November 25, 2016 / 3:31 AM / 3 years ago

UPDATE 2-Palm oil demand from Indonesia biodiesel sector to surge by 2020 -govt agency

* Sees palm demand from biodiesel sector at 10.6 mln T by
2020
    * Indonesia pushing to boost biodiesel usage
    * Govt targets 90-pct increase in unblended biodiesel
consumption
    * Should support palm oil prices

 (Adds biodiesel consumption targets)
    By Emily Chow
    NUSA DUA, Indonesia, Nov 25 (Reuters) - Indonesian demand
for crude palm oil (CPO) for use in biodiesel will grow nearly
70 percent by 2020, a government agency said on Friday, as the
price gap with conventional diesel narrows and more subsidies
for blending become available.
    Indonesia, the world's top producer of palm oil, is pushing
to increase usage of biodiesel to cut its oil import bill and
curb greenhouse gas emissions.
    Its so-called B20 programme requires a minimum 20 percent
blend of bio content in diesel fuel this year, up from 15
percent in 2015.
    The biodiesel sector's appetite for palm oil will increase
to 10.6 million tonnes by the start of the next decade from 6.3
million tonnes forecast for this year, said Bayu Krisnamurthi,
chief executive of the Indonesia Estate Crop Fund.
    "Looking forward, we calculated that by 2020, 26 percent of
palm oil will go to biodiesel, so biodiesel becomes the new
demand for the palm oil industry," Krisnamurthi said at a palm
conference in Bali on Friday.
    The fund is a government agency in charge of collecting palm
oil levies to finance biodiesel subsidies in the country.
    "The gap is getting thinner," said Krisnamurthi, referring
to the spread between prices for biodiesel and conventional
diesel coming down by around 30 percent this year as oil prices
 strengthened.
    The palm industry hopes the drive towards biodiesel will
provide underlying support for prices for the edible oil
, which hit a four-year high on Thursday amid a
forecast decline in Indonesia's palm oil output. 
    Meanwhile, the country is targeting a 90 percent increase in
unblended biodiesel consumption in 2017 to 5.5 million
kilolitres from an estimated 2.9 million kilolitres this year,
an energy ministry official said.
    The 2017 target is "with the assumption that there is an
expansion of subsidies", Dadan Kusdiana, secretary of the
renewable energy directorate, told reporters on Friday.
 
    Indonesia started collecting a levy on its palm oil exports
in July 2015 - $50 per tonne for crude palm oil and $30 for
processed palm oil products - and uses part of that to help fund
biodiesel subsidies. 
    Levies collected by the Indonesia Estate Crop Fund would
also need to increase to pay for additional biodiesel subsidies,
Kusdiana said, adding that his office had proposed an
incremental increase.
    The fund is targetting a 14 percent increase in levies
collected in 2017. 
    Below is a table of forecast demand for CPO from Indonesia's
biodiesel industry over the next four years, based on data from
the Indonesia Estate Crop Fund.
   
 2016   6.3 million tonnes
 2017   6.5 million tonnes
 2018   6.7 million tonnes
 2019   7 million tonnes
 2020   10.6 million tonnes
 ($1 = 13,570 rupiah)

 (Reporting by Emily Chow in NUSA DUA and Wilda Asmarini in
JAKARTA; Writing by Fergus Jensen; Editing by Joseph Radford)
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