Biofuel producers reach FOB agreement with Pertamina

Biofuel producers in the country have reached an an agreement with state-owned oil and gas firm PT Pertamina to deliver the fuel commodity to the latter under a Free on Board (FOB) arrangement, Kompas daily reported Saturday.

Director General of New and Renewable Energy, Rida Mulyana was quoted as saying that the biodiesel producers will deliver the commodity on board Pertamina vessels, which will then ship the fuel to mixing facilities spread in other islands across the country.

He added that under the system, the producers agreed to the price formula set by Pertamina. The additional cost of shipping the biofuel to the mixing facilities will be bore by the government, Rida said.

Pertamina requires the biodiesel to be mixed with its automotive diesel product to meet the government?s 10 percent requirement. The company has conducted tender twice for the supply of a total of 6.6 million kiloliters of biofuel for two years, but given the current fluctuation in the palm oil market, not many producers are willing to engaged in such a long-term contract, Rida said.

So far, Pertamina has only been able to secure`1.75 million kiloliters of biofuel for 2014 supply, compared to the target of 3.3 million kiloliters, from a number of producers. (*)