Pertamina Asks for Examination of Biosolar Materials Price Mechanism
Monday, 30 October, 2006 | 17:24 WIB

Tempo Interactive, Jakarta: PT Pertamina (Persero) is asking that the government re-examine the price mechanism of biosolar raw materials such as fatty acid methyl ester (FAME).

The reason for this, according to Hanung Budya, Pertamina’s Deputy Director for Marketing and Trade, the price mechanism for processed palm oil which will be mixed with diesel fuel to become biosolar could cause the company losses.

According to him, sales of biosolar will follow the price of subsidized diesel fuel at Rp4,300 per liter.

“Meanwhile, the biosolar cost of production that the Pertamina has to bear is higher than its selling price,” Hanung told Tempo some time ago.

He explained that FAME's price is increasing in line with the international diesel fuel price.

The situation has occurred since the amount of countries that produce biofuel is increasing.

“Therefore, the control mechanism of FAME's price must be established if we intend to expand biosolar market,' said Hanung.

The request for this review, Hanung added, has already been delivered to the Executing Body of Oil and Gas, BP Migas, but is not has not yet been any answer.

The review, said Hanung, is important for Pertamina in order to re-market biosolar.

“We've not yet experienced losses. But profits from biosolar sales have decreased to around Rp40 per liter,” he said.

Hanung is of the opinion that there are several alternatives that the government may take.

First, the government could set the FAME' price at the same level as the international diesel fuel price.

Second, the government could set a price range for protecting FAME producers and buyers.

A third alternative could be that the government provides direct subsidies to FAME or biosolar producers.

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