The Indonesian government agreed to set a pricing formula for biodiesel and bioethanol based on international prices to help boost the use of green fuel, Evita Legowo, director general of oil and gas at the energy and mines ministry, told reporters.
Argus said the new pricing formula will be a combination of its average monthly palm oil methyl ester (PME) fob South East Asia (Indonesia, Malaysia and Singapore) price and the export-based average monthly price issued by the Indonesian Department of Trade.
Argus provides daily fob price assessments for palm oil methyl ester meeting European EN14214 specifications loading from Indonesia, Singapore, and Malaysia. These price assessments are available in its daily Argus Biofuels report.
Palm oil methyl ester is made from crude palm oil and other inputs, and is typically blended with motor diesel. Indonesia is the world’s top producer of palm oil. The country is expected to produce about 20 million tons of palm oil in 2009, up from less than 19 million tons last year.
The Indonesian government introduced a mandate last November for a blend of 1% palm-based biodiesel in transportation fuels and a blend of 2.5% and 0.25% palm-based biodiesel for industry and power plant uses respectively. This mandate will be increased to between 2.5% to 3% for transportation, 5% for industry and 1pc for power plants by 2010.
Argus has been assessing prices for a range of biofuel components since January 2007. Its European prices are being used as the benchmark indicator for FAME zero and rapeseed biodiesel swaps and physical transactions.