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US $100M Mega Jatropha Project

Mother Earth Plantations Pte (MEP) is investing in the first mega jatropha project in Indonesia, with US$100 million over four years in West Timor.

Singapore-based MEP president Roland A. Jansen said Tuesday the company had started this mega biofuel project -which includes the development of 1 million hectares of land and the construction of a processing plant - half a year ago and is aimed to start initial production of 30,000 tons by 2013.

"We will increase the capacity up to 100,000 tons in the following years," Jansen said.

He said the company, through its local subsidiary PT Buana Ibunda would start construction of the processing plant by the end of 2009.

In relation to the development of up to 1 million hectares of land, the company decided to do this in four stages over a period of four years, with the first phase to start with the development of 100,000 hectares, followed by the development of 300,000 hectares per year over the next three years.

Jansen said the output from the plant, which would be in the form of biodiesel, would be prioritized for the local market, with only a small portion of the output to be exported to countries such as China.

Commenting on the renewable energy market in Indonesia, he said that jatropha had good prospects of becoming the main feedstock for the production of biofuel in Indonesia, despite the current trends with oil prices being fairly low.

International crude oil prices are currently hovering below $40 a barrel, as against the historic high of $147 per barrel in July last year before prices fell in line with the impact of the global financial crisis.

Investing in jatropha needs relatively less investment than other biofuels and should not heighten the global food and energy debate as it is a non-edible plant, he said.

A number of foreign energy companies, including CNOOC of China and Britain's BP Plc, have expressed interest in investing to help develop the country's biofuel sector.

Indonesia is regarded as having big potential in the biofuel sector due to its vast land area and rich natural resources, including palm oil as a popular feedstock for biofuel.

BP has also set its sights on the development of jatropha in Indonesia, however their plans are yet to be developed.

In addition to the current low price of oil, unclear regulations and previous lack of government supports in terms of incentives and guidance are among the reasons for the slow pace in the development of biofuel projects.

In an attempt to promote the use of biofuel, the government has decided to subsidize biofuel products with a maximum cap of Rp 1,000 (83 US cents) per liter.

Biofuel producers have repeatedly complained they have been running at a loss when selling biodiesel to Pertamina, since prices are set in accordance with fossil fuel prices, currently too low to cover the cost of biodiesel production.

Indonesia has the capacity to produce 2.9 million kiloliters of biodiesel per year and 215,000 kiloliters of bioethanol per year, with more than 200,000 kiloliters of bioethanol and biodiesel to be blended into subsidized fuels this year alone.

Posted on the Jakarta Post 04/03/2009

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