Indonesia-US Trade Deal: Ethanol Imports & E20 Mandate Concerns

Indonesia is now obligated to import at least 1 million kilograms of ethanol annually from the United States, according to a trade agreement finalized Friday in Washington D.C. The commitment is part of a broader Agreement on Reciprocal Trade (ART) between the two nations, detailed in Annex III, Article 2.23 of the agreement.

The agreement stipulates that Indonesia will not adopt or maintain any measures preventing the import of U.S. Bioethanol. Indonesia is required to mandate a five percent bioethanol blend (E5) in its gasoline supply by 2028, increasing to a ten percent blend (E10) by 2030, with a stated ambition to move towards a 20 percent blend (E20) contingent on domestic supply and infrastructure capabilities.

The annual import quota of 1 million kg of ethanol is equivalent to approximately 1.2 million liters, though the precise volume may vary based on temperature and ethanol concentration. This commitment comes as the Indonesian government has previously emphasized reducing reliance on fuel imports and bolstering domestic ethanol production. Minister of Energy and Mineral Resources (ESDM) Bahlil Lahadalia has stated the demand for “creative” solutions to achieve self-sufficiency in ethanol production, acknowledging the challenges of meeting domestic demand.

The ART agreement has prompted questions regarding Indonesia’s existing policy mandating a 20 percent ethanol blend in gasoline by 2028. Minister Lahadalia has indicated that achieving this goal requires innovative approaches.

Simultaneously, Indonesia is pursuing domestic ethanol production. A joint venture between PT Pertamina and PT Sinergi Gula Nusantara (SGN) is currently constructing a bioethanol plant in Banyuwangi, East Java, projected to produce 30,000 kiloliters of bioethanol annually using sugarcane as a feedstock.

Minister Lahadalia has stated that the import of ethanol, including from the U.S., will continue in parallel with efforts to increase domestic production, until Indonesia can meet its own needs. He also emphasized that the import agreement is proportional and measured to meet domestic requirements. The government is also actively seeking investment in the sector, including from U.S. Companies, to further expand domestic capacity.

The Indonesian government views the mandatory blending of gasoline with ethanol as a strategy to strengthen national energy security and create new business opportunities within the country. The U.S. Trade agreement facilitates this transition, providing a guaranteed supply of ethanol whereas Indonesia develops its domestic production capabilities.