Growing potential of biofuels across Asia

Asia’s development potential as a biofuels production resource continues to grow, driven by ambitious energy transition objectives and equally bold net zero targets.
While hugely diverse and progressive, however, the region could never be termed a risk-free, or even low-risk, investment environment.
There is, nevertheless, much to recommend it as a focus for advancing renewable fuels achievement.
The latest Association of Southeast Asian Nations (ASEAN) Energy Outlook, for example, which deals with progress and prospects from 2023 to 2050, features an extensive listing of energy and related policies for the body’s 10 member countries.
This includes an impressive range of ambitions from securing country-specific net-zero targets by 2040, 2050, or 2065, depending on national policies, to raising renewable energy usage by 50% and beyond, in some cases, by 2050.
While most of the 10 ASEAN members see a sharply rising role for EVs within their national transport fleets, there is still plenty of evidence of positive intent towards the promotion of biofuels.
Indonesia, for instance, is pursuing ever more ambitious biodiesel and bioethanol blending targets, alongside Malysia’s goal of hitting a biodiesel blend of 30% by 2030, while Thailand is aiming for 11.74% consumed biofuel within its transport sector fuel consumption by 2037.
There’s also an increasing focus on ASEAN-based sustainable aviation fuel (SAF) developments, led by Malysia’s declared target of reaching a 47% SAF blending mandate by 2050.

Sheikhupura development

Asia, in general, is already big into SAF developments, of course, with the latest high-profile attention involving the creation of a 145,000-tonne-a-year facility in Sheikhupura, Pakistan.
Backed by the Asian Development Bank (ADB), this is the first private sector-led SAF initiative in Asia and the Pacific, thanks to the signing of an $86.2 million (€73 million) financial package between the Bank and the developers, SAFCO Venture Holdings Limited (SAFCO).
Unveiled last December, the development is still in its relatively early stages. For an update on progress, however, Biofuels International spoke to Guillaume Le Bris, head of infrastructure and energy at ILX who are working alongside ADB in providing a percentage of project funding.
“We manage funds for three Dutch pension funds and two Danish pension funds, with our global strategy being based on investments linked to development banks, such as ADB,” said Le Bris.
This is an approach which enables the Amsterdam-headquartered business to embrace funding opportunities in emerging and developing regions without shouldering the risks normally associated with such projects.
In response, therefore, to the suggestion that Asia could be best described as ‘huge potential/huge risk’, Le Bris answered: “That’s why we only work with multilateral and bilateral development banks.
“In a sense they’re doing such great work from a due diligence and structuring point of view that their presence strongly mitigates the risks involved. That’s the concept, certainly, and it’s working very well.
“The project in Sheikhupura is groundbreaking in an SAP context in that we’re using private money from our managed funds to finance a major biofuel development in Pakistan when, if it wasn’t for our role in the transaction, institutional investors would probably not be doing this directly. “Part of our role is to explain what ADB has done, and is doing, in preparing for this project to go ahead, complete with all the due diligence they’ve carried out before getting to this point.
“While we obviously do our own due diligence, projects like these are assessed and driven by government and regional owned development banks, which in this case is ADB.”
Scheduled for completion in 2026, the Sheikhupura project is advancing as planned, added Le Bris, a judgement based on ILX’s experience of having been involved in many other such projects both globally, in general, and across Asia, in particular.
“We’ve supported projects, albeit not necessarily related to either biofuels or energy, in Mongolia, Bangladesh, Vietnam and Uzbekistan,” he said. “We also currently have another development coming together in Thailand and are looking at a further potential project in Indonesia.
“Assessing individual projects always comes down to what they will deliver for our investors. We’re working for our investors after all and they need to see a stable return in addition to impact, which is where Asia can be especially productive.

“Renewable energy and biofuels are certainly key priorities for us. Transactions in these sectors are appealing to our investors which means we always look positively at projects which are designed to help decarbonise the aviation industry, as is the case with the new SAP plant in Pakistan.
“We’re also looking at another energy development, based in Southeast Asia, which I can’t name at present, but which would be based on the use of palm oil residues as the core feedstock. These are the sort of investments we showcase and of which we are very proud as a funding provider.”

ADB support

ADB’s commitment to the Pakistan project, and others like it, appears to be solid and secure, as illustrated by comments from the Bank’s Director General for Private Sector Operations, Suzanne Gaboury, made when the Sheikhupura development was first unveiled a little less than a year ago.
“The development of the renewable fuels market in Pakistan exemplifies ADB’s commitment to support innovative and sustainable solutions that fight climate change,” she said, signalling the Bank’s readiness to keep driving the region’s biofuels capacity forward.

Indonesia’s B40 initiative

A prime example of positive promotion for biofuel usage across Asia is the Indonesian Government’s significant blending ambitions, as already mentioned.
After shifting from B35 to B40 this year, Indonesia’s leaders already have their sights set on taking the blending of palm oil with diesel to B50, potentially as early as next year.
The policy has not been without its detractors, however, or sceptics, which might be a better description of how some analysts view the Indonesian Government’s direction of travel.
Looking at how the upward blending drive might work, especially if all goes to plan, increasing the biodiesel blend rate from 35% to 40% this year is forecast to lift the country’s biodiesel consumption to 14.5 billion litres, up 10% on 2024 figures.
This is according to the latest Indonesia: Biofuels Annual, produced in mid-August by the US Department of Agriculture’s Foreign Agricultural Service (USDA/FAS).
Acknowledging that B40 reflects Indonesia’s ‘strong bid for energy self-sufficiency’ the USDA/FAS also commented on the country’s preparations to increase to B50 in 2026.
“A technical test for B50 has been completed and will be followed by a road test,” said USDA/FAS. “Given current production capacity, implementation of B50 in 2026 will require sizeable additional capacity and subsidies as shifting to B50 is estimated to require 19-20 billion litres of biodiesel.”
A challenging feedstock requirement certainly, but one that Indonesia’s leaders see as a strategic step that highlights the country’s involvement in global energy transition and a ‘significant milestone in achieving energy sovereignty and environmental sustainability’.
Indonesia’s bioethanol blending plans are equally ambitious, with government forecast documents showing inclusion rates reaching 50% by 2050.
Even if such a target proves unobtainable, and it might not, the country’s pathway for the future growth of biodiesel and bioethanol is clear for all to see, producers and investors alike.

Trade pressures

As with most other parts of the world, the impact of rising US trade tariffs is an obvious economic shadow for many Asian countries. Some have already secured deals to keep business as calm as possible, but others appear to be caught in the firing line.
Staying with Indonesia, as an example, a reciprocal trade deal with the US was agreed in July, under which Indonesia will pay the US a tariff rate of 19%.
At the same time, the Asian country agreed to eliminate tariff barriers on over 99% of US products exported to Indonesia across all sectors.
How this impacts biofuels production and use in Indonesia remains to be seen, a fact acknowledged by USDA/FAS. Nevertheless, a deal appears better than sustained uncertainty.
Tariff pressures on India, meanwhile, have ramped up in recent days (certainly at the time of writing), leaving the Asian powerhouse with US tariffs of 50% on goods from India. These are deemed to include a 25% penalty for India’s transactions with Russia.
While too soon to assess any potential knock-on business impact across the wider economy of Asia, India’s Union Commerce and Industry Minister, Piyush Goyal, was quick to declare that his country’s exports this year were still ‘likely’ to exceed 2024 figures.
He also pointed out that India has added several new trade agreements in recent times, including deals with Australia, the UAE, Switzerland, Norway, Liechtenstein, Iceland and the UK.  All of which, he added, would boost opportunities for Indian industries across many key sectors.

Ambition, innovation and cooperation

Finally, an upbeat statement of energy intent from the executive director of the ASEAN Centre for Energy, Dato’ Ir Ts Razib Dawood.
Speaking in early August, he said: “As ASEAN becomes the world’s fifth largest economy, energy demand will keep rising, and we must tackle it with ambition, innovation, and cooperation.
“As such, we stand ready to continue supporting ASEAN’s collective efforts in advancing regional cooperation, accelerating sustainable development, and ensuring energy security across the region.”

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