JAKARTA, March 12 (Reuters) - Indonesia’s Pertamina plans to float a third tender to buy palm oil for blending into biodiesel, an official of the state-owned oil firm said, signalling a strong start to the nation’s drive to step up usage of the alternative fuel.
Southeast Asia’s biggest economy and the top producer of palm oil introduced a new regulation in August, aimed at burning more palm-based biodiesel and cutting its oil import bill.
Although analysts were skeptical that it could be fully implemented due to logistical hurdles in more remote eastern provinces, even a partial success has the potential to lift palm prices and narrow Indonesia’s current account deficit.
Pertamina will issue tenders for a total 5.3 million kilolitres of palm-based biodiesel for 2014 and 2015, said Ali Mundakir, the company’s vice president of corporate communications, with 2.381 million kilolitres already procured.
“We have procured 2.381 million kilolitres through two tenders or 45 percent of the target,” Mundakir said. “To procure the rest, we plan to hold a third tender in March or April.”
The third tender would feed biodiesel demand in eastern Indonesian provinces, said Mundakir, which may prove more difficult logistically than the first two tenders.
To date, Singapore’s Wilmar International and unlisted Musim Mas are among the palm firms to win Pertamina’s tenders, said Mundakir, without mentioning specific volumes.
Jakarta’s energy ministry raised the minimum bio content in diesel to 10 percent, up from levels of 3-10 percent. For the power industry, the minimum was doubled to 20 percent.
The Indonesian Palm Oil Association last week said Indonesia’s use of palm oil for blending into biodiesel is likely to fall 41 percent short of its target due to a rally in prices of the vegetable oil.
Malaysian palm oil futures surged to an 18-month high of 2,916 ringgit per tonne this week, partly due to expectations that dry weather in the Southeast Asian region may dent palm oil production. (Reporting by Yayat Supriatna; Writing by Michael Taylor; Editing by Muralikumar Anantharaman)