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Indonesia: Regulation Mandates Proportion of Biodiesel in Diesel Fuel

(Sept. 30, 2013) Indonesia’s Ministry of Energy and Mineral Resources, in late August 2013, adopted a regulation that will require companies that sell diesel fuel in the country to include at least 10% biodiesel in their fuel mixes. The requirement must be met by January 2014. This regulation replaces one adopted in 2008 that had made the addition of biodiesel voluntary. (Amahl S. Azwar, Govt Forces Shell, Total to Boost Biodiesel Mix, THE JAKARTA POST (Sept. 23, 2013); Ministerial Regulation No. 25 [in Indonesian] (Aug. 28, 2013), Ministry website.)

The regulation will also apply to diesel fuel mixes used for industry and will impose a 20% minimum standard for fuel used in power plants. In addition, it requires that for gasoline sold for use in private vehicles, there must be at least 1% bioethanol. (Azwar, supra.)

At present, PT Pertamina, which is the state-owned oil and gas company, accounts for 97.3% of the petroleum market in Indonesia. Two foreign companies, PT Shell Indonesia (a subsidiary of Royal Dutch Shell) and PT Total Oil Indonesia (a subsidiary of France-based Total SA), are also in the market and will be subject to the new regulation. While spokespeople for both Shell and Total stated that they already have 2% biofuel in their diesel mixes, the Director General for Renewable Energy and Energy Conservation of the Ministry put the current figure at 1%. Gas stations will be periodically inspected, and those failing to meet the standards set in the regulation may be subject to suspensions of operations or revocations of their business licenses. (Id.)

The new regulation is reportedly part of the Indonesian government’s current economic policy. The measure is designed in part to reduce fuel imports, which will help with the trade imbalance and the weakening of the country’s currency, the rupiah. All the biodiesel will have to be locally sourced. (Id.; Mriganka Jaipuriyar & Anita Nugraha, Indonesia Further Tightens Biodiesel Mandate to Cut Gasoil Imports, PLATTS MCGRAW HILL FINANCIAL (Aug. 30, 2013).)