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Govt faces difficulties in supplying materials for B20

29 October 2018

Touted as one of the government’s major efforts to reduce fuel imports, which contribute to pressure on the rupiah, the mandatory 20 percent biodiesel (B20) mix policy is facing logistics issues that are disrupting the supply of materials to processing facilities.

The government has decided to cut distribution channels for biodiesel as suppliers of fatty acid methyl esters (FAME) — the material for B20 — are facing difficulties in distributing their items to 86 biodiesel processing facilities owned by state energy holding firm Pertamina.

The government is mulling over the idea of reducing the facilities to only 10 by Jan. 1, 2019, four months after it required nearly all sectors in the economy to utilize B20.

“With this plan, hard-to-reach places such as Wayame fuel terminal [in Ambon, Maluku] will only receive the end-product of B20, while the refining process takes place in one of the 10 drop-off points of FAME, like the nearest one in Balikpapan [East Kalimantan],” said Rida Mulyana, renewable energy director general at the Energy and Mineral Resources Ministry, in Jakarta on Friday.

The 10 drop-off points, all of which are owned by Pertamina, comprise six refinery units (RUs) and four fuel terminals (TBBMs). The selected refinery units are RU Dumai in Riau, RU Plaju in South Sumatra, RU Cilacap in Central Java, RU Balikpapan in East Kalimantan, RU Balongan in West Java and RU Kasim in Papua.

Meanwhile, the selected TBBMs are TBBM Pulau Laut in South Kalimantan, TBBM Tuban in East Java, TBBM Sambas in West Kalimantan and TBBM Medan in North Sumatra.

Previously, Rida said all 19-selected FAME producers must be distributed to 86 TBBMs across the country, although the majority of manufacturers were located in Sumatra.

Less than a month after the B20 expansion policy started, Pertamina lamented the lack of FAME supply to their TBBMs, especially in the eastern part of the country, such as in East Nusa Tenggara, Maluku, Papua and Sulawesi.

The ministry’s solution to deducing drop points of FAME supply is in accordance with a previous suggestion from Pertamina logistics, supply chain and infrastructure director Gandhi Sriwododo. Pertamina, however, in turn was expecting incentives in distribution and maintenance costs for its facilities.

“Biodiesel producers can provide supplies to our selected fuel terminals only, and then we will deliver the supplies ourselves to the rest of terminals,” he said recently. “In detail, we will process the FAME in our main fuel terminals and we will supply the rest of regions in the form of ready-to-sell biosolar.”

As a result of the distribution problem, the realization of FAME supply from Sept. 1 to 25, which should have stood at 359,734 kiloliters, had only reached 62 percent or 224,607 kl, data from Pertamina shows.

Meanwhile, as of October, the realization of FAME volume for the B20 policy had reached 2.42 million kl, 61.7 percent from the full-year target at 3.92 million kl, according to the ministry’s presentation on Friday.

Responding to the plan to reduce the FAME drop-off points, Indonesian Biofuel Producers Association (Aprobi) chairperson Paulus Tjakrawan believed the plan was on the right track to perfecting the B20 policy.

“If there is a change in supply points, we expect that it will smoothen the distribution,” he said. “The fewer drop points, the better the implementation. But, technical problems and mechanism should be addressed.”

However, problems remain in several oil storage tanks in the 10 facilities as they are still unprepared to process FAME owing to mismatch in specifications. As a solution, the government plans to build floating storage units for biodiesel.

Rida said the government might have to conduct an Environmental Impact Analysis (Amdal) for upcoming floating storage units, which will accommodate the supply of FAME.

Funding issues to realize the floating storage plan were also being discussed as Rida said the government had yet to determine where the funds would derive from. He ensured that Pertamina would not be burdened by the cost issues.

“Surely, it will be the obligation of FAME producers, […] but we are still discussing who will pay and whether it [floating storage units] should be bought or just rented,” he said.

Source: Jakarta Post, 29 October 2018