UPDATE 1-Indonesia B40 biodiesel plan back on track as crude oil prices pick up

(Adds background, comment)

JAKARTA, July 30 (Reuters) - Indonesia’s plans to raise the bio-content of its palm oil-based biodiesel to 40% - known as B40 - is back on schedule with a target for implementation by July 2021, Coordinating Minister for Economic Affairs Airlangga Hartarto said on Thursday.

Indonesia, which has been increasing the palm oil content of its biodiesel since 2015, wants to cut its energy imports and increase consumption of palm oil.

“I am targeting the implementation of B40 .... to be carried out by July 2021,” Hartarto said in a televised interview with CNBC Indonesia.

The plan for implementation next year was expected to be delayed due to low crude oil prices making palm a less attractive option for biodiesel feedstock.

But an improvement in crude oil prices means the B40 plan is back on track.

“Oil prices have begun to recover ... we hope the gap will increasingly narrow so we can still support funding,” Eddy Abdurrachman, chief executive of the Estate Crop Fund, which provides subsidies for biodiesel, said in the same interview.

B40 will also be produced using a different formulation, combining 30% fatty acid methyl ester (FAME) and 10% “green diesel” made out of palm oil with conventional diesel, Hartarto said.

Indonesia’s makes B30 biodiesel with a mix of 30% FAME with regular diesel, but it has faced resistance from consumers who say it is not compatible with their vehicles.

“This will be better because it has a higher cetane number,” Budi Santoso Syarif, deputy chief executive of Kilang Pertamina Internasional, a subsidiary of state oil firm PT Pertamina, said of the new formulation.

Although biodiesel promises lower emissions, the use of palm oil as a feedstock raises concern about deforestation in the clearance of land to grow it. The European Union is planning to phase it out as fuel for transport. nL4N28S2VV] (Reporting by Bernadette Christina Munthe and Fathin Ungku Editing by Jason Neely, Robert Birsel)