A regulatory package will soon be put in place to allow foreign oil firms such as Petronas of Malaysia and Shell of the Netherlands to distribute biofuel in Indonesia so as to boost competition on the domestic market, a report said Wednesday.

The Coordinating Ministry for the Economy has confirmed foreign firms would be allowed to buy biofuel from producers and sell it back to the public as long as it was being sold for transportation purposes, said The Jakarta Post daily.

The government had earlier appointed state oil and gas firm PT Pertamina and state power firm PT PLN to serve as standby buyers of biofuel.

The government has targeted biofuel production of 13 million tons per year by 2009.

According to the Investment Coordinating Board (BKPM), 15 companies have applied for licenses to produce a total of one million tons of bio-diesel per year.

As for the government, it plans to construct eight bio-diesel plants, with each having a production capacity of between 3,000 and 6,000 tons per year.

Last week, President Susilo Bambang Yudhoyono held meetings with Malaysia's top energy companies to encourage them to invest in the Indonesian bio-energy sector.

Speaking after the meetings, Minister for Energy and Mineral Resources Purnomo Yusgiantoro said that a committee would soon start work on drawing up regulations that would ease the way for foreign companies to invest in the bio-energy sector.

The use of biofuel is expected to account for 10 percent of the country's energy consumption by 2009, enough to significantly reduce the burden on the national budget arising from fuel subsidy spending.

Biofuel is a renewable energy resource and is produced from such crops as the castor-oil plant, oil palm, cassava and sugarcane, all of which can easily be grown in Indonesia.

Source: Xinhua