500.00 per liter for any plant with production capacity of 500 tones per year, and at IDR 550.00 per liter for a plant with production capacity of 120,000 tones per year (Wirawan, 2006). Assuming that oil density is 0.8, therefore the price of CPO is around CPO IDR 3,800 per liter and price of biodiesel for industrial sectors is between IDR 4,300 and IDR 5,300 per liter. Biodiesel demand as industrial raw material or additives has not been calculated. The reason is that biodiesel is not yet so popular in domestic demand as raw material for other chemical production. Table 6. Projected Biodiesel Consumption for Industrial Sector up to 2010 with various Blending percentage (Thousand kL)
Projected industrial diesel oil demand 2005 2010 data : Presentation of Department of ESDM in Losari (DESDM, 2006) Year 2005 2006 2007 2008 2009 2010 Diesel oil for industry 8,320 8,570 8,827 9,091 9,364 9,645 10 % Biodiesel 832 857 883 909 936 965 Fossil 7,488 7,713 7,944 8,182 8,428 8,681 20 % Biodiesel 1,664 1,714 1,765 1,818 1,873 1,929 Fossil 6,656 6,856 7,062 7,273 7,491 7,716 30 % Biodiesel 2,496 2,571 2,648 2,727 2,809 2,894 Fossil 5,824 5,999 6,179 6,364 6,555 6,752 40 % Biodiesel 3,328 3,428 3,531 3,636 3,746 3,858 Fossil 4,992 5,142 5,296 5,455 5,618 5,787

4.2. PERTAMINA POLICY ON BIODIESEL As a state-owned company which carries out business in oil gas, LNG, energy and petrochemical industries, PERTAMINA has announced its intentions to produce and sell biodiesel in Indonesia. The target of PERTAMINA is to gradually substitute diesel oil especially used as transportation fuel. Since 20 May 2006, PERTAMINA has been selling a blend of 95% diesel fuel (ADO) and 5% SNI standard biodiesel which the trade name of BIOSOLAR Currently, PERTAMINA has been selling BIOSOLAR with the price of IDR 4.300, same with the subsidized automotive diesel oil at around 170 diesel fuel public filling station (SPBU) in Jakarta and more than 5 SPBU in Surabaya (East Java) with a total volume around 1.400 kl per day (Pertamina, 2006) By the continuously growing of domestic biodiesel producer, PERTAMINA will open the BIOSOLARs SPBU in all big cities in Indonesia and increase the biodiesel blending content (B10, B15, etc). Table 7 shows the Projected BIOSOLAR and FAME Estimation.

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Table 7. Projected BIOSOLAR and FAME demand estimation

In million KL Projected BIOSOLAR market penetration Region Sumatera Medan, Pekanbaru, Palembang, Lampung Java DKI +Jabotabek, Bandung, West Java, East Java + Bali Sulawesi Kalimantan Papua/Maluku Projected BIOSOLAR and FAME demand estimation Consumption BIOSOLAR FAME Source : Pertamina, 2006 2006 0.00 1.08 0.00 0.00 0.00 2006 1.08 0.05 2007 1.15 4.60 0.00 0.00 0.00 2007 5.75 0.29 2008 2.30 9.20 0.00 0.00 0.00 2008 11.5 0.58 2009 4.00 13.80 1.00 1.00 0.20 2009 20 1.00 2010 5.20 15.60 1.60 2.50 0.78 2010 25.68 1.28

The current main problems faced by PERTAMINA are: limited biodiesel producer and the fluctuation of FAME price. Several biodiesel plants have been operated, but almost of them still only at small capacity, laboratory level or at the trial stage. PERTAMINA currently buys biodiesel from the only available biggest domestic biodiesel producer namely PT ETERINDO WAHANATAMA. Table 8 shows the Current and Projected Biodiesel Plant Construction up to 2010. Those figures are based on the confirmed data responded from the related companies and the data based on the BKPM (Agency for the Coordination of Investment in Indonesia), with some data unconfirmed by the related companies.
5,800 5,600

H a rg a Price (IDR)

5,400 5,200 5,000 4,800 4,600 4,400

7/ 17 / 7/ 20 0 19 6 / 7/ 20 0 21 6 /2 7/ 0 0 23 6 7/ / 20 0 25 6 / 7/ 20 0 27 6 /2 7/ 0 0 29 6 / 7/ 20 0 31 6 /2 8/ 006 2/ 2 8/ 006 4/ 2 8/ 006 6/ 2 8/ 006 8/ 8/ 2 0 0 10 6 / 8/ 20 0 12 6 /2 8/ 0 0 14 6 / 8/ 20 0 16 6 / 8/ 20 0 18 6 8/ / 20 0 20 6 / 8/ 20 0 22 6 / 8/ 20 0 24 6 / 8/ 20 0 26 6 /2 00 6

Gas Oil Fame

Source

Pertamina,

Tanggal Date

Figure 4. : Fluctuation of gas oil and FAME price A specific challenge faced by palm biodiesel development is the currently high price of CPO in the international market and its dynamic fluctuations. Dewi et al. (2004) estimated that the cost of feed stock is the main component in the overall price of biodiesel. Such a fluctuation in the CPO should have direct implication on the biodiesel

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plant financial performance. Figure 4 shows the fluctuation of gas oil and FAME price during the period of July to August. The alternative of biodiesel raw material from jatropha oil as suggested by various researchers including Dewi et al. (2005), Soerawidjaya and Tahar (2003) has great potential to be developed. However, such potentials should be explored further as there is no specific study on big scale jatropha oil plantation in Indonesia. Various incentives to encourage farmers to plant Jatropha oil have to be explored so that the return from the plantation is much better than planting other commodities. Table 8. Current and Projected Biodiesel Plant Construction up to 2010
Company/Institution Operation Lemigas BPPT PT EAI ITB PT RNI PPKS PT Ganesha 77 - PT PN IV Projected Plant up to 2010 PT Bakrie - PT Rekin BPPT-Pemda Riau PT Sumi Asih BPPT Ekuin BPPT Ekuin BPPT Ekuin PT RAP PT Indobiofuels-Hiswana PT Anugerahinti Gemanusa (Eterindo) PT Bio Energi Nusantara PT BDF Plantation PT Wilmar Bioenergi Indonesia PT Biodiesel Indonesia Darmex Oil Golden Hope Listed in BKPM PT Asianagro Agungjaya PT Wahana Abdi Tirtatehnika Sejati PT Sari Dumai Sejati PT Musi Mas PT Karya Pradjona Nelayan PT Indo Bio Fuels PT Amarta Trans Nusantara Source : various data Location Jakarta Serpong Jakarta Bandung Medan Medan Lampung Kampar Bekasi Jambi Sumedang, Solok Jakarta Dumai Gresik Serang Morowali Dumai Jakarta Production, thousand tons per year 2006 2007 2008 2009 2010 0.04 0.3 0.3 0.05 0.05 0.3 2.5 1.6 1.0

100 3.0 36.0 0.3 0.3 0.3 0.5 150.0 80.0 150.0 27.0 252.0

Marunda Bogor Bengkalis Medan Medan Muaro Jambi Kupang

100.0 30.0 100.0 100.0 100.0 150.0 1200.0

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4.3. THE SUSTAINABLE SUPPLY OF RAW MATERIAL The option of using biodiesel as alternative fuel is based on the availability of raw material. If rapeseed oil is the raw material for biodiesel in Germany and soybean for the United States, crude palm oil (CPO) is the logical option for Indonesia despite large potential of non edible oil such as Jathropa oil (Jathropa Curcas) and more than 40 other types of raw material available in Indonesia. Table 9 shows the palm oil and jathropa curcas plantation development plan released by the Ministry of Agriculture. The data was made based on the biodiesel production target by the Losari Concept. Table 9. Plantation Development Plan 2007-2010 (in ha)
No 1 2 Plantation Palm oil Jatropha curcas 2007 473.265 341.000 2008 473.265 345.000 2009 473.265 360.000 2010 473.265 375.000 Total 1 893 060 1 461 000

Source : Deptan 2006

V. CONCLUSSION
The government effort to develop biodiesel in Indonesia has in fact made several years ago. Depletion of fossil energy resources, increasing domestic consumption of diesel oil, increasing crude oil price, environmental problem and the abundance of raw material are become the main background of the country biodiesel development. Opportunity to market biodiesel has been widely opened as the current government fully supports biofuel development. This support is manifested into several government regulations that cover National Energy Policy (Presidential Regulation No. 5/2006 and Presidential Instruction No.1/2006), Biodiesel Standard SNI 04-7182-2006 and the decree of Oil and Gas Directorate General No. 3675K/2/DJM/2006 regarding blending regulation. These regulations have made a way for PERTAMINA to launch its BioSolar (Biodiesel B5) in all Pertamina Fuel Outlets in Jakarta and later on will be in all over Indonesia. As the company supplies 99% of the domestic fuel, Pertamina should guarantee to be the off-taker of domestic biodiesel producer. The stages of biodiesel development from research to be ready commercialized have been done and several important milestones have been achieved but more still have to be done. These include how to accelerate the construction of new biodiesel plants, plantation as a key driver in the continuity of raw material which is supported by the committed government policy and regulation. This implies all biodiesel stakeholders should work harder for the success of biodiesel program in Indonesia.

REFERENCE
[1] [2] [3] [4] Balai Rekayasa Desain dan Sistem Teknologi BPPT (2003) The report on the development of biodiesel as an alternative energy. Balai Rekayasa Desain dan Sistem Teknologi BPPT (2005), The report on the road test of biodiesel B10 on BPPT buses BSN, 2006, Indonesian National Standard on Biodiesel SNI 04-7182-2006 Department of Energy and Mineral Resources (DESDM), 2005 Blue Print Pengelolaan Energy Nasional Workshop Sosialisasi Blue Print Pengelolaan Energy Nasional 28-29 June 2005

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[5] [6] [7] [8] [9]

[10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20]

[21]

[22] [23] [24] [25]

DESDM, 2006 Harga BBM [Online] Available at: http://www.esdm.go.id DESDM, 2006 Presentation in Losari from DESDM(Accessed date: 19 July, 2006). DESDM, 2006, Kebijakan Energi Nasional Dalam Konteks Pengembangan Biofuel di Indonesia , Simposium Biodiesel Indonesia, 5 6 September 2006, Jakarta, Indonesia. Dewi, R.G., I. Kurniawan and U. Siagian (2005), The Assessment of Economic and Environment Performance of Biodiesel Production in Indonesia, Proceeding International Seminar & Ekhibition on Ecological Power Generation 2005, January 19, 2005 Jakarta Indonesia Department of Agriculture (DEPTAN), 2006, Penyediaan Bahan Baku Biodiesel di Indonesia, Simposium Biodiesel Indonesia, 5 6 September 2006, Jakarta, Indonesia.[14] Directorat General of Oil and Gas (Ditjen. MIGAS), 2006, Regulasi Pengembangan Biofuel di Indonesia, Simposium Biodiesel Indonesia, 5 6 September 2006, Jakarta, Indonesia. Handaka and Agung Hendriardi (2005) Konsep kerjasama penelitian dan pengembangan energi terbarukan di Indonesia, Workshop Pengembangan dan Pemanfaatan Energi Biomasa, 01 March 2005 Inpres No. 1, 2006 Penyediaan dan Pemanfaatan Bahan Bakar Nabati (Biofuel) sebagai Bahan Bakar Lain, Jakarta, Indonesia. Korbitz, W. 1999, Biodiesel production in Europe and North America, an encouraging prospect, Renewable Energy [Online] vol. 16, pp. 1078-1083 Available from: Science Direct (Accessed date: 20 February 2004). Legowo, E. H. (2005) Present Status of Biomass Development in Indonesia Biomass Asia 2005 Tokyo, Januari 2005, [Online] Available at http://unit.aist.go.jp/internat/biomassws/en/index.html (Accessed date : 20 February 2005) Mittelbach, M and C. Remschmidt (2004) Biodiesel: The comprehensive handbook, 1st Ed., Boersedruck Ges.m.b.H, Vienna Meneg BUMN, 2006, [Online] Available from:http://members.bumnri.com/ptpnxiv/news.html?news_id=11978, (accessed date: 20 July 2006). National Biofuel Team, 2006 Presentation to Dept. of Finance on Biofuel blue print Pertamina, 2006, Peluang dan Prospek Pasar Biodiesel di Indonesia, Simposium Biodiesel Indonesia, 5 6 September 2006, Jakarta, Indonesia. Perpres No.5, 2006 Kebijakan Energi Nasional, Jakarta, Indonesia. Prihandana, R., (2006), Dari Energi Fosil Menuju Energi Hijau Penerbit Proklamasi Publishing House, Jakarta, 2006 Rahmadi, A & Lu Aye 2003, 'Biodiesel from palm oil as an alternative fuel for Indonesia: opportunities and challenges', 41st Annual Conference of the Australian and New Zealand Solar Energy Society, Destination Renewables: from Research to Market, Melbourne, Australia, 26-29 November 2003, pp. 322. Reksowardojo, I.K., Shofwatuzzaki, T. H. Soerawidjaja, D. Darnoko, W. Arismunandar (2005) The Experience of Road Test Diesel EngineVehicles Using Blended Diesel Oil and Palm Oil Biodiesel Fuel, Proceeding International Seminar & Ekhibition on Ecological Power Generation 2005, January 19, 2005 Jakarta Indonesia Soerawidjaja, T. H. dan A. Tahar (2003) Menggagas Kebijakan Pengembangan Biodiesel di Indonesia Proseding Seminar Peluang Bisnis Industri Hilir Kelapa Sawit, Serpong, hal 1-16 Syahril, S., Resosudarmo, B.P., Tomo, H.S., (2002), Study on Air Quality In Jakarta, Indonesia, September, 2002. Wirahadikusumah, K. (2002) Jakarta Air Quality Management: Trends and Policies, The Regional Workshop on Better Air Quality in Asian and Pacific Rim Cities (BAQ 2002) 16-18 Dec 2002, Hong Kong, [Online] Accessed date : 19 August 2004) Wirawan, S.S, 2006, The current Status Biodiesel Development in Indonesia, One day Seminar on Biodiesel, BPPT Jakarta, March 2006

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