In the face of its depleting oil reserves and fluctuating world oil prices, Indonesia has launched an intensive biofuel production program aimed at cutting its fossil oil consumption by 10 percent in 2010.

At a recent cabinet meeting on national energy policies and bio- energy action plans, Indonesian President Susilo Bambang Yudhoyono stressed the importance of developing biofuel for Indonesia.

"The development of biofuel or bio-diesel will create more jobs, reduce poverty, develop cooperatives and small businesses and re- green denuded land. So, We will continue with the preparations and planning in 2006, and implement (the program) in 2007," he said.

Besides reducing dependence on fossil fuels, the cultivation of biofuel crops such as oil palm, cassava, sugar cane and jatropha curcas crops was also seen as a way to help boost local economies.

In order to carry out the program, the Indonesian government decided to set up a national team in charge of formulating policies for the development of bio-diesel or biofuel program, including on matters relating to cultivation of land, infrastructure, processing, marketing and funding.

With the program, Indonesia expects to be able eventually to reduce the use of fossil fuel oils by 10 percent in 2010 from the current level of 41 billion liters by promoting the production of use of bio-fuel to replace premium, kerosene, diesel oil and fuel oils used to generate electricity.

Energy and Mineral Resources Minister Purnomo Yusgiantoro said that the government was considering the development of 11 bio- diesel plants in various parts of the country in order to achieve the target.

The plants will have a total production capacity of 26,000 tons per annum, equal to almost 29 million liters, or about 45 percent of annual consumption in Jakarta, said the minister.

An interministerial team estimated that the country's bio- diesel production should reach 187 million liters by the end of 2007, 377 million liters by 2008, 1.2 billion liters by 2009 and 1. 3 billion liters by 2010.

According to Al Hilal Hamdi, head of the national team, the kind of plantations which would be developed to produce bio-fuel would include oil palm, jatropha curcas, cassava and sugar cane.

He said some 6.5 million hectares would be made available for the development of bio-fuel. Thus it would provide employment for about 3 million workers and boost rural economies.

Hilal said that the program needed an estimated investment of 100 trillion rupiah (10.8 billion U.S. dollars) in the sector within the next five years.

The government also unveiled a crash program to build 11 biofuel plants, with production targets of 187 million liters next year and 1.3 billion liters by 2010, or equivalent to 3 percent of the country's total fuel consumption of 41 billion liters in 2005.

Therefore, up to 2010, the use of fossil oils for the transportation sector is expected to be cut by 10 percent and by 50 percent in the power generation sector.

With the reduction in the use of fossil oils, the foreign exchange that could be economized would reach some 10 billion dollars, Hilal said.

To make the program a success, the Indonesian government called on the banking world to help provide funds for bio-energy development.

"Banks are requested to invest in the cultivation of jatropha curcas, cassava, sugarcane so as at the same time green arid land and help boost rural economic growth," Minister/State Secretary Yusril Ihza Mahendra said.

Meanwhile, the government is preparing fiscal incentives for investment, trade and research to expedite bio-energy development.

"We are preparing fiscal incentives such as tax holidays, tax allowances and reductions for research activities and value-added taxes," Hamdi said.

He said there were many companies that had expressed an interest in developing bio-energy, including domestic companies and foreign investors from China, Japan, India, the United States and Italy.

The government also called on the public not to hesitate to cultivate biofuel crops. It gave the assurance that it would absorb biofuel production no matter how much.

"We have two major stand-by buyers, namely state-owned Pertamina for the transportation sector and state power firm PLN for the electricity sector," Research and Technology Minister Kusmayanto Kadiman said.

Source: Xinhua