JAKARTA, Aug 26 (Reuters) - Indonesia president-elect Prabowo Subianto hopes to implement mandatory 50% palm oil-based biodiesel blending by early next year, which he said would cut fuel imports by $20 billion per year.

Indonesia said last week it planned to raise the blending to 40% in January 2025, from 35% now, in an effort to reduce fuel imports and lower emission from fossil fuels.

Prabowo takes over in October from incumbent Joko Widodo, whose administration has ordered the palm oil industry to prepare for B50, a 50% blend. Tests have already started on the higher blending preparation.

"We are at B35 now and we will accelerate to B40, B50," Prabowo said late on Saturday.

"With B50, 50% biodiesel made of palm oil, once we reach B50, that God willing by end of this year or early next year, we will save $20 billion a year, we do not need to send this money overseas."

Malaysia's benchmark palm oil futures surged and hit its highest in more than a month on the news, before it retreated and settled at 3,921 ringgit ($902.42) a metric ton, a 1.4% gain.

Indonesia's biggest palm oil producers association GAPKI said B50 cannot be implemented in early 2025, as it has not been tested, GAPKI chairman said on Monday.

Indonesia biofuel producer association APROBI said producers would need time to tests the B50 fuel and increase their production capacity to meet the demand, the group secretary general said.

The biodiesel industry may need to improve quality of its products to ensure the fuel will remain stable for higher mandatory blending, said Tatang Hernas Soerawidjaja, a biofuel expert at Bandung Institute of Technology.

Biodiesel is susceptible to forming sediment when in contact with oxygen, especially during transportation and storage, which could clog engine filters, he said.

"Some biodiesel producers may need to install new equipment to meet the new standard, and this would take six months. After that, the commercialisation tests which not only test the fuel on vehicles but also storage tests, which need six months," Tatang said.

"It would be wise to implement it by end of 2025 at the earliest," he added.

B50 will consume an estimated 18 million metric tons of crude palm oil, up from the estimated 11 million used for B35 this year, GAPKI said previously.

Indonesia's palm oil consumption has grown 7.6% annually on average since 2019, according to GAPKI data, while output over the same period has risen less than 1% a year in Indonesia, the world's top producer and exporter of palm oil. The increase in the biodiesel mandate would result in lower export volumes.

"Achieving 50% is not possible in the next few months since the required trials have not been conducted yet. Achieving 40% itself is a big task," said a Mumbai-based trader.

Indonesia's palm biodiesel mandate applies to land transportation, trains, industrial machinery and diesel power plants.

Indonesia is also developing palm-based jet fuel and has conducted flight tests, although implementation of the planned 3% biofuel blending for jet fuel by 2020 was delayed.

($1 = 4.3450 ringgit)

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https://www.reuters.com/business/energy/indonesias-prabowo-hopes-implement-50-palm-based-biodiesel-blending-by-2025-2024-08-26/