Indonesia plans East Java, Kalimantan methanol plants for B50 push

Indonesia will build methanol plants in East Java and East Kalimantan to supply 2.5 million metric tons/year of methanol for its newly launched B50 biodiesel program, as the government seeks to avoid replacing diesel imports with methanol imports and to strengthen domestic supply chains for renewable fuels.

The government will lay the groundwork in July for a gas-based methanol plant in Bojonegoro, East Java, and will also develop a coal-based facility in East Kalimantan as part of its coal downstream strategy, Energy and Mineral Resources Minister Bahlil Lahadalia said, Antara News reported July 9, after the launch of the mandatory B50 biodiesel program in Karawang, West Java.

"The need for methanol for B50 is about 2.5 million tons per year. The next step is to push for the immediate development of the methanol industry," Lahadalia said.

The move addresses a key supply challenge for Indonesia's B50 program, which raises the mandatory palm oil-based biodiesel blend in diesel to 50% from 40%. Methanol is a critical feedstock in producing fatty acid methyl ester, the biodiesel component blended with petroleum diesel.

Indonesia's appetite for imported diesel will decline under its newly launched B50 biodiesel program, which requires diesel fuel to contain 50% palm oil-based biodiesel, as Southeast Asia's largest economy seeks to reduce fuel imports and strengthen energy security, Lahadalia said.

Indonesia consumes about 38 million-40 million kiloliters of diesel annually and imports about 3 million-4 million kiloliters/year, he said.

Palm oil demand rises

The B50 program increases demand for FAME to 16.7 million-18 million kiloliters from 14.9 million kiloliters under B40, while boosting CPO requirements to 15.2 million-16.3 million mt from 13.6 million mt, Lahadalia said.

The increased CPO demand would provide market certainty for palm oil farmers, particularly when global prices weakened, he said.

"If the price of CPO abroad is low and other countries don't want it, we'll set aside some for the B50 program. This will increase prices for farmers, improve industries, and improve the country's prosperity," Lahadalia said.

President Prabowo Subianto inaugurated the mandatory B50 biodiesel program on July 9, making Indonesia the first country to implement such a high-level biodiesel mandate.

The Energy and Mineral Resources Ministry said the program followed six months of technical trials on passenger vehicles, heavy mining equipment, agricultural machinery, trains, ships, and power plants. The trials found that B50 performed better than the current B40 blend in several tests, including extending fuel filter life.

Compared with B40, the government projects that B50 will increase annual foreign exchange savings to 170 trillion rupiah ($10.5 billion) from 133.3 trillion rupiah and reduce CO2 emissions to 44.46 million mt from 39.66 million mt, according to the ministry's statement.

Platts, part of S&P Global Energy, assessed used cooking oil methyl ester FOB Straits at $1,265/mt on July 13, down $5/mt from July 10. UCOME FOB North China was assessed at $1,195/mt on July 13, down $5/mt from July 10.