23/3/06 KUALA LUMPUR (Dow Jones)--Growing interest in biodiesel is proving to be a boon not only for the palm oil industry, but also for companies providing support services, such as equipment makers.

Oiltek Sdn Bhd, a Malaysian supplier of palm oil refining machinery and equipment, said the rapid expansion of the biodiesel sector currently taking hold all over the world has opened up vast and new business opportunities.

"The (palm oil) processing industry is quite mature already. The challenge is to have new processes and new technologies coming up. In terms of traditional use of palm oil for food purposes, it is already established and you won't see much of a dramatic increase. But in the area of technical use of the oil, that is something that can be dramatic," Oiltek's Managing Director Wong Seong said in a recent interview.

"And the very hot issue now is biodiesel," he added.

Rising crude oil prices have prompted many countries to step up their search for alternative energy sources to help reduce their dependence on petroleum-based products.

Edible oils such as palm oil have been identified as among the most suitable agricultural commodities to substitute mineral oils.

The emergence of this lucrative new market for palm oil has sparked enthusiasm in the industry to build biodiesel plants.

For equipment suppliers like Oiltek, the biodiesel boom has been a blessing as it comes at a time when demand for conventional edible oil processing equipment is reaching saturation.

The Malaysian palm oil refining sector expanded aggressively between the late 1970s to 1990s. Since then, the pace of expansion has abated as refining margins have been eroded by excess capacities and stiff competition.

With most of the basic refining processes such as fractionation, neutralization and hydrogenation already in place, new applications are needed to spur the next big wave of plant and equipment sales.

"Because all the basic refining processes are already there, we need to get into new and more sophisticated processes. The latest development is biodiesel and we are already in it," Wong said.

Founded in 1980, Oiltek is best known in industry circles for its tall and thin tube-like crystalizers used for oil fractionation, believed to be more efficient than the short and wide foreign crystalizers that were common in the early days of the refining industry.

Oiltek has now ventured into biodiesel and is part of a project led by the Malaysian Palm Oil Board, or MPOB, to build three of the country's pioneer biodiesel plants.

The plants, which will each have a capacity to produce 60,000 tons a year, are expected to be ready by the year-end.


   Palm Biodiesel Possible In Winter

Oiltek holds the license for the technology to produce low pour point biodiesel, or better known as "winter fuel", a palm oil-based biodiesel suitable for use in temperate climates.

Palm oil is naturally semisolid and, therefore, tends to turn cloudy and thick in cold temperatures.

There have been concerns in the market that this characteristic may effectively prevent palm biodiesel from making any significant inroads into the European Union, by far the world's biggest and fastest growing biofuels market.

Wong said such concerns were unwarranted as palm oil can satisfy stringent European standards.

"There are processes where you can take out certain fractions and manipulate the oil so that Europe's cold filter plugging point specifications can be met. MPOB has developed something that will work in winter conditions and it is successful," Wong said.

The growing popularity of alternative fuels has boosted business opportunities for equipment suppliers not only in the area biodiesel alone, Wong said.

The production of biodiesel yields glycerin as a byproduct at a ratio of about 10-to-1.

"That simply means the more biodiesel you produce, the more glycerin you are going to get out of that process," Wong said.

Increasing supply of glycerin, often used to make soaps, would make it imperative for the industry to find more uses for the byproduct to prevent a glut.

"A whole new industry will be born out of that," Wong said.

   Refiners Seen Expanding Overseas

Wong said there's also attractive room for palm oil processing equipment sales overseas, beyond Malaysia and Indonesia, the world's biggest producers of palm oil.

The success both countries have had in growing and exporting palm oil has stirred interest in countries with similar climates to also get involved.

Oiltek has sold its products and services to customers in countries such as China, Pakistan, Bangladesh in Asia as well as Kenya, Tanzania, Egypt, Congo and Nigeria in Africa.

"We have also gone to Honduras and have been quite successful there. We see that there are more possibilities and more development in the Central America region. They realize palm oil is important and are increasing their oil palm plantations," Wong said.

He said he sees a growing trend among Malaysian palm oil refiners to set up plants overseas.

"(Refiners) will want to go to other countries like China and put up plants there, to be nearer to the market," he said.

Likewise, if the development of a Malaysian palm biodiesel industry is successful, the feat would also likely be emulated in other countries, he added.