Page 2 of
2 European blowback for
Asian biofuels By Bill Guerin
Indonesia's national fuel
consumption by 2010, potentially saving the
national coffers as much as $10 billion a year in
fossil-fuel imports.
Major industrial and
energy conglomerates have recently lined up behind
Jakarta's biofuel gambit. PT Bakrie Sumatera
Plantations, owned by the powerful Bakrie family
represented in government by Welfare Minister
Aburizal Bakrie, is building the first privately
run
bio-diesel plant in a $25
million joint venture with local construction firm
PT Rekayasa Industri. PT Astro Agro Lestari and PT
Asian Agri have also announced plans to build
bio-diesel plants.
With some 75 bio-diesel
projects either operational or in the pipeline,
Malaysia already has a considerable head start on
Indonesia. Golden Hope Plantations, Genting BhD
and Sime Darby Bhd are the major Malaysian biofuel
players, some of which have aggressively expanded
their franchises into Indonesia-based plantations.
Genting Biofuel Asia Pte Ltd, a subsidiary of
Genting Bhd, has earmarked as much as $3 billion
for different types of biofuel-production plants,
using either crude palm oil, sugarcane or jatropha
beans as sources.
Malaysia is already
exporting major consignments of bio-diesel to
Europe, and with the bigger existing investments
in biofuel production, it could be hit hard if the
EU reverses course and imposes trade sanctions on
palm-oil-derived biofuels. Indonesia, on the other
hand, so far only sells biofuel for the domestic
market, but the various planned or half-built new
production plants are geared to meet the
government's target of exporting 12 billion liters
(75.4 million barrels) of biofuel by 2010.
Europe could potentially switch from
importing cheaper palm-oil-derived biofuels to
using more expensive, locally produced
rapeseed-based fuels, which currently provide 80%
of the EU's biofuel needs. Currently bio-diesel
demand consumes just about half of the EU's total
rapeseed production, but anticipated higher demand
has recently pushed rapeseed futures in global
commodity markets to a record premium over other
oilseeds.
Significantly, up to 90% of
bio-diesel's cost is related to the price of
feedstock. Analysts have said palm-oil-produced
bio-diesel is only commercially viable if global
crude-petroleum prices stay around $58 per barrel
and palm-oil prices remain below $422 per ton.
Recent global commodity price fluctuations have
drawn the economics of palm-oil-based biofuel into
question. While petroleum is now being quoted at
about $50 a barrel, down more than 34% from a
record high last July, palm-oil prices have risen
to about $554 a ton, gaining about 40% in 2006.
If EU demand for palm-oil-based biofuel
dries up, as some analysts predict, Indonesia and
Malaysia could try to farm their stocks to Japan,
Australia and other fossil-fuel-importing
Asia-Pacific markets, where using more biofuels is
just now coming into vogue. That may or may not be
a viable business plan, however. In Indonesia,
Pertamina, the country's sole
government-authorized buyer and distributor of
biofuels, currently sells about 1,310 kiloliters
of bio-diesel and bio-gasoline per day at fuel
stations across Jakarta.
The state company
already claims that it is losing Rp3 billion ($68
million) a month on its bio-diesel operations, and
it has reportedly warned the government that it
will stop distributing and selling bio-diesel in
April if complex issues involving fuel subsidies
and cross-subsidies are not soon resolved.
Foreign energy companies will soon be
allowed to buy biofuel from producers and retail
it back to the public, with the caveat that it is
used only for local transport purposes. But it is
unclear whether big Western companies will -
similar to the EU - soon be forced to rethink
their positions on Indonesian- and
Malaysian-produced biofuels as well.
Bill Guerin, a Jakarta
correspondent for Asia Times Online since 2000,
has been in Indonesia for more than 20 years,
mostly in journalism and editorial positions. He
specializes in Indonesian political, business and
economic analysis, and hosts a weekly television
political talk show, Face to Face,
broadcast on two Indonesia-based satellite
channels. He can be reached at
softsell@prima.net.id.
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