UPDATE 1-Indonesian palm group to seek review of export levy if palm prices top 4,000 rgt

(Recasts with high palm prices, adds quotes from Indonesian official)

KUALA LUMPUR, Jan 7 (Reuters) - The Indonesian Palm Oil Association (GAPKI) said on Thursday it would ask the government to reformulate its biodiesel blending rates or revise the export levy if palm oil prices maintain their meteoric rise.

Malaysia’s benchmark crude palm oil prices started the year at near 10-year highs, trading at around 3,800 ringgit a tonne ($950.81) and further widening its premium over crude oil, making it a less sustainable option for biodiesel feedstock.

Togar Sitanggang, vice chairman of the GAPKI, said he will request the government to rethink its biodiesel blending rate or export levy if palm prices reach 4,000 ringgit a tonne.

“I will talk about this openly in the market, to the government of Indonesia ... we need to maybe reformulate the export levy because the spread is getting wider,” he said in an online conference.

Indonesia, the world’s top palm oil producer, recently increased export levies to finance its B30 biodiesel programme after the COVID-19 pandemic triggered a collapse in crude oil prices, and delayed plans to raise the bio-content of palm oil-based biodiesel to 40%.

“I don’t really see the B40 (happening) so fast, even 2022 would depend on the economic and the pandemic situation in 2021,” Togar said.

The B30 mandate stipulates that diesel in Indonesia contain 30% fatty acid methyl ester (FAME) made out of palm oil.

B40 fuel, though, may be produced using a different formulation, either 40% FAME, or 30% FAME combined with 10% hydrogenated vegetable oil (HVO), Togar said.

Testing of the new formulation has been slowed by the pandemic, he said.

Indonesia’s biodiesel blending capacity was 10.2 million tonnes in 2020, and that is set to rise to 12.2 million tonnes this year and to 13.2 million tonnes in 2022, Togar said.

The Southeast Asian nation’s biodiesel consumption this year is expected to rise to 8 million tonnes from 7.2 million tonnes in 2020, Togar said.

At a separate conference, Energy and Mineral Resources Minister Arifin Tasrif said Indonesia consumed 8.46 million kilolitres of biodiesel in 2020 and aims to produce 9.2 million kilolitres of FAME this year. ($1 = 4.0250 ringgit)

Reporting by Mei Mei Chu; additional reporting by Bernadette Christina Munthe; Editing by Tom Hogue