Indonesian government eyes B45 biodiesel as B50 faces delays; B40 demand exceeds projections

Indonesian government is starting to question whether the mandatory 50% biodiesel (B50) program can be implemented in 2026, as originally planned. In response to ongoing feasibility concerns, the government is now exploring the possibility of launching a 45% biodiesel blend (B45) as an interim step.

The Ministry of Energy and Mineral Resources (ESDM) has not yet completed its technical and economic assessments of B50. As a result, the outlook for introducing diesel fuel with 50% biofuel content remains uncertain.

Eniya Listiani Dewi, Director General of New, Renewable Energy and Energy Conservation (EBTKE) at ESDM, stated that the ministry is still working toward implementing B50 next year. However, B45 has emerged as a realistic alternative amid incomplete feasibility studies.

 “We’ve never conducted specific tests for B45, but studies are underway on the additional 5% blend. We’ve received the initial report, but there are still many critiques to address,” she said on Thursday (Sept 18).

She added that the government is continuing to prepare the technical framework for B50, though the final decision will rest with the Minister of Energy and Mineral Resources.

At the same time, Eniya acknowledged that calculations are still being finalized regarding the volume of fatty acid methyl ester (FAME) required for B50 production. FAME is a biofuel derived from the transesterification of palm oil with methanol.

Debates are still ongoing over the composition of B50—whether it will consist entirely of FAME or include a blend of 40% FAME and 10% hydrotreated vegetable oil (HVO).

 “As for whether we begin B50 in 2026, that has not yet been decided. We need to reassess exactly how much FAME would be needed,” she explained.

Eniya estimated that if B50 were composed entirely of FAME, demand could reach approximately 20 million tons—around 2 million tons more crude palm oil (CPO) than what is needed for the current B40 mandate, which uses 15 million tons of FAME.

She also noted that five new biodiesel plants would be required to support full-scale implementation of B50. Of those, three are currently under construction.

 “We need five large-scale plants, each with a capacity of 1 million kiloliters. That’s what’s required,” Eniya said.

B40 demand exceed projections

Meanwhile, the government is seeing unexpectedly high demand for B40 biodiesel this year—a blend of 60% diesel and 40% palm-oil-based biofuel. The official allocation for B40 is set at 15.62 million kiloliters (kl) in 2025, a 16.48% increase from the 13.41 million kl allocated under B35 in 2024.

However, Eniya revealed that actual demand may exceed the initial quota as various industrial sectors are submitting additional requests.

 “There is a possibility it will exceed the target. Our volume is 15.6 million kl. By December, there are already requests to increase the B40 volume,” she said following the 11th Indonesia International Geothermal Convention & Exhibition (IIGCE) 2025 on Wednesday (Sept 17).

She did not provide exact figures for the potential increase, stating that the Directorate of EBTKE is still waiting for official fuel demand data from the Directorate General of Oil and Gas (Ditjen Migas).

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 “Some are asking for 100,000 kl, some for 200,000 kl. This needs evaluation. I’ve already sent a letter to Ditjen Migas to assess the actual demand. But our year-end projection shows an increase,” Eniya said.

Of the total 15.62 million kl quota for B40, only 7.5 million kl will be subsidized through the Palm Oil Plantation Fund Management Agency (BPDPKS), which is financed by palm oil export levies. The subsidy requirement for B40 this year is now estimated at Rp 51 trillion—higher than the ministry’s original projection of Rp 35.5 trillion.

To cover the shortfall, the ministry has proposed an additional Rp 16 trillion to accommodate unpaid subsidies carried over from 2024. Future subsidy disbursements will depend on the price gap between CPO and petroleum diesel.

CPO supply outlook and industry concerns

Tungkot Sipayung, Executive Director of the Palm Oil Strategic Policy Institute (ASPI), projected that Indonesia’s CPO production will reach around 48 million tons this year and increase to 50 million tons in 2026.

Under a B50 scenario, biodiesel production would consume about 18.5 million tons of CPO. Domestic food consumption is estimated at 6 million tons—lower than the initial 8 million-ton forecast—while oleochemical demand is projected at 2–3 million tons.

 “This means domestic consumption next year could reach around 27–28 million tons,” Tungkot said to Bisnis Indonesia.

With projected production at 50 million tons, Indonesia would still be able to export around 22 million tons of CPO. However, increased domestic use for biodiesel could reduce export volumes, impacting government revenues and limiting available funds for biodiesel subsidies.

 “From a supply standpoint, there’s no issue. But reduced exports will affect the government’s ability to finance the biodiesel incentive program,” Tungkot noted. “If B50 is implemented, then the subsidy mechanism must be revised. The burden shouldn’t fall entirely on the palm oil industry.”

Industry capacity and cost Pressures

Despite these concerns, the Indonesian Biofuel Producers Association (Aprobi) remains confident in its ability to support a potential B50 rollout. Aprobi Secretary General Ernest Gunawan said that if Indonesia transitions from B40 to B50, feedstock demand will rise to 17–18 million tons.

 “With Aprobi’s installed production capacity of around 19.6 million kiloliters, B50 remains technically feasible,” he said to Bisnis Indonesia.

Still, high biodiesel prices remain a major challenge. According to Putra Adhiguna, Managing Director of the Energy Shift Institute, the most pressing issue is the increasing cost of subsidies, as FAME is significantly more expensive than diesel.

 “The BPDPKS will be under growing pressure to cover the widening cost gap,” he said.

He warned that higher biodiesel prices could negatively impact user industries such as mining, which are sensitive to fuel price fluctuations.

For reference, the current B40 subsidy is projected to cost Rp 35.5 trillion for 2025, covering the public service obligation (PSO) portion of 7.55 million kiloliters.

Putra argued that large-scale subsidies—ranging between Rp 30 trillion and Rp 40 trillion—could be more effectively allocated to support long-term structural reforms in the transport sector.

 “Instead of being burned away, this budget could be used to accelerate the adoption of electric vehicles, which would also help reduce Indonesia’s dependence on imported fuel,” he concluded.

Editing by Reiner Simanjuntak