To step up competition for the state-energy firm, the government has granted a temporary permit to PT Dirgantara Petroindo Raya to set up operations to sell jet fuel, an energy ministry official said on Thursday.

The company, a joint venture between BP Plc and Indonesian oil logistic firm PT AKR Corporindo Tbk is planning to start operations at an airport in Morowali, a mining centre in Central Sulawesi, said Muhammad Rizwi, director of downstream oil and gas at Indonesia's Energy Ministry.

The company is still preparing to build its storage facilities and is set to receive final permit once these are completed, he said.

A source familiar with the matter said the AKR-BP joint venture will open a tender for fuel requirement sometime soon.

The Morowali, Central Sulawesi airport is new and not a big airport with a single 1,850 metres runway, but the step is still seen to be important as it would give the company a foot in the door in a booming market.

Indonesia's coordinating minister overseeing maritime and natural resources, Luhut Pandjaitan, told reporters earlier this week that he has given instructions to the energy ministry to accelerate the approvals for AKR jet fuel trading permits.

"This (move by Indonesia) means opportunities for those who have a strong position in the aviation market," a middle distillate trader said.

Indonesia is Southeast Asia's biggest country and economy, and one of the fastest-growing aviation markets.

The Southeast Asian country is expected to be among the top 10 largest air passenger markets in terms of traffic by around 2020, and will be a market of 270 million passengers by 2034, according to reports by International Air Transport Association (IATA).

(Additional reporting by Koustav Samanta and Jessica Jaganathan in SINGAPORE, Writing by Koustav Samanta; Editing by Rashmi Aich)

By Wilda Asmarini and Chen Aizhu