APPEC: Indonesia's move beyond B50 to require new biodiesel capacity: Wilmar

Indonesia's ambitions to raise its palm oil-based biodiesel blending mandate beyond B50 will require additional production capacity, with new investment depending on project economics, said Rahul Kale, Wilmar's group head of biofuels, at APPEC 2026.

"I think the challenges will come on B60, which is essentially capacity-driven," Kale said during a panel discussion on Sept. 9 in Singapore.

"Even at B50, we're starting to edge towards a very high utilization of existing capacities in Indonesia," he said, adding that a key question would be whether profitability under the biodiesel program is sufficient to support the investments needed to reach higher blend mandates.

Indonesia formally launched its B50 program on July 1, raising biodiesel blending in the public-service-obligation diesel pool to 50%, while the non-PSO segment remains at B40. The move formed part of a broader push by President Prabowo Subianto to reduce fuel imports and improve energy security.

S&P Global Energy Horizons estimates Indonesia's domestic biodiesel demand will rise to 13.85 million metric tons in 2026, from 13.2 million mt previously, following the accelerated implementation of B50. However, biodiesel production quotas were largely unchanged for 2026, at 15.646 million kl, equivalent to about 13.77 million mt, suggesting limited room for demand growth without additional capacity.

Indonesia is already the world's largest biodiesel-consuming country outside the ethanol sector, Kale said, estimating the country's biofuels mandate at around 17 million mt annually.

The comments come against a backdrop of expanding global biomass-based diesel demand, which S&P Global Energy projects will continue to grow, exceeding total production in 2027, with Indonesia remaining one of the largest contributors to demand growth.

Supportive economics

Despite concerns about future capacity requirements, Kale said current biodiesel economics support the existing program.

"Gasoil is more expensive than biodiesel, so there is absolutely no issue in terms of sustaining where we are," he said.

The POGO spread, which measures the difference between Bursa Malaysia Derivatives Crude Palm Oil and ICE Gasoil Singapore MOC, stood at a minus $123.25/mt on Sept. 10, down from 2026's high of $424.88/mt on Jan. 27, based on Platts assessments.

Indonesia's biodiesel mandate is funded through levies and duties on palm oil exports. The mechanism compensates producers when biodiesel is more expensive than conventional diesel, helping maintain blending economics.

"We're speaking of the most successful biofuels program in the entire world," Kale said, describing Indonesia's scheme as an industry-supported model.

According to Kale, palm oil export levies collect roughly $2.5 billion annually and currently support a biodiesel mandate of about 17 million mt, roughly half of which is subsidized.

Food vs fuel

Higher biodiesel consumption is expected to divert more palm oil into domestic use, potentially reducing export availability. However, Kale argued that biofuel mandates ultimately encourage additional agricultural investment and production growth.

"I'd encourage everybody to see biofuels as a food reserve rather than anything else," he said.

Without a strong demand signal from biofuel policies, adding another 1 million mt of palm oil production could take five to seven years, he said. Biofuel demand has helped underpin investment across global vegetable oil markets, supporting long-term supply growth.

Ethanol opportunities

Separately, Kale said Wilmar is evaluating opportunities in Indonesia's emerging ethanol sector, including pathways that utilize biomass feedstocks and sugar-processing side streams.

Wilmar already participates in ethanol mandate programs in India and Australia.

"We participate in ethanol mandates in India and Australia to some extent. Indonesia, we definitely consider both from biomass and from sugar side streams," Kale said.

Platts assessed Ethanol CIP Philippines at $636.33/cubic meter on Sept. 10, up 66 cents/cubic meter day over day.