16/07/2008 (The Edge Daily), Kuala Lumpur - Sime Darby Bhd is building a new RM330 million refinery in North Port, Port Klang to strengthen its position in the palm oil downstream business in Southeast Asia.

Its president and group chief executive Datuk Seri Ahmad Zubir Murshid said its board of directors agreed in May to construct the North Port refinery complex which was expected to be completed by mid-2010.

He said Sime Darby planned to use up all of its 600,000 tonnes of crude palm oil (CPO) production in the central region of Peninsular Malaysia for the new plant.

It involves the construction of a 2,000 tonne-per day refinery plant and a kernel crushing plant with storage tank facilities. Sime Darby said it would translate into about 660,000 tonnes worth of additional refining capacity for its plantation division in the central region.

Ahmad Zubir said the decision was made due to the increase in global demand for refined palm oil products and its large CPO supply base in Peninsular Malaysia after the merger.

“The number of refineries in the central region of Peninsular Malaysia is very limited and most of them have small or no exposure in upstream businesses. However, these refinery players have high bargaining power and can squeeze upstream players like Sime Darby,” he said.

Sime Darby currently has 600,000ha of landbank under its belt, where about 530,000ha are planted and currently at its prime age. Sime Darby’s annual CPO production totals 2.4 million tonnes while its total refining capacity in Malaysia is only about 0.8 million tonnes. In Peninsular Malaysia alone, Sime Darby’s CPO production is over one million tonnes.

Ahmad Zubir said currently in Malaysia, Sime Darby had refineries in Banting (Golden Jomalina), Pasir Gudang (Kempas Edible Oil) and Bintulu (Austral Edible Oil), with a total annual capacity of over 800,000 tonnes per annum. With North Port, Sime Darby’s annual total refining capacity will increase to about 1.5 million tonnes in Malaysia.

“North Port will give us the scale and opportunity to use new technologies which will further improve our productivity and efficiency. This expansion plan is only the beginning. Our North Port project is part of a bigger picture that will unfold.

“The strategic move will enable Sime Darby to have the flexibility to sell our palm oil products according to market demand. We also have plans to expand our refining capacity in Indonesia, China, Europe and Africa to match our upstream expansion plans,” he said.