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
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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
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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
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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
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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
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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