Strategy for Commercialization of Pertamina Renewable Diesel in the B2B Domestic Market

 KPI is a major energy corporation that operates in Indonesia, primarily producing diverse fuel and petrochemical products from its six refineries nationwide. PT KPI has successfully modified its facility to manufacture the first renewable diesel in the region to meet global and national energy transition and decarbonization goals. This renewable product surpasses FAME/biodiesel in terms of its superior quality, sustainability, and ability to be used directly without requiring any modifications to the engine. In the medium term, KPI plans to build a new Green Refinery to increase the production capacity of renewable diesel. The commercialization of renewable diesel is far from the target, only 12% of the total production capacity. This poor sales performance will endanger the continuity of future projects and energy transition targets in KPI and nationally. This research aims to understand the B2B market and customer decision-making behavior regarding renewable diesel products. To answer the business issue, the author utilizes the conceptual framework of the Five-Stage Model of Business Decision Behavior developed by Koster and Armstrong. Relevant respondents from the business-to-business sector were questioned using a predetermined set of questions, following the established protocol of the Five Stage Model concept. The respondents were middle and senior-level executives from major B2B clients who fully understood and knew about fuel operations, sustainability-related business challenges, and decarbonization. Through the recommended framework and analysis of consumer business decision behavior, a recommendation and solution were proposed for marketing strategy the renewable diesel product to B2B clients.

Introduction

PT (KPI) is Indonesia’s State-Owned Enterprise Energy Company subsidiary. Currently, the Company fully manages the refinery business and operation in Indonesia as a business entity that aims to generate profit. The Company has four core business focuses: procuring feedstock, processing/refining the feedstock to various products such as fuel, petrochemical, and unique products, marketing the product, and managing the development/expansion project. To prepare for the business challenges of the energy transition and decarbonization, KPI started diversifying its existing business into renewable biofuel business with achievement by successfully implementing the Modification Project of Existing Facilities to produce the first renewable diesel (HVO) product in the region using the first-generation feedstock. Renewable diesel has superior and excellent quality compared to biodiesel/FAME, which has become.

Indonesia’s only mandated bio-solar blending component (IRENA, 2023). By producing this advanced biofuel compared to the existing biodiesel/FAME, PT KPI expects to open and lead the energy transition in the bioenergy sector in Indonesia by producing better renewable diesel quality and lower GHG emissions to the customer. This vision aligned with the Government pledge in Energy transition and decarbonization through several pledges and commitments on:

• Enhanced National Determined Contribution.

• Long-Term Strategy of Low Carbon and Climate Resilience Net Zero Emission for Energy Sector by 2060 or faster.

• Roadmap toward Net Zero Emission in the Energy sector.

Based on that document, renewable bioenergy sharing/ composition will be increased to replace fossil fuel starting in 2030 and peak in 2060. For solar itself, Indonesia has begun and proved its ambition for blending biofuel (FAME/biodiesel) into solar fuel, which is currently reaching 35% (Purba, 2018).

Per the KPI’s vision to prepare for the energy transition and decarbonization era and support the government commitment to Net Zero Emission Ambition, KPI expects to successfully commercialize the renewable product in the market since the success will become an essential milestone for the Company’s business. As informed in the Company’s annual report stipulated at Table I, renewable diesel capacity will be increased through investment in the New Green Refinery in Java and Sumatera Island. In contrast with expectations, the commercialisation of renewable diesel could be more satisfactory.

Table I. Renewable Diesel Sales

Parameter	Unit of measurement (UoM)	Value
Design cap	%	100
% Sales on design cap	%	12
% Sales for global customer	%	99.9
% Sales for domestic customer	%	0.1

Commercialization in the global/export market currently is halted/limited due to the feedstock sustainability issued for several regions such as the EU, while in the domestic market com, commercialization is still limited due to higher prices, less product familiarisation, and less accurate defining STP (segmenting, targeting, positioning) of customers. Among the KPI customers, there are B2B customers who have better awareness related to fuel products and are concerned about quality due to the increment blending mandate FAME into solar. Also, these B2B customers consume bio-solar energy quite an enormous amount of. If KPI succeeds in commercializing renewable diesel to B2B customers, it will become an effective solution to make the production of renewable diesel sustainable.

According to the business issue above, KPIs need to define the marketing strategy for commercializing renewable diesel in the B2B domestic market.

Methodology

To answer research questions and business issues, this research used a qualitative methodology to analyze the Company’s position, resources, and capability internally and externally; also, to understand and construct a business solution concept, the author used Kotler and Armstrong’s model named business buying decision. The data was collected through several methods, primary and secondary; the preliminary data was obtained from the customer’s interview, which was prepared for this research, while the secondary data was obtained from the Company’s website, a government website, and the internet.

The study of customer decision-making behavior utilizes the Five Stage Model (Kotler & Armstrong, 2010), as stated in Fig. 1, which includes:

• Problem recognition,

• Information search,

• Evaluation of alternative solutions,

• Supplier selection, purchase decision, and

• Post-purchase analysis.

Fig. 1. Conceptual framework.

To comprehensively capture all five stages of the paradigm mentioned above, a set of interview methods and a list of questionnaires were devised.

Regarding the respondents’ B2B customers, the author has an approach and discusses the characteristics in Table II.

Table II. Respondent Characteristics

Customer	Description	Position
(A)	Integrated mining service, a subsidiary of Astra	Energy management expert, ESG committee
(B)	Indonesia mining company	Sr. Business development manager
(C)	Indonesia mining service association heavy equipment covers 40% of its members and is mining services.	Secretary-general

Business Exploration and Result

According to the methodology mentioned previously, the research focuses on internal and external analysis to elaborate and analyze internal and external factors that may affect the commercialization of renewable diesel cumbersome equipment in the B2B domestic market. To ensure the solution meets the business issue, the customer analysis is conducted by directly interviewing customers from the B2B sectors. Also, the authors actively attended various events held by the B2B customers to acquire a better voice from the customers. (Porter, 1985; Kotler, 1984).

Referring to in-depth interviews with the B2B potential customers using Business Decision Behavior or Five Stage Model by Kotler and Armstrong’s model, the result of the analysis shows the critical aspects as follows:

• Most B2B customers acknowledge an issue related to the quality of bio-solar, which contains higher FAME content; the issue happens in the engine performance (filter), maintenance period, manufacturer guarantee, and storage ability issue. These customers expect better alternatives for solar by introducing renewable diesel as a blending component besides FAME-only.

• B2B customers were actively looking for better solutions for sustainability since, in their Company, sustainability has already become an essential topic mentioned in the vision, mission, and Key Performance Indicator. One of the critical activities was looking for better fuel quality with much lower carbon intensity emissions. If any alternative better fuel complies with government regulations, they will consider using it.

• Once they are looking for the options, B2B customers start to select and determine the fuel selection based on numerous factors such as price, regulation, GHG emissions, and most, productivity, which means how much productive the 1 unit of fuel can produce the product of mining product with minimum downtime. These factors will determine the overall added value of a particular fuel.

• Another crucial factor for decision-making was supplier reliability; based on the geographic aspect, most of the B2B customer’s cumbersome equipment was located at a remote site or area, and the reliable fuel supplier was the critical factor to consider when selecting new fuel.

• As the fuel had the highest operating cost after equipment rental/lease/purchase, most B2B customers required a trial for new fuel, including renewable fuel, before they decided to use a particular fuel.

• Due to the importance of fuel in the Company’s overall operations, the Board of Directors decided to choose or alter the fuel.

Based on the customer decision-making process behavior above, the commercialization strategy of renewable diesel was developed in product education, differentiation strategies, approach to the decision-making process on the customer side, and fulfillment of the regulatory requirements.

Conclusion and Solution

According to the conceptual framework, methodology, and business exploration analysis, the commercialization of renewable diesel in the B2B domestic market has good potential and promises opportunities. The B2B customers already have a good understanding of sustainability, decarbonization, and renewable fuel for their operation. They have a rational decision-making process for renewable fuel considering overall aspects or benefits, including quality, robust supply chain, the benefit of low carbon fuel, and overall productivity. These results can be utilized to develop proper strategies in marketing and sales activities. (David & David, 2016).

The proposed solutions and recommendations to answer the business issue consist of:

• PT KPI’s management proactively engages in B2B customer management, particularly in the decision-making process about fuel utilization at the management level.

• PT KPI shall proactively organize events, workshops, and conferences, as well as sponsor activities with B2B customers to enhance their understanding of renewable diesel products.

• PT KPI suggests conducting a trial of renewable fuel in the equipment and operations of B2B customers to enhance confidence and demonstrate the better qualities of renewable diesel.

• The management of PT KPI aggressively engages with the regulator to expedite the issuance of various regulatory frameworks, such as specifications for renewable diesel as biofuel categories.

Further studies related to the commercialization of renewable diesel may be conducted by utilizing other frameworks, such as situational analysis for internal and external factors. A better strategy could be implemented by analyzing all the resources that PT KPI possesses and adjusting them to the external threats and inner strengths.

In the attempt at renewable fuel development in PT KPI, besides renewable diesel, challenges or issues may arise regarding other types of renewable fuels, such as sustainable aviation fuel (SAF), sustainable marine fuel (green bunker), and other low-carbon fuels. A lack of supportive environmental instruments, including regulations, customer targets and product knowledge, market positioning, pricing mechanisms, and other factors, primarily causes these challenges. This customer business decision framework can be employed to surmount these obstacles by making the required adjustments according to the unique business attributes of each renewable fuel.