29/1/07 (BangkokPost)  - The Charoen Pokphand Group (CP) has delayed a project to produce biodiesel from palm oil for the government, and shifted to growing and selling palm saplings to serve local plantations.

The costly state-backed integrated biodiesel project, which would invest in oil-palm fields and refineries for biofuels to blend with diesel for biodiesel, was abandoned following the ousting of the Thaksin Shinawatra administration.

"We are still interested in the biodiesel project, but there is no rush now," said Montri Congtrakultien, the president of the CP Group's crop-integration business.

He admitted that in light of continuing investigations into allegations of irregularities in a rubber-sapling project, the company had been reluctant to take part in any state contracts, particularly in the farm sector.

CP Crop Integration Business Group was among several companies that joined a special-purpose vehicle (SPV) programme launched by Mr Thaksin's Thai Rak Thai Party ahead of the election campaign in 2005.

Private companies have been invited to run any of the 85 local sites that produce palm oil to serve the biodiesel industry. Farmers receive cheap loans for growing oil palm and participating companies are offered tax perks.

According to Mr Montri, although its biodiesel project had been put on hold, the company was still optimistic that palm oil would be a crucial source for the alternative-energy industry in the future. Therefore, it was putting its efforts into research and development of better-quality palm strains, as well as jatropha.

According to Mr Montri, the company had employed veteran researcher Anake Limsrivilai, with 30 years of experience in the research and development of oil-palm strains.

"And after several years of R&D, we've finally found a strain that can give an average yield of 3.5 to four tonnes per rai, higher than 2.7 tonnes currently," he said.

The distribution of the CP Golden Tenera strain of saplings will start in March or April and palm plantations in the South and East will be major markets.

A source in the industry said that CP had also acquired small companies that produced palm saplings in the South to increase its total palm production.

The market outlook for Thailand's palm-oil industry remained bright due to global demand for alternative fuel which could lead to a shortfall of raw materials, said Wiwan Boonyaprateeprat, president of Southern Palm Oil Industry (1993) Co, another large company that has invested in the palm business.

The affiliate of the Southern Group is among 10 companies that have approached the Energy Ministry to run a biodiesel plant.

Its Surat Thani project, which cost 1.2 billion baht, will have the capacity to produce 300,000 litres of palm oil per day.

Thanks to its own 30,000-rai palm plantation and a 99-megawatt electricity generating plant, the company sees the investment as viable.

"We're quite ready for the investment but clearer policy is necessary to prevent a battle for raw materials," said Ms Wiwan.

"If these plants are in operation, it could result in surging demand for palm nuts and might affect the palm-oil for cooking industry."

She suggested that the Energy Ministry help businesses plan by clarifying the planned number of biodiesel plants in addition to the prices for biofuel to be sold to oil companies.