Jakarta, February 17:

Indonesia is embarking on an ambitious biofuel programme which has already attracted more than $17 billion in foreign and domestic investment and criticism from conservationists worried about the country’s forests.

While Indonesia is rich in oil and gas supplies, demand in Southeast Asia’s biggest economy is outpacing production and it is seeking alternative energy sources to secure its future.

The government has set a target that 17 per cent of the country’s energy requirements must be met from renewable sources by 2025 and last year established a National Team for Biofuel Development to develop alternative energy supplies.

For team chief executive Al Hilal Hamdi, crops such as palm oil, cassava, jatropha and sugar cane could hold the answer not only to Indonesia’s concerns about energy security, but also unemployment, poverty, the environment and local unrest. Last month foreign and domestic firms signed agreements totalling $12.4 billion to develop biofuel projects to turn crops such as palm oil and sugar cane into biodiesel and bioethanol.

Chinese state-owned China National Offshore Oil Corp inked the single biggest deal — worth $5.5 billion — with PT SMART, a subsidiary of Indonesia’s Sinar Mas Group, and Hong Kong Energy (Holdings) Ltd. The other investors included Malaysia’s Genting Bhd, Japanese firms Mitsubishi and Mitsui, Brazil’s Petrobras and companies from South Korea and Singapore.

“Foreign investment is $12.4 billion and the domestic investment is about five billion — half of that is for the farmers through the Indonesian banks,” Hamdi said. Over the next eight years, some five million to six million hectares will be planted with biofuel crops, he said.

But just where all this land — an area far larger than Denmark and a bit smaller than Sri Lanka or the US state of West Virginia — is going to come from is what worries conservation groups concerned about deforestation.

And according to a surprising study by Netherlands-based Wetlands International and Delft Hydraulics, biofuel is often more polluting than fossil fuels. Drainage of vast peatland areas for oil palm plantations leads to huge emissions of carbon dioxide as drained peat decomposes very rapidly, the study released in December found.