Biofuel Production

May 22nd, 2007, in Business & Economy, by

Making Indonesia number one in biofuel production.

Bill Guerin says that the government and some key local and foreign business concerns are determined to make Indonesia the world’s leading producer of biofuels, specifically biodiesel used for powering vehicles.

The government has offered huge incentives for companies to develop biofuels, primarily derived from palm oil, and many local firms that dominate in the logging, wood-processing and pulp industries have secured big contracts with such overseas companies as Chinese energy giant China National Offshore Oil Corp (CNOOC), which is one among 59 foreign and local energy investors who in January 2007 signed various biofuel-related renewable energy agreements worth US$12.2 billion.

CNOOC signed up with the Indonesian company Sinar Mas Agro Resources and Technology (SMART), and Hong Kong Energy, and Bill worries that SMART, a subsidiary of Indonesia’s largest oil palm grower, Golden Agri-Resources Ltd, has in the past had colossal debt problems, which it defaulted on. SMART also has some connection to Sukanto Tanoto, Indonesia’s richest man, who himself has been plagued by unpaid debt problems.

There are also concerns on how the current “green gold” rush in palm oil is contributing to deforestation with Tanoto’s Asia Pacific Resources International Ltd (APRIL) being accused of dubious practises in forest clearing and is said to not even have a valid logging licence. atimes

Meanwhile an editorial in the Jakarta Post states that the headlong rush to develop biofuel production ignores the fact that biofuels cannot fully replace fossil fuels, such as petrol and diesel, and that they must always be mixed with other liquids, such as palm oil blended with diesel. Using palm oil for fuel purposes also pushes up the price for its use in human consumption, with corresponding adverse economic effects for families. peakoil

Also, unless Indonesian producers of biofuel can prove that the product was made in an environmentally sustainable way

international consumers will not touch Indonesian biofuel.

12 Comments on “Biofuel Production”

  1. Sylvester says:

    Nowadays, many people around the world are convinced that this time is the age of biotechnology. Biofuel is one of the topics. Some example of biofuel are E10 (10 % ethanol, 90 % petrol) and biodiesel (from vegetable oil). Ethanol is produced from sugar fermentation by yeast or some bacteria. Most people believe the benefits of biofuel. The business is booming. Brazil, US, China are the main biofuel producers worldwide. In Indonesia, many rich guys are starting the business in it.

    I fully agree that biofuel has a lot of benefits, particularly because it is renewable resource, suitable to replace the fossil fuel. Maybe reduces the global warming too. However, there is nothing perfect in this world.

    In term of environmental pollution, biofuel is arguebly less harmful. The pollutan emissions are compArable to petrol. Engine quality is a more decisive cause. Also, the biofuel such as E10 has a higher octane number but lesser energy content.

    One thing for consideration is that the massive biofuel industry will need a huge raw material mainly agricultural products. The irony is that to provide the raw material, many farmlands and forests have to be converted to the plantation. This would affect the agriculture which means our food. Not mentioning the destruction of the forests.

    Just recently the price of the cooking oil in Indonesia increases sharply. One of the main reasons is part of Indonesian CPO is used for emerging biofuel industry or exported to other countries. Also, a great number of Indonesian forests have been destroyed for the plantation.

    I still support biofuel, but we have to be really careful with this issue.

  2. Sputjam says:

    Biofuel, in diesel or ethanol form, even at current high crude oil prices, costs more to produce than ordinary, fossil fuel diesel or petrol.
    The irony is that, the more bio-fuel manufactured, the more expensive the cooking oil price is going to be. That means the poor will have to cut down on cooking oil consumption.
    In mexico, riots by indigenious indians are due to expensive corn oil, which is being converted into bio-fuel. Can similar situation occurs in Indonesia. And will the chinese minority bear of the brunt of the violence if it occurs due to shallow thinking of ministers.
    I suggest the excess power generated by power stations, which is not utilised during the night, be converted into hydrogen, by electrolysis instead. Normal cars can be converted to run on hydrogen, based on BMW’s technology, or powered by fuel cells.

  3. Putu Alberto Lee says:

    Thanks Sputjam,

    Once again, and again, I’m reminded so many parallels between Mexico and Indonesia. I even saw some surprising similarities between the religious Catholic+indigenous practices in the villages with the ones in Bali (and maybe some other place).

    I love both places. I miss them both.

  4. Sputjam says:

    Maybe you should read this report first on Indonesian biofuel manufacturers :-


  5. El Gran Combo Puertorico says:

    And will the chinese minority bear of the brunt of the violence if it occurs due to shallow thinking of ministers.

    Can we see some similarities here, between moderate moslems (supposedly majority of moslems) and “regular” chineses (also majority)? — let’s not bring up the Jews here. Same goes for them.

    There’s a tendency to generalize that moslems are bad, for what the minority (extremist) are doing. The same goes for chinese in Indonesia. People see chinese are bad, for the thing those bad conglomerates are doing.

    Poor them.

    Anyway, have we ever heard them standing up against that “offending minority” in their groups? I have almost never.

    I guess they will have to do it at some point. It’s their fight anyway.

    And the government need to be conscious about these issues. At least they can do one thing about it: first cut the craps with bad chinese conglomerates exploiting Indonesia and Indonesian people.

    Or maybe because the government (supposedly) are mostly Javanese? Self-loathing Javanese with no pride and dignity at all? Easy money and “good” image, that’s all they care about.

  6. Arema says:

    Sylvester: I still support biofuel, but we have to be really careful with this issue.


    Umm, I thought a plant named jarak is seen as the potential biofuel alternative of palm oil? I heard one European company (Swedish if I’m not mistaken) bought hundreds of hectares in Sumatra and transforming the land into jarak plantation? So which one is the better one here? Jarak or palm oil?

    I fully support the idea, as Indonesia is largely an agricultural country, therefore suitable for this potential cash cow. But as Sylvester has elaborated, we have to be careful and not get sucked in by the ever-threatening greed.

  7. Sputjam says:

    In europe, if industries/indivduals produce carbon gases, they are taxed for the amount emitted. Hence to avaoid taxation, they use palm oil/sugar cane to produce diesel/ethanol. Since palm oil/sugar cane absorb carbon dioxide during their life span, anyone who uses biofuel, will be exempted from carbon tax.

    Hence europe tax dollars are flowing into equatorial regions such a Indonesia/papua/africa planting these biofuel producing plants. The bad part is that jungles that probably absorb more carbon dioxide than plantations are destroyed in the process.

    Why can’t they just spend the tax dollars in preserving jungles to absorb the green house gases? Pay locals decent money to upkeep forests. Better pay them to keep forest than to see them burn the forest for a living.

  8. DoOs says:

    Biofuel production is an opportunity cost to palm oils, used for cooking. Hence prices of complementary goods will increase. Therefore the biofuel operation benefits only in the tertiary sector but not the primary sector which has been weakening due to price instability.

  9. Janma says:

    Jarak is castor oil isn’t it?
    I liked Sputjam’s idea of paying people to keep the forest safe instead of destroying it for a living, don’t know how it would work though, wouldn’t people just flood to those areas that received a subsidy to protect the forest? Free money to do nothing? Or maybe they could be employed to protect the forest? But are they employable? And is it the big corporations who are destroying more forest? There must be a solution like that tried, I might look it up.
    As for bio fuel, I think the problems are immense. Food production is more important and maintaining wild lands, imagine the amount of land needed to run our type of world on bio fuel?! Impossible!

  10. DoOs says:

    Its to late to protect the forest, global warming is already happening and what we need to do is gather up reserves as soon as we can for preperation.

    Another solution to fuel is hydrogen fuel cells which I’m currently investing on. They might not be profitable but soon the market will change.

  11. Kang Aris says:

    Allah give us many-many fitures of oil. If we thank to him, He will give us more oils again

  12. sputjam says:

    Hydrogen in its present form is just too expensive to produce. Some nut in France are investing on engines that runs on compressed air. this sound good but their will be limits on distance. End product is cold air emtted thorugh the exhaust. Maybe this is a solution for commuter vehicles that ply daily in cities in the trooics such as jakarta as the exhaust have a cooling effect instead of heating and polluting the environment like present internal combustion engines. And all you need to fill up the compressed gas tanks is a compressor in your home which could be done overnight, like re-charging your mobile phone batteries. Using compressor at night also means using electrity during off peak hours, which will be wasted anyway if nobody uses it.

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