23/11/2012 (Fox Business) -  Singapore-listed Golden Agri-Resources Ltd. (E5H.SG), the world's second-largest oil palm planter by acreage, will continue to expand its palm plantation areas in the next year, mainly by focusing on estate acquisitions in Indonesia's Kalimantan state.

"Kalimantan continues to present a lot of good opportunities for the company," Rafael B. Concepcion Jr., Golden Agri's executive director, told Dow Jones Newswires in a recent interview.

Golden Agri's move to snap up existing estates comes as Indonesian firms are finding it increasingly difficult to obtain new licenses from provincial and state governments due to stricter environmental rules that would have otherwise allowed them to clear land and grow oil palm trees. Adding a sense of urgency to the scramble for land is the fact that Malaysia, the world's no. 2 producer, is forecast to run out of available oil palm land in another two to three years at a time when global consumption for the tropical oil is rising.

"Suitable land for oil palm cultivation in Indonesia is increasingly scarce, and [provincial] governments in Indonesia aren't keen to issue new land licenses. As such, we see firms are looking at acquiring existing estates in Indonesia," said Carey Wong, Singapore-based senior analyst at OCBC Bank.

Owning a substantial amount of land in Indonesia will also ensure that Golden Agri has enough feedstock to meet demand in the country from its downstream palm oil refining business, which aims to boost capacity from the current 1.4 million metric tons to 2.6 million tons annually by the end of 2014.

Golden Agri's latest annual report put its total oil palm land area at 459,500 hectares, of which some 225,000 hectares are located in Kalimantan.

Given Asia's growing food and industrial sector demand for palm oil, "we're accelerating our growth through mergers and acquisitions in the year ahead," Mr. Concepcion said, adding that the company is looking to expand its plantations by 20,000 to 30,000 hectares next year.

Palm oil is a highly versatile and cheap oil that's used to make a wide variety of consumer products, from chocolate to lipstick. Global demand for palm oil has more than doubled since 2000 and prices have since tripled to around 2,432 ringgit a ton ($795) on Malaysia's derivatives exchange.

Golden Agri's move to accelerate growth in its upstream palm oil and downstream palm oil processing business comes in the wake of its 1.5 billion-ringgit issuance of Islamic medium-term notes earlier this week. The Islamic bond, or sukuk, is part of a 5 billion-ringgit program established earlier this month and has a tenor of five years, where proceeds would go toward hectarage and refining expansion plans, the company said.

Asian palm oil firms have in the past concentrated their expansion plans in Indonesia and Malaysia, which together account for 85% of global production. But limited availability of suitable land has driven planters such as Golden Agri and Sime Darby Bhd to Liberia.

Growing oil palms in Liberia is attractive. The country, with huge mining and agriculture potential, has attracted a large amount of foreign resource investment following the end of a civil war in 2003, but its infrastructure remains poor, making it more expensive to transport raw materials and people around the country.

Golden Agri, through its fund Golden VerOleum, formed a $1.6 billion partnership with the Liberian government in 2010 to develop 220,000 hectares of land, although Mr. Concepcion said estates are still undeveloped, given the infrastructure deficit and limited availability of labor in the country.

"There are significant opportunities for [oil palm] development in Africa," he said, noting that palm oil buyers in Europe and the U.S. are closer to Africa compared with Indonesia and transportation costs from Africa to those regions would be significantly lower than shipping palm oil from Indonesia to Europe or the U.S.

"But the challenge in Liberia is to kick-start a new commercial industry when the country is still in the process of developing their workforce and infrastructure."

Still, Mr. Concepcion said Liberia is a long-term project. With strong economic prospects, policy changes by African governments to energize markets and palm oil's ubiquitous presence in African kitchens, "there's a ready local market, and it could provide improved economics to the Liberian project in the longer term."