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JAKARTA: Indonesia's is preparing a roadmap to expand the downstream industry for palm oil by 2024 to absorb potential oversupply of the vegetable oil, a senior official at the country's Ministry of Industry said on Thursday.

The Indonesia palm oil association (GAPKI) estimates output of palm and palm kernel oil from the world's top exporter will rise to around 50 million tonnes this year and to 60 million tonnes by 2025.

Meanwhile, the vegetable oil is facing barriers in the European Union due to environmental concerns and India due to import tariffs amid already sluggish market due to oversupply.

Benchmark palm oil futures in Kuala Lumpur continue to trade near its lowest since close to four years.

"We want to push to have bigger absorption of crude palm oil especially in industries such as chemicals and other downstream sectors," said Achmad Sigit Dwiwahjono, director general of chemical, pharmaceutical and textile industries at the Industry Ministry.

He said the ministry is currently drafting a plan to create an additional 12 million tonnes per year of absorption capacity in Indonesia by 2024 to produce biodiesel and other palm-based fuel and more derivative products.

Dwiwahjono said Indonesia currently only has 125 palm derivative products, while rival Malaysia has up to 300 products. Indonesia wants to increase the number of products made from palm oil to at least 150, he said.

So far, Indonesia uses around 30% of its palm oil production domestically and exports the rest, said GAPKI chairman Joko Supriyono.

"The challenge going forward is how to strengthen the domestic market to balance out the exports," he said. In Indonesia, palm oil is mostly used for food and cleaning products, and increasingly for biodiesel in recent years due to a mandatory biodiesel programme.

"Exports are already diversified, but we need more value-added products," Supriyono added.

Indonesia's state energy company PT Pertamina has signed an initial agreement with Italian oil company Eni SpA to develop a refinery that would produce fuel completely derived from palm oil, while state electricity utility PT Perusahaan Listrik Negara has said they are converting four of its power plants to use palm-based fuel.

Copyright Reuters, 2019