Indonesia Gearing towards Bio-ethanol

– Next Generation Energy Fuel and its

Challenges?

Ratneswary Balasingam,
Research Analyst
Chemical, Materials and Food
11 November 2008
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
Benchmarking Indonesian Bio-ethanol

Market Size and Projections

3
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, "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."

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
 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).

"Mandatory Bio-fuel Policy" 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
 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
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
CompetitiveMarket
Marketwith
withan
anaverage
averageofof10
10active
activemarket
marketplayers.
players.
• •Market
MarketRevenue
Revenueisisestimated
estimatedatat USD160.5
USD160.5million
millioninin2008
2008and
andisis
expected
expectedtotogrow
growto
toUSD
USD244.8
244.8million
millioninin2010.
2010.
• •CAGR
CAGRfrom
from2008
2008toto2010
2010isisestimated
estimatedto tobe
be23.51%,
23.51%,compared
comparedto
toCAGR
CAGR
from
from2005
2005toto2008
2008isis6.97%.
6.97%.

7
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
MarketVolume
Volumeisisestimated
estimatedatat 205,753
205,753tones
tonesinin2008
2008and
andisisexpected
expectedto
to
grow to330,851
growto 330,851tonnes
tonnesinin2010.
2010.
• •CAGR
CAGRfrom
from2008
2008to to2010
2010isisestimated
estimated26.8
26.8%
%compared
comparedto
toCAGR
CAGRfrom
from
2005
2005to
to2008
2008isis7.4%.
7.4%.

8
 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
Cassava & Molasses

Sustaining Feedstock

10
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
 Planted Areas
Indonesia (2006)
Sugar Cane: ~344,000 ha
Cassava : ~ 650,000 ha
Lampung
>25% of Sugar Cane planted
Owned by sugar factory , new
plant
Java
>60% of Sugar Cane planted
Sugar Cane
- around 40 per cent of sugar cane in Java is
grown on wet land so yields are low;
- 50% of cane producers are small holders ,the
average size is less than half a hectare
- inefficient management practices and sugar
mills are small and use outdated technology
Indonesia (2010)
Sugar Cane: 750,000 ha
Cassava : 1,500,000 ha
Java
~ 50% of cassava planted
IDB Superior Cassava (ISC)
yield level 150 tons/ha, will be
introduce to cover 90,000 ha
Cassava
-2nd staple food, beyond SSL rate
-Potential FGE production in 2007
- Producers are mainly small holders producing
cassava chips while bigger players producer starch.
- 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
 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
 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
 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
 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
 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
 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%
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Key Drivers, Trends & Initiatives

19
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

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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
Trends & Initiatives

Rank Trends Initiatives

1 Global warming and environment
issues
2 Policy and meeting international
standards (2006- 2025) plan, refer
slide 21
3 Liaison with foreign company and
technology transfer
4 Lack of raw material hampers
amount produce
*ABGC- Academician, Businessman, Government and Community
Carbon emission reduction?, bio-ethanol replacing
fossil fuel
Improving ABGC* linkage, waste management,
increasing yield, agronomy practices
Utilization bio-fuel to reduce import.
Implementation of policies.
Developing and improving output / technology
Example: RNI// PT Choi Biofuel Indonesia,RNI// PT
PSA Aotu-matika, Mitsubishi Corp // Medco Energi
Internasional.
Option of ‘C’ and ‘B-Heavy’ molasses routes, SSF?
Use Cassava (150 ton/ha // 14-17 ton//ha)
Need to achieve SSL for Sugar production

Source: Frost & Sullivan,2008

22
Indonesian Bio- Ethanol Production Stages

Source: Minister of Energy and Mineral Resources, Indonesia, 2006

23
Key Challenges

24
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
Conclusion: Achieving the Ultimatum

26
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.

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For Additional Information

Steve Lee
Strategic Account Manager
Chemical, Materials & Food
(65) 6890 0914
steve.lee@frost.com

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