Indonesia Gearing Towards Bio Ethanol Nov08

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Indonesia Gearing Towards Bio Ethanol Nov08

  1. 1. Indonesia Gearing towards Bio-ethanol – Next Generation Energy Fuel and its Challenges? Ratneswary Balasingam, Research Analyst Chemical, Materials and Food 11 November 2008
  2. 2. Focus Points 1 Benchmarking Indonesian Bio-ethanol :Market Size and Projections 2 Cassava & Molasses : Sustainable Feedstock 3 Key Drivers , Trends & Initiatives 4 Key Challenges 5 Conclusion: Achieving the Ultimatum 2
  3. 3. Benchmarking Indonesian Bio-ethanol Market Size and Projections 3
  4. 4. BIOETHANOL Next Generation Energy Fuel… The idea of using bio-ethanol or ethyl alcohol, based on starch and sugar, to power cars and other vehicles is not new to the market. As predicted by Henry Ford in 1925, quot;the fuel of the future is going to come from fruit like sumac...or from apples, weeds, sawdust - almost anything. There is fuel in every bit of vegetable matter that can be fermented. There's enough alcohol in one year's yield of an acre of potatoes to drive the machinery necessary to cultivate the field for a hundred years.quot; Nowadays with the uncertainty in price of crude oil, increasing concern for the environment and global warming, and the likelihood that exploitable oil reserves will come to an end. BIOETHANOL Next Generation Energy Fuel… 4
  5. 5. Indonesia Gearing towards Bio-ethanol Effects of high petroleum and natural gas prices, decline in production of crude fossil oil due to aging oil fields has led Indonesia to seek opportunities in bio- fuel production (bio-ethanol and bio- diesel). quot;Mandatory Bio-fuel Policyquot; which states the use of a 1-5 percent blend of bio- ethanol and 99-95 percent of gasoline for transportation will become mandatory in 2010.The program started in 2006 developed in stages. This study cover the 3 main categories/grades Bio-ethanol (hydrous ethanol) – technical/raw spirit/industrial grade. Bio-ethanol (hydrous ethanol) – high quality food and beverages grade. Bio-ethanol (anhydrous ethanol/ dry ethanol) – fuel grade ethanol (FGE) 5
  6. 6. Indonesia Gearing towards Bio-ethanol Over 10 factories have invested in bio-ethanol production in 2008.However: In-sufficient to meet the requirement at 5% of FGE in 2010 under current production methods. Investment to setup a 8 kilo liter per day bio-ethanol plant is estimated around USD7.38 million in 2007. ( small holders) Looking into technologies based on cellulose derived from crop residues or bio-mass (baggase, rice straw etc). Bio-ethanol is mostly derived using C molasses method in Indonesia. 6
  7. 7. Market Revenue and Projection Market Size by Revenue (2005-2010) 300 Value (USD Million) Increase in CAGR is 250 estimated, as CAGR : 23.5% 200 production for fuel CAGR : 6.97% 150 grade bio-ethanol 100 increases 50 Year - 2005 2008 2010 ► Bio-ethanol Market is valued at USD160.5 million in 2008 • •Competitive Market with an average of 10 active market players. Competitive Market with an average of 10 active market players. • •Market Revenue is estimated at USD160.5 million in 2008 and is Market Revenue is estimated at USD160.5 million in 2008 and is expected to grow to USD 244.8 million in 2010. expected to grow to USD 244.8 million in 2010. • •CAGR from 2008 to 2010 is estimated to be 23.51%, compared to CAGR CAGR from 2008 to 2010 is estimated to be 23.51%, compared to CAGR from 2005 to 2008 is 6.97%. from 2005 to 2008 is 6.97%. 7
  8. 8. Market Volume & Projection Market Size by Volume (2005-2010) 350 Volume (MT ‘000) 300 CAGR : 26.8% Production is 250 expected to rise by CAGR : 7.4% 200 ~125,000 tonnes, 150 charge up mainly by 100 the Mandatory Bio- 50 Year fuel Policy. - 2005 2008 2010 ► Bio-ethanol Market is volume at 205,753 tones in 2008 • •Market Volume is estimated at 205,753 tones in 2008 and is expected to Market Volume is estimated at 205,753 tones in 2008 and is expected to grow to 330,851 tonnes in 2010. grow to 330,851 tonnes in 2010. • •CAGR from 2008 to 2010 is estimated 26.8 % compared to CAGR from CAGR from 2008 to 2010 is estimated 26.8 % compared to CAGR from 2005 to 2008 is 7.4%. 2005 to 2008 is 7.4%. 8
  9. 9. Key Industry Participants Market Share by Top 3 Players (2008) PT Molindo Note : Raya Industrial Others include :PT Rhodia Manyar,PT Medco Energi 24% Internasional Tbk,PT Madu Baru,PT Perkebunan Others Nusantara XI, PT Basis Indah,B2TP,BPPT ,PT. Medco 37% Etanol Lampung PT Indo Lampung PT Indo Distillery Acidatama 20% Share by End Use Chemical 19% Application (2008) ► Bio-ethanol Market is valued at 205,753 tones in 2008 Fuel Grade 18% Note : Industry grade (Ethanol 95-96% (hydrous ethanol) -technical/raw spirit used as spirits, Industry disinfectants and solvents - other industrial grade used as chemical solvents Grade Beverages Grade (Ethanol 95-96% (hydrous ethanol) -high quality beverages Beverages 55% Fuel Grade Ethanol (FGE) (Ethanol >99.5% (anhydrous ethanol/ dry ethanol) – fuel Grade grade and pharmaceuticals. 27% Source: Frost & Sullivan,2008 9
  10. 10. Cassava & Molasses Sustaining Feedstock 10
  11. 11. Introduction Feedstock used for producing bio-ethanol in Indonesia Sugar Cane Cassava Sugar Cane is a primary feedstock for sugar production in Indonesia. Bio-ethanol is derived from molasses a by product of sugar product. Indonesia is yet to be self sufficient in sugar production. Cassava is relatively new to be used as a feedstock in Indonesia. Currently, focused feedstock for bio-ethanol production for rural areas in Java. 11
  12. 12. Planted Areas Indonesia (2006) Indonesia (2010) Sugar Cane: ~344,000 ha Sugar Cane: 750,000 ha Cassava : ~ 650,000 ha Cassava : 1,500,000 ha Lampung >25% of Sugar Cane planted Owned by sugar factory , new plant Java Java >60% of Sugar Cane planted ~ 50% of cassava planted IDB Superior Cassava (ISC) yield level 150 tons/ha, will be introduce to cover 90,000 ha Sugar Cane - around 40 per cent of sugar cane in Java is Cassava grown on wet land so yields are low; -2nd staple food, beyond SSL rate - 50% of cane producers are small holders ,the -Potential FGE production in 2007 average size is less than half a hectare - Producers are mainly small holders producing - inefficient management practices and sugar cassava chips while bigger players producer starch. mills are small and use outdated technology - Currently yield level is 15-18 tons/ha, new variety will be introduced ,IDB Superior Cassava (ISC) yield level 150 tons/ha, introduced to Java. 12
  13. 13. Processing Routes (Molasses) Molasses is a thick, dark syrup produced by reducing juice from sugar cane. Bio-ethanol is produced from molasses, however it can be produced through bagasses and sugar cane also. Bio-ethanol Production from Molasses Sugar Cane Bagasses Sugar Filter Cake Molasses 24% 8% 63% 5% Fermentation Power Plant Distillation Bio- Compost/Feed Plant Spent Wash Electricity Compost/ Feed Dehydration Ethanol is made from sugar cane Ethanol 99.5% through the molasses method, the sugar production of is not disrupted GASOHOL 13
  14. 14. Processing Routes (Cassava) Cassava chips are produced by local smallholders. Bio-ethanol Production from Cassava. Cassava Roots Sand Separation Cassava Chips Starch Milling Modified Starch Pellet / Liquefaction by alpha amylase *Total bio-ethanol produced from cassava is 16,986 Consumption tons in 2008. *DME program produces 400 bio-ethanol liters per Saccharification & day. 55 areas detected for smallholder production in 2006. Estimated >7,000 tons of bio-ethanol produced. Fermentation (Baker’s Yeast) Filtration & Distillation Ethanol 99.5% GASOHOL + CaO (calsium oxide) 14
  15. 15. The current total annual domestic sugar Sugar & Molasses : Availability consumption is 3.8 million tonnes (per capita consumption is 15kg), yet annual domestic production is estimated 3.3 million tonnes and 1.41 million tonnes from imports for 2008. Sugar & Molasses North Sumatra North Sulawesi Sugar : 4,600ton/year Sugar : 460 ton/year Molasses: 2,300 ton/year Molasses: 230 ton/year West Sumatra South Sulawesi Sugar : 17,670 ton/year Sugar : 490 ton/year Molasses: 8,835 ton/year Molasses: 245 ton/year Lampung Sugar :28,340 ton/year Molasses : 14,170 ton/year West Java East Java Sugar : 104,555 ton/year Sugar : 911,430 ton/year Central Java Molasses : 52,300 ton/year Molasses :455,700 ton/year Sugar : 2,288,300 ton/year Molasses : 1,144,150 ton/year Indonesia Frost & Sullivan,2008 Sugar : 3,355,845 ton/year Molasses : 1,677,920 ton/year 15
  16. 16. The current total annual domestic food Cassava : Availability consumption is 13.9 million tonnes (per capita consumption is 55.7kg), and annual domestic production is estimated 20.8 million tonnes for 2008. Cassava North Sumatra Cassava: 412,000 ton/year South Sulawesi Cassava: 607,000 ton/year Papua West Sumatra Cassava: 41,000ton/year Cassava: 243,000 ton/year Lampung Others Cassava:5,473,283 ton/year Cassava: 2,969,100 ton/year West Java Cassava: 2,044,674ton/year East Java Central Java Cassava: 4,769,662 ton/year Cassava: 4,235,210 ton/year Indonesia Frost & Sullivan,2008 Cassava: 20,794,929 ton/year 16
  17. 17. Cassava & Molasses : Conversion Ratio Conversion Ratio : Raw Material* Sugar Content (kg) Bio ethanol (L) Raw Material: Bio ethanol Cassava 240-300 167 6.5:1 Corn 600-700 400 2.5:1 Bagasse 10-20 760-830 1.3-1.2:1 Sago 120-160 90 12:1 Sugar Cane 110 67 15:1 Molasses 450-520 250 4:1 *Calculations are made for every 1000 kg of the raw material Rough Estimates For All Grades 45% of molasses is used for Bio-ethanol production ,others goes into amino acid (glutamic acid & lysine) production and animal feed 4:1 Molasses : 1,677,930 ton/year x 45% Bio-ethanol:188,767 ton/year ~0.5% of cassava is used for Bio-ethanol production, mainly for direct consumption and food Indonesia Bio-ethanol: processing 205,735ton/year in 2008 6.5:1 Fuel Grade Cassava: 20,794,929 ton/year X0.5% Bio-ethanol:16,986 ton/year 18% Industry Food/ Grade Beverages 55% Grade 27% FGE Bio-ethanol:37,032 ton/year Frost & Sullivan,2008 17
  18. 18. Cassava & Molasses : For Fuel Supply Consumption for Transportation Bioethanol No. Fuel Pump Year Gasoline (tones) Retail Area Principal Blends (2007) 2005 17,459,000 Malang BioPremium 5 E-3/ E-5 2008 19,204,900 Jakarta 14 Pertamina BioPertamax 2010 22,348,606 Surabaya E-3/E-5 6 2015 35,107,000 * CAGR of 9% from 2008-2015 Source; PT Pertamina(Persero),2008 Rough Estimates For Fuel Grade Supply Bio-ethanol Crude Oil Bio-ethanol Blend (%) (2008) (2008) Fuel grade (99.5%): 37,032 ton/year 19,167,868 ton/year 0.2% (2010) (2010) Fuel grade (99.5%):162,178 ton/year 22,153,526 ton/year 0.7% (2015) (2015) Fuel grade(99.5%):3,510,700ton/year 31,596,300 ton/year 10% GAP of ~1 million Frost & Sullivan,2008 Production can go up to 1.25 million tons derived from raw materials of bagasse and sugar cane tons to achieve 5% 18
  19. 19. Key Drivers, Trends & Initiatives 19
  20. 20. Key Drivers Rank Driver 1 - 2 Years 3 - 4 Years 1 Energy Security Issues ,Policies and High High Government Incentives 2 Meeting Euro Bio-fuel Standards High High 3 Rural Development and Diversification High Medium of Rural Economy (DME program) - funding by government and local financial institution. Source: Frost & Sullivan,2008 20
  21. 21. Key Drivers Policy and Regulations Targeted Energy MIX (2025) • President Decree No : 5/2006, January 25, 2006. Coal – Policy Of National Energy 33% • President Decree, No : 1/2006, January 25,2006. Others – Supply and uses of Biofuels for alternative fuel 7% Gas • President Decree No 10/2006, July, 24,2006 30% Biofuels – Establishment of Biofuel’s National 5% Committee for acceleration of poverty removal and reduction of Geo Oil thermal 20% unemployment 5% Others include: Nuclear, Biomass, Hydro, Solar, Wind, Liq. Coal Product Standards • Minister of Energy and Mineral Resources Decree No: 3674 K/24/DJM/2006, March,17, 2006 – Standard and Quality ( Specification) Gasoline Fuel which marketed locally. – Usage of ethanol enable up to maximum 10% volume • Minister of Energy and Mineral Resources Decree No; 3675 K/24/DJM/2006, March,17, 2006 – Standard and Quality ( Specification) Diesel Fuel which marketed locally – Usage Of FAME enable up to maximum 10% volume • Minister of Energy and Mineral Resources Decree No: 13483 K/24/DJM/2006, September,26, 2006 – Standard and Quality ( Specification) Biodiesel as Alternate Fuel which marketed locally. • Minister of Energy and Mineral Resources Decree No: 051/2006, October,10, 2006 – Procedures for Commercial Trading of Biofuel as Alternate Fuel. Source: Frost & Sullivan – Article 9.1 : Security of Supply of Biofuels for domestic demand. – Exporting and or Importing Biofuels have to get recommendation from The Minister of Energy Source: Minister of Energy and Mineral Resources, Indonesia, 2008 21
  22. 22. Trends & Initiatives Rank Trends Initiatives 1 Global warming and environment Carbon emission reduction?, bio-ethanol replacing issues fossil fuel Improving ABGC* linkage, waste management, increasing yield, agronomy practices 2 Policy and meeting international Utilization bio-fuel to reduce import. standards (2006- 2025) plan, refer Implementation of policies. slide 21 3 Liaison with foreign company and Developing and improving output / technology technology transfer Example: RNI// PT Choi Biofuel Indonesia,RNI// PT PSA Aotu-matika, Mitsubishi Corp // Medco Energi Internasional. 4 Lack of raw material hampers Option of ‘C’ and ‘B-Heavy’ molasses routes, SSF? amount produce Use Cassava (150 ton/ha // 14-17 ton//ha) Need to achieve SSL for Sugar production *ABGC- Academician, Businessman, Government and Community Source: Frost & Sullivan,2008 22
  23. 23. Indonesian Bio- Ethanol Production Stages Source: Minister of Energy and Mineral Resources, Indonesia, 2006 23
  24. 24. Key Challenges 24
  25. 25. Major Challenges Rank Challenges 1 - 2 Years 3 - 4 Years 1 Meeting Raw Material Requirement High High 2 Implementation of Cellulosic production Medium High of ethanol - SSF technology 3 Driving home industry producers to High/Medium High supply bio-ethanol Source: Frost & Sullivan,2008 25
  26. 26. Conclusion: Achieving the Ultimatum 26
  27. 27. Conclusion: Achieving the Ultimatum Indonesia wants to see bio- ethanol replace 5 % of its fossil fuel transport consumption by 2010. To achieve this target, Indonesia may have to look into the potential of utilizing bio-mass (bagasse & other crop waste) as a feedstock to produce bio-ethanol. In 2008, Bio-ethanol in Indonesia has an annual production of 205,753 tonnes. With current price of bio- ethanol of USD 0.7-0.9 per liter, revenues are estimated at USD 160.5 millions. Liaisons with foreign player and technology sharing will boost production for bio-ethanol. Government plans and policies will help boost the market for bio- ethanol. Government funding and incentives to the industry is seen as a driver for producers. 27
  28. 28. Your Feedback is Important to Us What would you like to see from Frost & Sullivan? Growth Forecasts? Competitive Structure? Emerging Trends? Strategic Recommendations? Other? Please inform us by taking our survey. 28
  29. 29. For Additional Information Steve Lee Strategic Account Manager Chemical, Materials & Food (65) 6890 0914 steve.lee@frost.com 29

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