Palm Oil DilemmaAnjar Priandoyo

Jayabaya, 12th century, Javanese king, incarnation of the Hindu deity Vishnu, known for its prophesy

Javanese would be ruled for the life span of a maize (3.5 month, one crop cycle)

(Jayabaya, 1179)

People forget about this until

• For 800 years, people forget about this until March 1942 invasion Empire of Japan. People think Japan as saviour, where one crop cycle interpreted as 3.5 century of Dutch colonization (1592-1942) in Indonesia (Cornelis de Houtman is the first Dutchman come to Indonesia). Well this is wrong Japan is not saviour and Dutch is not rule for 3.5 century

• In 6 August 1945 something big happen, atomic bomb in Hiroshima Nagasaki change the course of war, Japan surrender, Indonesia declare independence in 17 August 1945. One crop cycle interpreted as 3.5 years.

What’s wrong (and right) with the prophecy

• Interpretation of corn (textual vs symbolic) which is not native of Indonesia

• Interpretation of political forces. Mongol invasion (1292), Islam conversion (15th century)

• Interpretation on cycle (Crop cycle, climate cycle). Indonesia only has two seasons (wet and dry). • Irregularity such as heavy rain in dry seasons, or

drought in wet seasons.

• Tectonic plate movement (Tambora Eruption, Krakatoa Eruption)

How Jayabaya related with my research

• Jayabaya as “forecasting” framework

• Understanding of dominant forces (fuel mix) that shapes Indonesia. Who will be dominant forces?

• Quantification of timeline “life plant of maize” 3.5 month. How long the dominant forces would be?

• Environmental impact of energy development. What will be happened if current situation goes at the same rate?

Who will be dominating forces? (Fuel mix)

Who will be dominating forces? (Export perspective)

• Indonesia is the biggest palm oil producer in the world. Indonesia has 53% export market share followed by Malaysia (37%). Together combined 85% of global production

• In 2015, 10% from Indonesian export is Palm Oil, followed by coal and petroleum.

• 11 million ha of land is use for palm oil plantation, rice paddy 8 mha, maize 4 mhaand rubber 3.6 mha

• In 2015, from 34 Mt palm oil production, 27 Mt is exported and 7 Mt is used domestically. In domestic consumption 2 Mt palm oil is used for biodiesel.

Who will be dominating forces? (Int’l trade perspective)

• Complex future of Palm Oil

• India and China is main destination for Indonesia Palm Oil. US is main destination for Biodiesel.

• As EU ban on biodiesel this destination will shifting, domestic consumption will increase.

What will be the consequences?

• Forest as renewable energy expansion• Most of geothermal in the conservation

forest

• To reach biodiesel in energy mix it needs 25 million ha of land

• Forest fire: Main Indonesian export

Thank you

The Complexity of TransitionFIRST AND BEST DOES NOT ALWAYS WIN THE RACE

Fuel Status Year Size

LPG Success 2007-2010

50 million HH

CoalBriquettes

Fail 2006-2007

1 million HH

Palm Oil Success 2010-2014

2 Mton (7% palm oil production), 7 Million vehicles

Jatrophacurcas

Fail 2006-2008

< 0.1 Mton, Japan planted since 1942

Sugar Cane

Fail 2006-2008

<2 Mton

Households

Transports

The Complexity of TransitionLARGE SCALE TRANSITION IS UNPREDICTABLE

In 1900, Indonesia’s main energy source is coal which accounted for 70% of energy mix. By 1960, oil which 70% of energy mix and as of 2010, Oil accounted for 52% Gas 29%, Coal 15%, Renewable 5%

Transition Kerosene to LPG Biodiesel Geothermal Coal

Timeframe 2007-2010 2010-2014 1980-2010 1989-1999

Market or

Sector

Urban and Rural

HouseholdsTransportation Electricity

National Energy

Supply

Annual

Growth Rate401% 92% 7.83% 30%

Main

FactorsIncreased Oil Price

Declining Palm Oil

Price, Increased Oil

Price

Market

Liberalization,

Increased Oil Price

Commodity Boom,

Electrification

Program

Dynamics of European Legacy

• Dynamics of European legacy in Indonesia. British Botanical Garden (1817), Dutch Cultuurstelsel (1830), Palm Oil (1848), Rubber (1876)

Sir Stamford Raffles British Java Governor

(1811–1815)

H.W DaendelsDutch East Indies Governor

(1808-1811)

Environmental impact of energy development

• Environmental impact

Netherlands import from Indonesia

Biodiesel is “promising future” for Indonesia

• Biodiesel is one of the most promising palm oil products due to the scarcity of energy in Indonesia.

• In 2013, the export composition of palm oil processed product is Fatty Acid 537 kt, Fatty Alcohol 259 kt, Glyserol 485 kt and Biodiesel 1,687 kt.

• In 2014, 2,936 kt of biodiesel of which 1,512 was exported and 1,424 kt used for domestic consumption

Structure of Palm oil Industry

Structure of Palm Oil Industry

Fresh Oil Palm- Fresh Fruit Bunch 87%

- - Loose Fruit 13%

Palm Oil MillsProduction Capacity

34 MT

By Product- Palm Kernel (CPO)

- Shell (Charcoal Briquettes)

- Kernel Meal (Animal Feed)

- Fiber (Biomass)- Cake Decanter

(Biogas)

Refinery Palm

OleofoodRefined, Bleached and Deodorized

Plam Oil (RBDPO)Non-dairy creamer, ice cream, instant

noodle

OleochemicalRefined Palm Stearin

Soap, Animal Feed, Coffee whiteners

BiodieselFatty Acid Methyl Ester (FAME)

Palm Fatty Acid

Refined Palm Olein

Domestic Consumption

Export