Fri, Jun 23, 2006 - Page 9 News List

As oil prices soar, Southeast Asia looks to biodiesel

DPA , JAKARTA AND KUALA LUMPUR

Faced with soaring oil prices, Indonesia and Malaysia are turning to biodiesel, a fuel that cuts regular diesel with vegetable oil, to reduce emissions and costly subsidies.

Indonesia has long searched for ways to reduce air pollution in Jakarta, one of the dirtiest cities in the world, and the government last month introduced biodiesel at gasoline stations in the capital.

"The air pollution in Jakarta is very terrible," said Amir, 35, a bus driver who was filling up at a Pertamina station in East Jakarta.

"I chose using biodiesel to support our government's planning and make the air in Jakarta fresher," he said.

"More than anything else the cost of biodiesel fuel is cheaper than [regular diesel]," he said, "so I can save money for my family."

While cost is the main motivator for most residents of the Indonesian capital, the alternative fuel was, in fact, only slightly cheaper than regular diesel during the weekend launch because it was being sold at gasoline stations owned by the government, which set the prices artificially low.

The high cost of substitutes is just one of the obstacles governments around the world face in making the move to alternative energies and weening their populations off a heavy dependence on fossil fuels.

Still not cheap

"The biggest impediment of biofuel popularization is its higher price than conventional fuel," Tomohide Sugino, a project leader for the UN's Center for Alleviation of Poverty through Secondary Crops' Development in Asia and the Pacific, wrote recently in a Jakarta Post opinion column.

"Roughly speaking, the production cost of biofuel is twice as much as gasoline," he wrote. "The forerunners who have successfully increased biofuel consumption have provided tax exemptions or subsidies to their biofuel producers."

Without these incentives, private companies have been hesitant to produce and sell biodiesel because of the relatively high cost of their most available substitute -- palm oil.

The uncertainty of supplies is another factor, despite the fact that Indonesia is second only to Malaysia in the production of crude palm oil.

Indonesia and Malaysia together control nearly 85 percent of the global production of crude palm oil, but demand for it has been risatile "wonder oil" has been used in goods ranging from margarine and soaps to lipstick and even napalm and is now found in an estimated one in 10 supermarket products.

"The prices of crude palm oil are rising, and export demand is increasing, so small and large palm-oil-producing companies are already making enough [money]," said Andrew Lim, a palm-oil-estate small holder.

"It isn't worth the risk right now to put in the capital for a biodiesel plant unless the government can make it worth our while," he added.

That's why the Indonesian government is looking at new ways to increase the production of palm oil and biodiesel for domestic use.

Research and Technology Minister Kusmayanto Kadiman said he had asked relevant ministries to develop a policy that would prioritize the production of palm oil for biodiesel use in Indonesia.

Kadiman said his ministry planned to build four biodiesel-processing plants in Indonesia that would together cost up to US$33 million, and to develop 500,000 hectares of plantations every year, with more than US$1 billion from the government.

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