Sinar Mas Group may revive biodiesel project

February 18, 2015

Indonesia’s largest palm oil plantation group, Sinar Mas Group, may revive a plan to build biodiesel production capacity as the country considers alternate sources of energy besides crude oil.

Sinar Mas Agro Resources and Technology (SMART), the group’s local plantation arm, originally planned to build two biodiesel plants with China National Offshore Oil Corporation (CNOOC) and Hong Kong Energy in 2007. However, the plan was shelved when palm oil prices started to rise.

SMART chairman and CEO Franky Widjaja said, “If the policy is right….then we will be encouraged to invest more.”

In 2013, the previous government introduced a biodiesel mandate, requiring all petroleum diesel fuel to contain 10% biodiesel. However, that goal has not been met because the prices state-owned oil and gas company, Pertamina, offered biodiesel producers were extremely low. Parliament recently approved an increase in the biofuel subsidy from IDR1,500 (USD0.11) to IDR4,000 (USD0.31) per litre, which might help boost biodiesel sales.

Widjaja has not revealed whether the company is interested in getting a new partner for the potential project. He says that favorable policies must come first. “If there is no return, nobody wants to invest.”

Palm oil is used to make biodiesel, as well as many other products ranging from soap to cooking oil. Indonesia is the world’s largest producer of palm oil.

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