1. Benefits of Biodiesel Use from Palm Oil Industry’s Perspective M. Fadhil Hasan Executive Director Indonesian Palm Oil Association 1 2013. 9. 5

2. Palm Oil as a Renewable Energy Sources Bioliquid and Biomass demand created by Government lead initiatives to move away from Fossil Fuels to Renewable Energy Sources (RES) Frameworks first started in Europe & US in the late 1990s and have spread globally. High mandated adoption targets to be achieved over the next decade, we are at the halfway mark today. These mandates and frameworks are evolving as research into the direct and indirect effects of RES identifies best sustainable sources 2

3. Biofuel Mandates Most share common drivers and criteria for RES – Reduce Green House Gas emissions relative to the fuel being displaced. – No raw material from land with High Biodiversity Value – No conversion of land with High Carbon Stock Largest frameworks are in Europe and US – The Renewable Energy Directive in Europe mandates the use of bioliquids and biomass as part of the RES mix – Renewables Fuel Standards 2 in US mandates the use of bioliquids for Road Fuels. 3

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5. Indonesian Palm Oil Industry Production in 2012 and 2013: 25.2 and 27.5 million tonnes, respectively. Export in 2012 and 2013: 16.8 and 20.5 million tonnes, respectively. Domestic consumption in 2012: 8.4 million tonnes. Price of CPO declined in the last two years while production continue to increase. Thus, there must be an alternative use of CPO in dometic market so that price in international market can be increased. Policy to develop downstream industries have shown positive results although is not yet optimal. The use of CPO for biodiesel in domestic market will reduce supply of CPO which in turn increase price. 5

6. Monthly Average Price of CPO if Rotterdam ($) 2010-2012 6

7. Benefits of Increase in Domestic Biodiesel Consumption (with assumption consumption of biodiesel amounts to 3 million kiloliters/B10) Reduce import of BBM/Solar by 28% equals to devisa saving of US $ 2.42 milar significantly enough to reduce Indonesian trade deficit. Create employment opportunities in upstream as well downstream industries (plantation, transportation, processing industries) estimated of 217.500 persons. Reduce Green Gas House Emission by 8 million tonnes (7%). Increase price of CPO in internaional market by 15%-20% with reduction of supply of 2.6 million tonnes. Reduce dependency toward fossil fuel (energy independence) 7

8. Install Capacity of Biodiesel and Ethanol in Indonesia Produsen BBN Biodiesel  23 Produsen  Material: Palm Oil Ethanol  13 Produsen  Material: Molases, Tapioca 8

9. The Use of Biodisel: Domestic and Export Production (Volume) YearDomestic Use Thousand kl Export Thousand kl Total Production Thousand kl Export (%) 20091307020035% 2010223202438,2% 20113591453181280% 20126691542221169,7% 201346250096255% There is still big potential to increase domestic use and export of biodiesel as gap between install capacity and actual production are still wide. 9

10. Mandatory Use of Biodiesel Sector20092010201520202025 Transportation1%3%5%10%15% Transportation Non-PSO 5%7%10%12%15% Industry5%7%10%12%15% 20092010201520202025 Transportation1%2.5%5%10%25% Transportation Non-PSO 1%3%7%10%20% Industry2.5%5%10%15%20% Electricity0.25%1%10%15%20% Bioethanol (minimum) Biodiesel (minimum) 10

11. Challenges on the Utilization fo Biodiesel Pricing Policy and Subsidy: -Subsidy for biodiesel need to change from fix subsidy basis (cost of production plus) to economic price basis. -The need to include transportation cost in the calculation of Reference Price of Biodiesel (Harga Patokan Biodiesel) Location and Distribution: -Location of factory are in Java and Sumatera while the industries located throught Indonesia complicating the biodiesel distribution. 11

12. Challenges on the Utilization fo Biodiesel Infrastructure: the need to develop port, trasnportation etc. Socialization to all stakeholders on program of energy diversification. Firmness: government obligates industries to use biodiesel with clear carrot and stick principles. Accusation of subsidy and dumping practices by Eroupean Union. 12

13. Recommendation Improving subsidy policy and reference price for biodiesel. Increase the percentage of biodiesel blending to 10% (B10) and higher over time. More firmness regulation to encourage the use of biodiesel. Better coordination among stakeholders. 13