Strategic Downstream Move: Indonesia To Produce Sustainable Jet Fuel From Palm Oil

Bali, Indonesia – In a significant development for both its agricultural and energy sectors, Indonesia has committed to producing Sustainable Aviation Fuel (SAF) derived from palm oil. The announcement from top economic minister Airlangga Hartarto frames this initiative as a crucial next step in the country's downstream industrialization policy, following the landmark B40 biodiesel program. By venturing into bioavtur, Indonesia seeks to diversify the applications of its palm oil, reduce the carbon intensity of a hard-to-abate transport sector, and establish itself as a supplier in the emerging global market for clean aviation fuel.

The economic case for domestic SAF production is deeply tied to national energy security. Indonesia's growing aviation industry relies heavily on imported fossil-based avtur, with import volumes and costs showing a sharp upward trend. This dependence represents both a financial drain and a strategic vulnerability. Developing a renewable alternative from domestically superabundant palm oil offers a pathway to displace a share of these imports, conserve valuable foreign exchange, and strengthen the resilience of the national transportation infrastructure against international market disruptions.

Concurrently, the environmental imperative is undeniable. The international aviation community, guided by bodies like the International Civil Aviation Organization (ICAO), has established ambitious targets for carbon-neutral growth and eventual emission reductions. SAF is universally recognized as essential to meeting these goals in the coming decades. For Indonesia, a major palm oil producer, investing in SAF represents an opportunity to provide a tangible solution to a global problem. Scientific assessments confirm that sustainably produced SAF can achieve substantial lifecycle emission reductions—by 65% to 80% or more—compared to conventional jet fuel.

Indonesia's endeavor is grounded in proven domestic research and development. The country's technical capability was demonstrated in 2021 with the successful flight test of a CN235 aircraft using a 2.4% bioavtur blend (J2.4) made from refined palm kernel oil. This achievement, a result of collaboration between state-owned enterprises, universities, and government agencies, proved the fuel's performance and reliability. The current strategy aims to industrialize this capability, with early projects focusing on partnerships like that between PT Pindad and the Palm Oil Plantation Fund Management Agency (BPDP) to build production facilities.

Acknowledging that the sustainability of the feedstock is critical for international market access, Indonesia is taking proactive governance measures. The government has reinforced the mandatory Indonesian Sustainable Palm Oil (ISPO) certification scheme and is building an integrated digital system for traceability. These actions are designed to provide transparent, verifiable evidence that palm oil used in SAF adheres to strict environmental and social standards, addressing concerns from international regulators and consumers and ensuring the fuel's acceptability in regions with stringent import rules.

The broader economic landscape makes this an opportune moment for such an initiative. The palm oil sector is a powerhouse, generating a trade surplus of billions of dollars and supporting the livelihoods of millions of smallholder farmers. Creating a new, sophisticated domestic market through SAF production can help stabilize farm-gate prices, drive investment in advanced refining and chemical engineering, and generate high-skilled employment, all while retaining more economic benefits within the country.

Looking forward, the government has signaled a clear implementation pathway. Minister Airlangga has stated that Indonesia plans to begin applying new biofueling measures in the second semester of 2026. This will build upon the solid foundation of the B40 program, which has already delivered measurable successes in import substitution and emission reductions, showcasing the nation's capacity to execute large-scale biofuel policies.

Indonesia's plan to manufacture jet fuel from palm oil is a forward-looking synthesis of industrial ambition and environmental strategy. It reflects a commitment to evolving beyond commodity exports and participating in value-added, technology-driven markets. By pursuing this course, Indonesia not only aims to enhance its own energy and economic security but also to position itself as a key enabler of sustainable global aviation in the 21st century

Tag: Aviation Decarbonization Downstream Industry Industrial Strategy National Energy Policy Sustainable Jet Fuel Value-added Palm Oil