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 Mahamad Rodzi Abdul Ghani
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 Bloomberg News
 Indonesia tests fuel alternative in palm oil

13/7/06 (Bloomberg News)  - JAKARTA Indonesia plans to invest 200 trillion rupiah, or $22 billion, over the next five years to promote the use of alternative fuels using crops such as palm oil, Energy Minister Purnomo Yusgiantoro said Thursday.
About $6 billion will be spent securing 6 million hectares, or 14.8 million acres, of land, in an as-yet-unspecified location, and the rest will fund factories, roads and other supporting services, he said. Plant-based fuels can be mixed with gasoline, diesel and kerosene, now subsidized by the government.
Biofuel "can replace fuel in the transportation sector," Purnomo said Thursday at an event in Jakarta to promote biofuel. It also helps communities raise their level of fuel self- sufficiency and creates jobs, he said.
Indonesia, Southeast Asia's biggest oil producer and user, still imports a third of its fossil-fuel requirements, and the government wants to use more vegetable oils to reduce overseas purchases of petroleum and refined products.
Higher crude oil prices, which have tripled since 2002, are spurring greater government and investor interest in biofuels worldwide.
Global supply of biofuels may almost double in the next five years, the International Energy Agency, an adviser to 26 oil-using nations, said Wednesday. The growth is "a supply and policy response to high oil prices," the agency said.
President Susilo Bambang Yudhoyono said July 3 that Indonesia should focus on making biofuels from four commodities, palm oil, cassava, jatropa, a plant that yields castor oil, and sugar left over from processing.
Indonesia is already the world's second-largest producer of palm oil, the price of which has gained 5.6 percent since the year started to 1,497 ringgit, or $409, a metric ton. Production may reach 15 million tons this year, Derom Bangun, chairman of the Indonesian Palm Oil Producers' Association, said on June 21.
The government plans to spend about 51 trillion rupiah over the next five years to develop land for more oil palm, rubber and cocoa plantations to spur growth and create jobs, Supra Tamtama, deputy director for estate crops in the Ministry of Agriculture, said June 29. Three-quarters of the funds will be for palm oil, he said.
Biofuels will account for 10 percent of the content in fuel products, Purnomo said Thursday. Based on this year's usage, that is equivalent to 4.1 million kiloliters, or 1.08 billion gallons.
The government will enlist the support of agricultural companies such as Astra Agro Lestari, the country's largest plantation company by market value, smaller producers, cooperatives and multilateral agencies, he said.
The government will also seek favorable financing from state banks such as Bank Rakyat Indonesia, Bank Mandiri and Bank Negara Indonesia, the minister said.
A so-called biofuel master plan will be ready by the end of this month that will detail financial incentives for small- and medium-sized companies and cooperatives to produce biofuel, and ease the issue of permits and regulations for large companies.

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