Indonesia sets palm biofuel plant condition for jet purchases from US, France: minister

JAKARTA (Reuters) - Indonesia has asked for its companies to be allowed to build palm oil jet fuel plants in the United States and France as a condition for its airlines to buy Boeing Co and Airbus SE planes, its trade minister said.

FILE PHOTO - Indonesia's Trade Minister Enggartiasto Lukita arrives to attend the APEC Ministers Responsible For Trade meeting in Hanoi May 20, 2017. REUTERS/Hoang Dinh Nam/Pool

This marks the latest effort by the world’s biggest palm oil producer to find ways to help mop up output of the tropical oil, its second-largest export, that is increasingly unwelcome in the European Union (EU) and United States given environmental and competitive concerns.

Home to the world’s third-largest expanse of tropical forests, Indonesia faces pressure to limit destruction of forests, particularly growing on carbon-rich peatlands, that are at risk from rapidly expanding palm and mining sectors.

EU negotiators in June agreed to phase out use of palm oil in transport fuels from 2030 due to concerns over high indirect greenhouse gas emissions, while the United States in April placed an anti-dumping tariff of up to 341 percent on Indonesian biodiesels.

Indonesia’s trade minister, Enggartiasto Lukita, on Monday told reporters he had conveyed the country’s palm oil fuel plant requirement for jet purchases to the U.S. secretary of commerce during a visit to Washington in late July.

“We have asked that Indonesian companies be allowed to produce jet biofuel in the U.S.,” he said.

The aim is to source “all raw materials” for the plants from Indonesia, he added.

The United States has responded “positively” and Indonesia has also conveyed the same requirement to Airbus, he added.

Indonesian airlines rely on the U.S. and European aircraft makers to meet their demand for planes.

The same minister has previously threatened that Indonesia will stop buying Airbus planes if the EU implements a plan to curb palm oil use in biofuels, according to local media.

An Airbus spokesman declined to comment, while a Boeing spokesman was not immediately available for comment.

Calls to the media affairs center at the U.S. embassy in Jakarta went unanswered.

Garuda Indonesia, the country’s national carrier, has previously said it was postponing deliveries of Airbus and Boeing jets it has already ordered as it attempts to improve its financial position.

Rival Lion Air, which is privately owned, in April confirmed an order for 50 Boeing 737 MAX jets worth $6.2 billion at list prices.

Garuda and Lion declined to comment.

Reporting by Bernadette Christina Munthe, additional reporting by Jamie Freed in Singapore and Cindy Silviana in Jakarta, writing by Fransiska Nangoy; Editing by Himani Sarkar