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Developing Indonesia Downstream Industry :

Potential and Challenge


Managing Market, Strengthening Industry Value Chain
9th Indonesian Palm Oil Conference and 2014 Price Outlook,
28
th
-29
th
November 2013. Bandung. Indonesia
Paulus Tjakrawan
Indonesia Biofuels Producer Association
Asosiasi Produsen Biofuel Indonesia
The Outline
Income Per Capita & Fuel Consumption Comparison
Government Policy
Palm Oil Industry
Down Stream Development
Year of Challenge
What should to be done
2
Comparison
3
Source. CIA Fact Book 2013
248
Million
1,349
Million
- 1,000,000,000 2,000,000,000
Indonesia
Russia
EU
US
China
Population
4,700
9,300
- 20,000 40,000 60,000
Indonesia
Russia
EU
US
China
GDP/Capita- US$
0.83
1.15
0.00 2.00 4.00 6.00 8.00 10.00 12.00
Indonesia
Russia
EU
US
China
Oil Consumption/Capita/Day-Lt
C
O
M
P
A
R
I
S
O
N
National Development Policy
4
NATIONAL DEVELOPMENT
FOCUS ON :
ENERGY & FOOD
SECURITY
ENERGY & FOOD
SECURITY
ENVIRONMENT ENVIRONMENT
JOB CREATION &
POVERTY ALLEVIATION
Source, MEMR
G
O
R
V
E
R
N
M
E
N
T

P
O
L
I
C
Y
Palm Oil Industries & Supporting Association
Plantations Palm Oil Mills
DownStream
Industries
RFM
Oleochemicals
Biodiesel + HVC
APKASINDO
GIMNI, AIMMI
APOLIN
APROBI
GAPKI & GPPI
MAKSI & DMSI
Source. GIMNI
P
A
L
M

O
I
L

I
N
D
U
S
T
R
Y
Palm Oil Product Stages
6
Process Stages Product Association
Feedstock Fruit Bunch, Palm Kernel, Crude Palm Oil (CPO)
GAPKI &
APKASINDO
1
st
Stage Downstream
Product
Palm Kernel Mill/Expeller, CP Stearin, CP Palm Olein, CP Kernel
Olein, CP Kernel Stearine, RBD Palm Stearin, RBD Palm Oil, RBD
Palm Kernel Oil, PFAD
GIMNI/AIMMI
2
nd
Stage Downstream
Product
RBD Palm Olein bulk and packaging </= 25kg, RBD Palm Kernel
Stearin
GIMNI/AIMMI
Biodiesel and Glycerine APROBI
3
rd
and 4
th
Stages
Downstream Products
Margarine, Shortening, Soap, Special Fats (CBS, CBA) GIMNI/AIMMI
Lauric Acid (surfactants), Plasticizers, Palmitic Acid (candle,
crayon), Stearic Acid (rubber grade), Stearic Acid (stabilizers,
coating), Oleic acids (surfactants), MCT (Pharmaceuticals), PK
Diethonamide (foam booster), Alcohols (detergents),
Monodiglycerides (stabilizer)
APOLIN
Methane gas, Hydrogen, Renewable Electricity, Pulp/paper, Bricket
H. Carbon, Bio-lubricant, Particle Board, Anti oxydants (B-
carotene, Tocopherols, Tocotrienols), Surfactant, Bioavtur (fuel -
jet), Bio-plastics and Bio-chemicals
HVCP
Associations
Source. GIMNI
P
A
L
M

O
I
L

I
N
D
U
S
T
R
Y
Refinery, Fractionation & Modification.
Production Capacity (000 Ton, Installed & Projection*)
7
2011 2012 2013 2014*
RFM (000Ton) 21,600 22,000 23,500 45,100
21,600 22,000
23,500
45,100
-
10,000
20,000
30,000
40,000
50,000
2011 2012 2013 2014*
Refinery, Fractionation & Modification Production Capacity
(Installed & Projection)
Source. GIMNI
P
A
L
M

O
I
L

I
N
D
U
S
T
R
Y
Oleochemical Production Capacity
(000 Ton, Installed & Projection)
8
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Fatty Acid 565 565 860 860 970 970 1470 2060 2530 2940 3925 4225
Fatty Alcohol 120 120 180 280 280 280 280 315 570 690 690 790
0
1000
2000
3000
4000
5000
6000
2004 20052006 20072008 20092010 20112012 20132014 2015
PO Oleochemicals Production Capacity (Installed and Projection)
Fatty Alcohol
Fatty Acid
Source. APOLIN
D
O
W
N
S
T
R
E
A
M

I
N
D
U
S
T
R
Y
Biodiesel Production Capacity
(Kl, Installed)
9
2006 214,943
2007 1,709,195
2008 3,137,931
2009 3,528,092
2010 3,936,138
2011 4,280,966
2012 4,880,966
2013 5,670,000
214,943
1,709,195
3,137,931
3,528,092
3,936,138
4,280,966
4,880,966
5,670,000
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
2006 2007 2008 2009 2010 2011 2012 2013
Biodiesel Production Capacity (Installed)
Source. MEMR, APROBI
D
O
W
N
S
T
R
E
A
M

I
N
D
U
S
T
R
Y
Fast Growing Palm Oil Downstream Industry
After 2011, the PO Downstream Industry increased steeply, it was
triggered by
Ministry of Finance regulation, PMK No. 128/PMK 011/2011 which
was renewed Export Duty regulation, It was projected to protect the
PO domestic demand mostly for the cooking oil. The PO cooking oil is
our staple food. Also, this fiscal policy intentionally to
encourage/boost the downstream industry.
Government driven to enlarge the incentive as a tax holiday for the
investment more than 100Million USD. This incentive increases the
interest of investors to invest in downstream industries.
Biofuels mandatory
An estimated investment till 2014 about USD 2.7 billion
After 2011, the PO Downstream Industry increased steeply, it was
triggered by
Ministry of Finance regulation, PMK No. 128/PMK 011/2011 which
was renewed Export Duty regulation, It was projected to protect the
PO domestic demand mostly for the cooking oil. The PO cooking oil is
our staple food. Also, this fiscal policy intentionally to
encourage/boost the downstream industry.
Government driven to enlarge the incentive as a tax holiday for the
investment more than 100Million USD. This incentive increases the
interest of investors to invest in downstream industries.
Biofuels mandatory
An estimated investment till 2014 about USD 2.7 billion
10
Source. GIMNI, APROBI
D
O
W
N
S
T
R
E
A
M

I
N
D
U
S
T
R
Y
Indonesia Palm Oil Profile ( 000Ton)
11
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2009 2010 2011 2012 2013
Export CPO
Export Biodiesel
Export Non Biodiesel
Biodiesel
Non Food
Food
E
X
P
O
R
T
Domestic
Export
Downstream
Non Biodiesel
Export
Biodiesel
Export CPO
Total
Production
Export,
Downstream
Product
Food Non Food Biodiesel
2009 5,081 7,296 10,870 23,246 40.1%
2010 6,107 7,591 11,137 24,835 40.5%
2011 4,835 1,075 300 7,208 1,070 12,295 26,784 40.2%
2012 5,415 1,172 582 11,386 1,372 8,095 28,022 61.1%
2013 5,600 1,231 1,020 12,086 1,500 8,114 29,550 62.6%
Source. GIMNI
D
O
W
N
S
T
R
E
A
M

I
N
D
U
S
T
R
Y
Biofuel Mandatory
AS ENERGY AND MINERAL RESOURCES MINISTER REGULATION NO 25, 2013
12
BIOETHANOL (Minimum)
Sector Sept.2013 Jan 2014 Jan. 2015 Jan. 2016 Jan. 2020 Jan. 2025
Transportation,
Public Service Obligation
(PSO)
- 0.5% 1% 2% 5% 20%
Transportation,
Non PSO
1% 1% 2% 5% 10% 20%
Industry 1% 2% 5% 10% 20%
BIODIESEL (Minimum)
Sector Sept.2013 Jan. 2014 Jan. 2015 Jan. 2016 Jan. 2020 Jan. 2025
Transportation,
Public Service Obligation
(PSO)
10% 10% 10% 20% 20% 25%
Transportation,
Non PSO
3% 10% 10% 20% 20% 25%
Industry 5% 10% 10% 20% 20% 25%
Electricity 7.5% 20% 25% 30% 30% 30%
D
O
W
N
S
T
R
E
A
M

I
N
D
U
S
T
R
Y
Biodiesel Production
13
Indonesia Biodiesel Production (Volume)
Year Domestic
000 kl
Export
000 kl
Total
Production
000 kl
Export
2009 130 70 200 35%
2010 223 20 243 8,2%
2011 359 1,453 1,812 80%
2012 669 1,542 2,211 69,7%
2013*) 1,200 1,600 2,800 61%
Source, Pertamina, BPS, EBTKE, Aprobi 2013*) PROJECTION
D
O
W
N
S
T
R
E
A
M

I
N
D
U
S
T
R
Y
Indonesia Biodiesel Fact 2012
14
Source, Pertamina, APROBI, US EPA
Domestic Biodiesel Utilization,
669.328 kilo liter/ 4,2 MBarel
Reducing Diesel Oil Import
6,4%
Up Stream Manpower
48.500
Emmission Reduction
1.672.652 Ton CO2 (5%)
Export Ability 2013
3.5 mil. kl
D
O
W
N
S
T
R
E
A
M

I
N
D
U
S
T
R
Y
Palm Oil Biodiesel Emission Reduction
Compare to Diesel Fuels
Research & Calculate by, Emission Reduction
Ministry of Agriculture 56,7% - 59,8%
Indonesia Palm Oil Board 56%
15
Source, MoA, IPOB, IBPA
D
O
W
N
S
T
R
E
A
M

I
N
D
U
S
T
R
Y
Biodiesel Programs
B10 for subsidized diesel fuel in Jawa, Sumatra, Bali, Madura
and Part of Kalimantan
The Electric Power Companies started to use Biodiesel and PPO
(Processed Palm Oil), from 10% till 60% blended in the diesel
Fuel.
It is planned to have B10 for subsidized and non subsidized
diesel in 2014. It will consume about 4 million kl (~3.5 million
Ton) Biodiesel.
Challenges
Location. Most of the industries located in west Indonesia
Price. Pertamina. State own Oil Company requests the biodiesel industries
to supply biodiesel using different price (must be less than diesel fuels
Singapore price for 2 years) than the Government regulated biofuels index
price.
B10 for subsidized diesel fuel in Jawa, Sumatra, Bali, Madura
and Part of Kalimantan
The Electric Power Companies started to use Biodiesel and PPO
(Processed Palm Oil), from 10% till 60% blended in the diesel
Fuel.
It is planned to have B10 for subsidized and non subsidized
diesel in 2014. It will consume about 4 million kl (~3.5 million
Ton) Biodiesel.
Challenges
Location. Most of the industries located in west Indonesia
Price. Pertamina. State own Oil Company requests the biodiesel industries
to supply biodiesel using different price (must be less than diesel fuels
Singapore price for 2 years) than the Government regulated biofuels index
price.
16
D
O
W
N
S
T
R
E
A
M

I
N
D
U
S
T
R
Y
Downstream Industry Outlook
To produce the High Value Chain Products
The Industries focus on the processing of "Liquid and
Solid Waste" and other high value-added, such as
Reduced-GHG-Emission" bio-plastics, particle board,
extracting beta-carotene, hydrogenation biodiesel, bio-
lubricants, aviation (jet) fuel etc..
The Industries focus on the processing of "Liquid and
Solid Waste" and other high value-added, such as
Reduced-GHG-Emission" bio-plastics, particle board,
extracting beta-carotene, hydrogenation biodiesel, bio-
lubricants, aviation (jet) fuel etc..
17
D
O
W
N
S
T
R
E
A
M

I
N
D
U
S
T
R
Y
Year of Challenge
Year 2014 will be a Year of Challenge for palm oil in the global market.
Palm oil and its derivatives export destination will implement a number of
regulations that suppress Indonesian products.
One is the EU regulations concerning the obligation to include the name of palm
oil on the label, which will take effect on December 13, 2014.
Other European countries such as Belgium, the Netherlands, Germany and
France are also only willing to buy the oil that has been certified by RSPO
(Roundtable on Sustainable Palm Oil) and Impose Anti-Dumping Duty on Fatty
Alcohols (in EU) and Biodiesel. Renewable Energy Directive revision.
US EPA NODA, that the reduction of emissions by Palm Oil biodiesel is only 17%,
whereas the requirement is stated to be 20% in order to be accepted in the USA.
Indonesia and Malaysia already submitted the life cycle emission calculation to
US EPA, Which is 59% for the emission saving.
Small holders low productivity, replanting, land and sustainability certifications
Implementation of B10 in Indonesia
Year 2014 will be a Year of Challenge for palm oil in the global market.
Palm oil and its derivatives export destination will implement a number of
regulations that suppress Indonesian products.
One is the EU regulations concerning the obligation to include the name of palm
oil on the label, which will take effect on December 13, 2014.
Other European countries such as Belgium, the Netherlands, Germany and
France are also only willing to buy the oil that has been certified by RSPO
(Roundtable on Sustainable Palm Oil) and Impose Anti-Dumping Duty on Fatty
Alcohols (in EU) and Biodiesel. Renewable Energy Directive revision.
US EPA NODA, that the reduction of emissions by Palm Oil biodiesel is only 17%,
whereas the requirement is stated to be 20% in order to be accepted in the USA.
Indonesia and Malaysia already submitted the life cycle emission calculation to
US EPA, Which is 59% for the emission saving.
Small holders low productivity, replanting, land and sustainability certifications
Implementation of B10 in Indonesia
18
Source. GIMNI, APROBI
Y
E
A
R

O
F

C
H
A
L
L
E
N
G
E
What Should To Be Done?
19
Government consistency to implement the regulations
Proper Infrastructure (Road and Port)
Reliable workforce and empowering small holders supporting by Export duty
Tax and incentive simplification
Intensified countering the anti palm oil campaign
Handling and straighten the Environment, Social & Heath Issues
To have the comprehensive research on Palm Oil
W
H
A
T

S
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D

T
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B
E

D
O
N
E
THANKYOU & HAVE A NICE DAY
20
Indonesia Biofuels Producer Association/IBPA
Asosiasi Produsen Biofuel Indonesia/APROBI
5
th
Fl. Unit B-C, 88@Casablanca Office Tower A
Jl. Casablanca Kav. 88
Jakarta Selatan 12870
T +6221 2956 8736
F +6221 2956 8697
Email, aprobi@ymail.com