Indonesia targets sugarcane as key feedstock for E20 ethanol fuel blend

Indonesia is fast-tracking a plan to produce a 20% ethanol fuel blend using domestically grown sugarcane, with President Prabowo Subianto ordering relevant ministries to prepare land and processing infrastructure within two years.

The government identified sugarcane as the most viable feedstock for the E20 program after ruling out corn and cassava as unsuitable for mass-scale mechanized production, according to a Sept. 17 release from Office of Assistant to the Deputy Cabinet Secretary for State Documents. Coordinating Minister for Food Affairs Zulkifli Hasan announced the directive following a limited cabinet meeting at Merdeka Palace in Jakarta on the same day.

"The President presided over the limited meeting," Hasan said. "We discussed the target to produce at least E20 within the next two years. Therefore, the Minister of Agriculture was ordered to prepare the plans, including land."

The push toward E20 carries direct implications for Indonesia's gasoline import demand. If realized, a 20% ethanol blend across the country's fuel pool would require a substantial ramp-up in domestic ethanol output, potentially displacing a significant volume of imported gasoline or blending components.

Indonesia's ethanol output stood at just 160,946 kiloliters in 2024, according to industry body Apsendo, while a 10% blending program alone would require 1.4 million kiloliters annually, nearly nine times that figure.

Land and industry

The government is preparing approximately two million hectares of sugarcane farmland spread across Java, Sumatra, Kalimantan and Papua, according to Hasan. Sovereign wealth fund Danantara has been tasked with developing the ethanol processing industry to support the program.

"It turns out that sugarcane is the most viable source for ethanol conversion," Hasan said. "We are preparing approximately two million hectares of land, drawing from locations outside of Java, on Java, and on Sumatra. Subsequently, Danantara will develop the industry. We must work hard over the next two years to assess the progress. We need to be capable of producing E20."

The minister said the government has mapped regions with sugarcane farming potential and confirmed that the E20 blend will be sourced entirely from domestic production. He added that the long-term ambition extends beyond E20, with E50 cited as an eventual target, mirroring the trajectory of Indonesia's biodiesel program.

Hasan said the E20 would come entirely from domestic production.

"We will gradually move toward E50, as we did toward B50," Hasan said. "However, we must first aim for E20. In the long run, we are eyeing E50."

Indonesia implemented a 5% ethanol blend in gasoline, known as E5, starting in July 2026, alongside the world's highest biodiesel blending mandate of 50%, or B50, which also took effect in July.

The latest announcement suggests Jakarta is seeking to accelerate its bioethanol rollout well beyond the schedule set in an April decree, which requires fuel retailers to blend ethanol at a minimum of 5% over 2026-27, rising to 10% between 2028 and 2030, according to the energy and mineral resources ministry.

The first phase of the E5 mandate covers Jakarta, East Java, West Java, Central Java, Yogyakarta, Bali and Lampung, according to the Ministry of Energy and Mineral Resources.

President Prabowo had also asked the agriculture ministry to speed up sugarcane replanting programs to be completed within two years, rather than the previous four-year target, and to set up at least 30 new bioethanol plants.

Asian ethanol prices for both fuel-grade and industrial-grade ethanol climbed to their highest levels in three months, supported by higher US ethanol futures, origin prices and freight rates, according to Platts assessments from S&P Global Energy.

Platts assessed the Asian fuel ethanol marker at $675/cubic meter CIF Philippines on Sept. 18, up $28.33/cubic meter month over month. The assessment was the highest level since May 26, when it stood at $677/cubic meter CIF Philippines.

Platts industrial grade B ethanol climbed to $632/cubic meter CFR Ulsan on Sept. 18, up $28/cubic meter month over month to the highest level since May 14, when it stood at $643/cubic meter CFR Ulsan.