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 Indonesian’s 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.

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The data also shows that around 63% of the Indonesian’s 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.
Biodiesel’s 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

2
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 bio-
diesel 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 engine’s emission.
Currently, Lemigas specializes in the testing methods for biodiesel fuel properties.
• Department of Agriculture has worked on biodiesel for several years. Its BB-
Mektan (Agricultural Mechanization Research Center) has tested the performance of
various blending of biodiesel and ADO on the 5.5 KW stationary diesel engines

3
 (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 Center–BPPT 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 Center–BPPT 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 Center–BPPT 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 Figure 2. Front view of an 8 tones/day

EC BPPT prototype biodiesel plant 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,

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 Engineering Center-BPPT also conducted similar road test for the BPPT’s 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 Indonesia’s
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. Category Supply Side Utilization Side
1 • Production exploration • Energy Efficiency
• Energy Conservation • Energy Diversification
Main Policy • Production Optimization
• Energy price will gradually change to the economical price
• Consider the environmental factor
2 • Energy infrastructure development
• Subsidy policy for poor people
• Government and private sector partnership scheme
Supporting Policy
• Public empowerment
• Research and development promotion
• Coordination between related stakeholders
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

5
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

Contribution on energy mix
No. Energy
2004 Targeted 2025
1 Oil 52.50% ≤ 20%
2 Gas 19.04% ≥ 30%
3 Coal 21.52% ≥ 33%
4 Biofuel 0% ≥ 5%
5 Geothermal 3.01% ≥ 5%
6 Others renewable energy 3.93% ≥ 5%
(Biomass, Solar, Wind,
Nuclear, Hydro)
7 Coal Liquefaction 0% ≥ 2%
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

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 Year 2006-2010 2011-2015 2016-2025
Biodiesel Supply Biodiesel Supply Biodiesel Supply
Market 1.5 Million kL 3 Million kL 6.4 Million kL
10% of ADO 15% of ADO 20% of ADO

NATIONAL BIODIESEL STANDARD

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

Commercial Plant
Commercial Plant Commercial Plant of
Technology (5000 – 20.000
Tons/Year)
(20.000 - High Quality
100.000 Tons/year) Biodiesel

Design &
Engineering Performance
Research Biodiesel
Process
Plant test
Intensification
And Optimization

Development Updating of
Standard &
&
Modification
of Plant
Performance
Fuel D i
Blending Test
Additive
Technology 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

7
should be in NTT and Sulawesi. Table 3 shows milestone of Biodiesel Program for
Losari Concept.

Table 3. Milestone for Biodiesel Program (Losari Concept)

2006 2007 2008 2009 2010 Total
ADO Consumption (Million Kl) 11.9 11.0 12.2 12.3 12.4
Comm. Biodiesel Prod. (thousand kL) 40 240 640 1536 2360
Biodiesel Production (thousand kL) 40 200 400 896 824 2,360
Supply of CPO (Thousand Tons) 440 320 760
Supply of Jatropha (Thousand Tons) 40 200 400 456 504 1,600
Land for Palm (Thousand Ha) 110 80 190
Land for Jatropha (Thousand Ha) 25 125 250 285 315 1,000
Biodiesel Plants (Unit @ 3.000 ton/yr) 12 15 15 9 51
Biodiesel Plants (Unit @ 30.000 ton/yr) 6 10 13 15 44
Biodiesel Plants (Unit@ 100.000 ton/yr) 2 2 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.

8
 Table 4. Characteristic comparisons of Fossil Diesel Fuel (FDF) and Biodiesel
No Parameter Unit FDF (1) Biodiesel
1 Density kg/m3 820 - 870 (15°C) 850 – 890 (40°C)
2 Kinematic viscosity (40 °C) Mm2/s (cSt) 1.6 - 5,8 2,3 – 6,0
3 Cetane number min. 45 min. 51
4 Flash point °C min. 60 min. 100
5 Cloud point °C max. 18
6 Pour point °C Max. 18
7 Copper strip corrosion Rating max. no 1 max. no 3
(3 hours at 50°C)
8 Carbon residue
- in undistilled sample, or % (m/m) - max 0,05
- in 10 % distillation residue % (m/m) max. 0.1 max. 0,30
9 Water and sediment %-vol. max. 0,05* max. 0,05*
10 90% (v/v) recovered at distillation
temperature °C - max. 360
11 95% (v/v) recovered at distillation
temperature °C max. 370 -
12 Ash content (sulfated ash) % (m/m) max.0,01 max.0,02
13 Sulfur content ppm-m (mg/kg) max. 5000 max. 100
14 Phosphorous content ppm-m (mg/kg) - max. 10
15 Acid number mg-KOH/g max.0,6 max.0,8
16 Free glycerol % (m/m) - max. 0,02
17 Total glycerol % (m/m) - max. 0,24
18 Ester content % (m/m) - min. 96,5
19 Iodine number % (m/m) (g-I2/100g) - max. 115
20 Halphen test - 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.

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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
Year
(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)

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

10
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)
Diesel oil
Year 10 % 20 % 30 % 40 %
for
industry Biodiesel Fossil Biodiesel Fossil Biodiesel Fossil Biodiesel Fossil
2005 8,320 832 7,488 1,664 6,656 2,496 5,824 3,328 4,992
2006 8,570 857 7,713 1,714 6,856 2,571 5,999 3,428 5,142
2007 8,827 883 7,944 1,765 7,062 2,648 6,179 3,531 5,296
2008 9,091 909 8,182 1,818 7,273 2,727 6,364 3,636 5,455
2009 9,364 936 8,428 1,873 7,491 2,809 6,555 3,746 5,618
2010 9,645 965 8,681 1,929 7,716 2,894 6,752 3,858 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
BIOSOLAR’s 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.

11
 Table 7. Projected BIOSOLAR and FAME demand estimation
In million KL
Projected BIOSOLAR market penetration
Region 2006 2007 2008 2009 2010
Sumatera 0.00 1.15 2.30 4.00 5.20
Medan, Pekanbaru, Palembang, Lampung
Java 1.08 4.60 9.20 13.80 15.60
DKI +Jabotabek, Bandung, West Java, East Java + Bali
Sulawesi 0.00 0.00 0.00 1.00 1.60
Kalimantan 0.00 0.00 0.00 1.00 2.50
Papua/Maluku 0.00 0.00 0.00 0.20 0.78
Projected BIOSOLAR and FAME demand estimation
Consumption 2006 2007 2008 2009 2010
BIOSOLAR 1.08 5.75 11.5 20 25.68
FAME 0.05 0.29 0.58 1.00 1.28
Source : Pertamina, 2006

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

5,400
H a rg(IDR)
a

5,200
Gas Oil
Price

5,000 Fame
4,800

4,600

4,400
8/ 006
8/ 006
8/ 006
10 6
19 6
21 6
23 6
25 6
27 6
29 6
31 6
8/ 006

12 6
14 6
16 6
18 6
20 6
22 6
24 6
26 6
6
8/ 2 0 0
7/ 20 0
7/ 20 0
7/ 0 0
7/ / 20 0
7/ 20 0
7/ 0 0
7/ 20 0

8/ 20 0
8/ 0 0
8/ 20 0
8/ 20 0
8/ / 20 0
8/ 20 0
8/ 20 0
8/ 20 0
00
2
2
2
/2

/2

/2

/2

/2
2/
4/
6/
8/
/
/

/
/

/
/
/
17
7/

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

12
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

Production, thousand tons per year
Company/Institution Location
2006 2007 2008 2009 2010
Operation
Lemigas Jakarta 0.04 1.6
BPPT Serpong 0.3 1.0
PT EAI Jakarta 0.3
ITB Bandung 0.05
PT RNI 0.05
PPKS Medan 0.3
PT Ganesha 77 - PT PN IV Medan 2.5
Projected Plant up to 2010
PT Bakrie - PT Rekin Lampung 100
BPPT-Pemda Riau Kampar 3.0
PT Sumi Asih Bekasi 36.0
BPPT – Ekuin Jambi 0.3
BPPT – Ekuin Sumedang, 0.3
BPPT – Ekuin Solok 0.3
PT RAP Jakarta 0.5
PT Indobiofuels-Hiswana Dumai 150.0
PT Anugerahinti Gemanusa (Eterindo) Gresik 80.0
PT Bio Energi Nusantara Serang 150.0
PT BDF Plantation Morowali 27.0
PT Wilmar Bioenergi Indonesia Dumai 252.0
PT Biodiesel Indonesia Jakarta
Darmex Oil
Golden Hope
Listed in BKPM
PT Asianagro Agungjaya Marunda 100.0
PT Wahana Abdi Tirtatehnika Sejati Bogor 30.0
PT Sari Dumai Sejati Bengkalis 100.0
PT Musi Mas Medan 100.0
PT Karya Pradjona Nelayan Medan 100.0
PT Indo Bio Fuels Muaro Jambi 150.0
PT Amarta Trans Nusantara Kupang 1200.0
Source : various data

13
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 Plantation 2007 2008 2009 2010 Total
1 Palm oil 473.265 473.265 473.265 473.265 1 893 060
2 Jatropha 341.000 345.000 360.000 375.000 1 461 000
curcas
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.

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