Jakarta, July 29 (ANTARA) - In the face of its depleting oil reserves and fluctuating world oil prices, Indonesia has launched an intensive biofuel production program aimed at cutting its fossil oil consumption by 10 percent in 2010.
President Susilo Bambang Yudhoyono showed serious attention to development of bio-energy when he convened a limited cabinet meeting in Magelang, Central Java, this month, to discuss national energy policies and bio-energy action plans.
Besides reducing dependence on fossil fuels, the cultivation of biofuel crops such as oil palm, cassava, sugar cane and jatropha curcas crops was also seen as a way to help boost local economies.
"The development of biofuel or bio-diesel will create more jobs, reduce poverty, develop cooperatives and small businesses and re-green denuded land," the President said.
In order to carry out the program, the Indonesian government decided to set up a national team in charge of formulating policies for the development of bio-diesel or biofuel program.
Chaired by former manpower minister Al Hilal Hamdi, the national team will formulate policies, including on matters relating to cultivation of land, infrastructure, processing, marketing and funding.
With the program, Indonesia expects to be able eventually to reduce the use of fossil fuel oils by 10 percent in 2010, namely using bio-fuel to replace premium, kerosene, diesel oil and fuel oils used to generate electricity.
According to Al Hilal Hamdi, the kind of plantations which would be developed to produce bio-fuel would include oil palm, jatropha curcas, cassava and sugar cane.
He said some 6.5 million hectares would be made available for the development of bio-fuel. Thus it would provide employment for about three million workers and boost rural economies.
Of the 6.5 million hectares, three million hectares will be developed for oil palm, 1.5 million hectares for jatropha curcas, 500,000 hectares of sugarcane and 1.5 million hectares for cassava.
The investment per hectare was estimated at Rp30 million for oil palm, Rp15 million for sugarcane, Rp3 million for jatropha curcas and Rp3.5 million for cassava.
Hilal said that the program needed an estimated investment of Rp100 trillion (US$10.8 billion) in the sector within the next five years.
The government also unveiled a crash program to build 11 biofuel plants, with production targets of 187 million liters next year and 1.3 billion liters by 2010, or equivalent to 3 percent of the country's total fuel consumption of 41 million kiloliters in 2005.
Therefore, up to 2010, the use of fossil oils for the transportation sector is expected to be cut by 10 percent and by 50 percent in the power generation sector.
With the reduction in the use of fossil oils, the foreign exchange that could be economized would reach some 10 billion dollars, Hilal said.
Besides, he added, Indonesia would also export some 10 to 12 kiloliters of bio-fuel. "With this program, arid lands could be cultivated and self-reliant villages could be developed," he added.
Funding
In order to make the program a success, the government called on the banking world to help provide funds for bio-energy development, including the cultivation of jatropha curcas, cassava and sugarcane.
"Banks are requested to invest in the cultivation of jatropha curcas, cassava, sugarcane so as at the same time green arid land and help boost rural economic growth," Minister/State Secretary Yusril Ihza Mahendra said after a meeting held at his office to discuss the development of alternative energy.
The government said it was optimistic that banks are potential institutions to provide funding. The government was seeing the possibility of raising Rp100 trillion from general banks to be allocated as loans to oil palm farmers.
"The funds are also available for cassava and sugar cane farming if it is commercial while the fund for development of jatropha curcas oil plantation will be made available by the government," Al Hilal Hamdi said.
According to the chief of the National Team for Bio-energy Development, the banks have asked for a government subsidy for the loans so that the farmers would only be required to pay around 10 percent interest.
Besides, the government is preparing fiscal incentives for investment, trade and research to expedite bio-energy development.
"We are preparing fiscal incentives such as tax holidays, tax allowances and reductions for research activities and value-added taxes," Hamdi said.
He said there were many companies that had expressed an interest to develop bio-energy including Sinar Mas, Argo Lestari, Molindo and PT HM Sampurna besides state-owned agro-companies and cooperatives.
Among foreign investors interested in it are CITIC from China, Itochu from Japan, Greenenergy from India and companies from the US and Italy. Japanese oil company Nippon Oil Corporation has also expressed interest to develop a bio-diesel plant in Jambi.
Besides, the Indonesian Cooperatives Board (Dekopin) was planning to construct jatropha curcas processing plants. Dekopin Chairman Adi Sasono said Dekopin would build the processing factories in an effort to produce an energy source that can replace fossil fuel oils.
"We are considering the building of jatropha curcas oil factories for instance in Sukabumi, West Java, which is near Jakarta," Adi Sasono said.
To make its program a success, the government called on the public not to hesitate to cultivate biofuel crops. It gave the assurance that it would absorb biofuel production no matter how much.
"We have two major stand-by buyers, namely state-owned Pertamina for the transportation sector and state power firm PLN for the electricity sector," Research and Technology Minister Kusmayanto Kadiman said.
(T.A014/A/HAJM/B/O001) 19:00/ ) (T.A014/A/A014/A/H-AJM/O001) 29-07-2006 19:48:34
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