01/12/2012 (Creamer Media's Engineering News) - Gabon will become a significant exporter of palm oil by 2020, as it diversifies into agriculture and works to reduce its reliance on crude oil exports, the country's agriculture minister told Reuters in an interview on Thursday.

Gabon expects to produce 250 000 t/y of palm oil by 2020, up from 50 000 t currently, with Belgium's SIAT and Singapore's Olam running projects in the country.

West Africa consumes a huge amount of palm oil, which is used in cooking and for fuel. With the vast majority of the region's 3.5-million tons deficit imported from Asia, Gabon is well placed to enter the market by undercutting transport costs.

"We have a large amount of available land and an attractive environment for investment," Julien Nkoghe Bekale said speaking on the sidelines of the UK-Gabon Investment Forum.

Gabon has an estimated five-million hectares of available arable land, with one-million hectares ready for immediate use, without reaching into rainforest, the minister added.

"At the moment palm oil prices are good, so obviously we will seek to export it rather than focus on local consumption," Bekale said.

Gabon's economy is heavily reliant on oil exports, which accounted for around 52% of gross domestic product (GDP) in 2011. However, the country is attempting to diversify into new areas and is opening up to foreign investment.

Bekale forecast that agriculture would grow to 15% of GDP by 2020, from 1% currently.

"What we're aiming to do is create an attractive framework, whether it be legislative, regulatory or fiscal, for investment. For agricultural enterprises we're going to have tax exemptions on VAT, on customs and even on companies".

SIAT produces an estimated 11 000 t/y of palm oil in Gabon, having invested around $100-million since 2004.

However, the major investment has come from Olam which signed a joint venture with the Gabon government to develop 50 000 hectares, with the option of expanding to 100 000 hectares. The project is estimated to be costing Olam $788-million.

Bekale waved away any concern over the health of Olam's balance sheet following criticism by the short-seller Muddy Waters that the company's high debt levels put it in a precarious financial state.

"We are not at all worried because for us Olam is a secure strategic partner and plans to invest $2-billion. They have already begun their projects and are executing them well and in the best environmental practice", he said.

Olam International Ltd, 16% owned by Singapore state investor Temasek Holdings Pte Ltd TEM.UL, said in a 45-page report on Wednesday it was not at risk of insolvency and had enough liquidity to pursue its business and future investments.

FLEXIBLE LABOUR LAWS

Bekale said that in contrast to the oil sector where Gabon has been tightening its policy on foreign workers, the agriculture sector is keen to attract foreign companies and expertise.

"You have to understand, the agricultural sector is not the oil sector. We need a large labour force and we don't have enough agricultural labour so we will have to have more supple legislation in this sector."

Edward George, a specialist in soft commodities at Ecobank, which specialises in African investments, agreed that Gabon is an exciting prospect for palm oil production.

"I think Gabon really has the potential to become a significant exporter of palm oil to the region," he told Reuters on the sidelines of the conference.

"Once Gabon can get this plantation up and running of 50 000 hectares very quickly it will be able to meet its domestic demand and that's when we'll start to see it exporting to Cameroon, Angola and most importantly to Nigeria."