SINGAPORE, Nov 3 (Bernama) -- A major palm oil industrial cluster (POIC) being developed in the south-western part of the Malaysian state of Sabah is an ideal location for palm oil-related industries, a major conference here was told.

POIC Sabah Sdn Bhd's chief executive officer Pang Teck Wai said the 2,030-hectare facility in Lahad Datu provides easy access to a large supply of palm oil not only from Sabah but also from neighbouring Kalimantan in Indonesia.

"Sabah is now the largest palm oil producing state. We produce 35 per cent of Malaysia's palm oil and have a potential of possibly another 300,000 to 500,000 hectares for expansion," he said at the Ethanol and Biofuels Asia 2006 conference organised by Terrapinn Pte Ltd.

The two-day conference, ending today, is attended by about 250 delegates from around the world, and held in conjunction with Global Entrepolis Singapore 2006, a business event focusing on connecting the global business community.

Pang said the capacity for expansion would make a total oil palm hectarage of over 1.5 million in Sabah in the future.

"So the state will be there for many many years as the largest palm oil producing state," he said.

In terms of oil production flow, Sabah is now exporting the most palm oil, at 5.3 million tonnes last year, compared to the next largest, Pahang, with about 2.5 million tonnes, he added.

Speaking to Bernama later, Pang said that POIC Sabah also wants to attract more palm oil from Kalimantan where future expansion of oil palm plantations in Indonesia is going to be.

"So altogether we are projecting a possibility of 10 million tonnes of palm oil to come to this POIC in Lahad Datu," he said.

POIC Sabah, incorporated in 2005, is a state-owned company. The facility in Lahad Datu has so far attracted over 80 enquiries from around the world interested in setting up a range of palm oil-related industries from biodiesel to oleochemical to biomass, and supporting industries such as logistics and chemicals.

Of about 50 biofuel applications approved in Malaysia so far, 12 of them will be located in the POIC.

Biodiesel plants are due to begin production in the later part of 2007 with a combined installed capacity of about 700,000 tones per year, making the POIC in Lahad Datu among the biggest biodiesel producers in Malaysia.

"People are still looking for location. Obviously, the cost is low to produce biodiesel from palm oil compared to other products like rapeseed in Germany and soybean in the United States," Pang said.

"The POIC is an area that has the highest volume of palm oil in one single location. Also, the logistics that the POIC put in place would probably make it one of the most efficient and competitive vegetable oil indutrial areas in the world," he said.

The POIC will also have jetties that can take in ships of up to 100,000 tonnes, Pang said.

"With that kind of ships, it would have about 50 percent advantage in terms of shipping... the bigger the ship, obviously the lower the cost," he said.

-- BERNAMA