RI moving fast on biofuel development

Ika Krismantari, The Jakarta Post, Jakarta

Indonesia is laying the foundations to become one of the world's top biofuel producers in the coming years, with 59 energy firms and institutions inking 58 agreements Tuesday as their preliminary commitments to investing US$12.4 billion in the renewable energy sector.

The biggest single investment will come from China's major energy firm, CNOOC, which will team up with Sinar Mas Agro Resources and Technology and Hong Kong Energy to invest a total of $5.5 billion in the development of plantations covering an area of about 1 million hectares in Papua and Kalimantan.

Other major deals include one signed by Malaysia-based Genting Biofuels Asia for an investment of $3 billion, and another for a joint Indonesian-Malaysian venture involving an investment of $1 billion.

"We hope that we can produce 200,000 barrels of oil equivalent in biofuels per day by 2010," the chairman of the government's biofuel development committee, Alihilal Hamdi, said.

Alhilal said he was optimistic about the future of biofuel energy in Indonesia, saying that many companies, most of them local, were set to start producing biodiesel and bioethanol later this year.

Among them were Riau-based Wilmar Energy, which was set to produce one million tons of biodiesel by the end of this year, making it among the world's largest biodiesel producers.

Meanwhile, the Sugar Group would start production in March and Medco Bioetanol by the end of this year.

At present, biodiesel and bioethanol producers included the Eterindo Group, which produced 120,000 tons of biodiesel per year, Bumi Asih and Platinum producing 30,000 tons of bioethanol per year, and Mulindo Raya Industrial producing 10,000 tons of bioethanol per year.

Alhilal also listed several local governments, including those of Papua, Pacitan in East Java and Wonogiri in Central Java, that had joined forces with state-owned firms to develop biofuel feedstock plantations in their respective regions, which are major producers of palm oil, cassava and sugarcane -- the basic feedstocks for bioethanol and biodiesel production.

The government has said it plans to designate up to 6.5 million hectares of uncultivated land for the development of biofuel-feedstock plantations in an effort to produce enough biofuel by 2010 to replace 10 percent of the country's total oil-based fuel consumption -- which reached 70 million kiloliters last year.

In the 2007 budget, the government set aside Rp 1 trillion to cover the cost of subsidizing interest payments on agriculture-related loans and the cost of procuring seedlings, with another Rp 10 trillion being earmarked for improving agricultural infrastructure.

Tuesday's signing ceremony also involved a number of financial firms, including local banks, which have committed themselves to providing a total of Rp 50 trillion (US$5.4 billion) in loans to support the country's green energy fund.

The banks, comprising Bank Rakyat Indonesia, Bank Mandiri, Bank Bukopin, the West Sumatra regional development bank and the North Sumatra regional development bank, have given commitments to provide loans of up to Rp 25 trillion for the development of plantations and Rp 25 trillion for the building of processing plants.

Alihilal added that under the loan scheme, the banks would provide loans carrying an effective fixed interest rate of 10 percent to small plantation owners cultivating crops of oil palm, cocoa and rubber, and 14 percent for the building of processing plants.
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