President Joko "Jokowi" Widodo inaugurates a biodiesel factory owned by Jhonlin Agro Raya in Tanah Bambu, South Kalimantan, on Thursday. (Photo courtesy of Presidential Secretariat)

Biodiesel to Cut Indonesia's Oil Fuel Import by $3.9b in 2021

BY :JAKARTA GLOBE

OCTOBER 22, 2021

Jakarta. Indonesia is on course to cut diesel fuel imports worth $3.9 billion this year thanks to the country's growing biodiesel industry, validating President Joko "Jokowi" Widodo's decision to rely on biodiesel for national energy security.

"If we can produce our biodiesel in Indonesia…our imports will drop drastically," Jokowi said during the inauguration of the biodiesel factory owned by Jhonlin Agro Raya on Thursday. 

Indonesia's current account has been in deficit in the past decade, partly because it has to import oil fuel like kerosene and diesel from abroad to meet its growing domestic demand.

To reduce the oil fuel imports, Indonesia started mandating B-20 biodiesel, a mix of diesel oil fuel with 20 percent biodiesel produced from crude palm oil, in 2016 and increased it to B-30 last year.

Jokowi said the program had shown results. Indonesia's biodiesel industry is estimated to cut Rp 56 trillion ($3.9 billion) in import costs this year, up 47 percent from Rp 38 trillion in 2020. 

Apart from reducing imports, Indonesia, the world's largest palm oil producer, also benefit from the program by creating a sustainable demand for the commodity. 

Jokowi said the biodiesel industry would maintain crude palm oil (CPO) price stability. As a major CPO-producing country, Indonesia should not have to follow market-set prices of palm oil. Instead, the country should be able to control the price of CPO within the market. 

"We should be able to control it in this way: when the price of CPO exports goes up, we can export. If not, we use the oil for ourselves. We must have that alternative," Jokowi said, explaining the planned allocation of CPO. This strategy will be carried out to ensure the stability of demand for oil palm farmers and positively affect the wider community's welfare.

Moreover, the construction of the biodiesel plant will also create many employment opportunities. "This is what the community has been waiting for. Building a smelter creates jobs. Building a biodiesel factory creates jobs," said Jokowi.

During the event, Jokowi also expressed appreciation towards the Jhonlin Group who built the biodiesel factory to industrialize CPO to biodiesel. This will increase the value of CPO and create more derivative products from the raw material. 

"We hope that in the future, there will be other companies that will start down streaming and industrializing their CPO into cooking oil, cosmetics, semi-finished goods, or finished goods," he said. 

This sentiment is echoed in other sectors as well. Recently, the government has stopped purchasing nickel exports because refining and processing plants can process nickel into semi-finished goods and finished goods. 

"We hope our raw materials can be processed into goods that have high value, such as with lithium batteries, batteries for electric cars," said Jokowi.

The same can be said for the copper industry. Last Tuesday, Jokowi inaugurated the groundbreaking for constructing the Gresik Smelter owned by Freeport Indonesia in East Java. 

"I'm thrilled with our progress with copper. Last week, we inaugurated the largest copper-processing smelter in the world. This smelter will transform copper into finished and semi-finished goods." Jokowi explained,

"Today, CPO becomes biodiesel."

To speed up industrialization and down streaming, Jokowi is committed to continuing to encourage domestic companies engaged in the natural resources or mining sector to process their extracted raw materials into semi-finished or finished goods.

"We will continuously encourage this so that our domestic companies can process everything from raw materials into semi-finished goods and finished goods," Jokowi said.

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