MALAYSIAN PALM FOR FUEL PLAN AND VERY PRELIMINARY

KUALA LUMPUR, Feb 26 (Reuters) - A Malaysian minister has piqued theinterest of palm oil markets with a plan to use crude palm oil (CPO) torun power plants but an expert familiar with the project has called it"very preliminary"."We have been successful in converting palm oil into bio-diesel and wehave got cars running on cpo alone, but that's about it. Mr. Ahmad Hitam,an official at the Malaysian Palm Oil Board (MPOB), told reuters."We haven't done any test on power plants yet, said Ahmad, head of MPOB'spalm mechanisation unit under its biology division, during a weekendtelephone interview.The CPO-for-duel plan was fired up by Primary Industries Minister Lim KengYaik, who has been campaigning to diversify uses for palm oil due todismal prices and a world glut in oils.Lim said, last week an excess supply of 500,000 tonnes of CPO was expectedin Malaysia this year and he proposed that almost all of it be convertedinto bio-diesel or be "burnt" as fuel for boilers in power plants.

SAME RATE OF ENERGY?

Short traders in palm oil forwards rushed to cover positions but as theeuphoria died, many wondered if the minister had just wanted to boostprices and questioned if the plan was commercially and technicallyworkable.Ahmad said tests on palm bio-diesel had produced some positive results andMinister could have been encouraged by this."For instance, we found that each kilo of bio-diesel produces about 40,000kilo joules while conventional diesel generates about 45,000 kilo joules,"he said. "So it's not very different."Mr. Ahmad said MPOB had been testing for nearly eight years now theefficiency of palm bio-diesel in more than 20 Mercedes-Benz cars whoseengines were converted for the purpose."We recently opened up four to five of the cars, which had done about150,000 km each," he said. "We found their engines in pretty goodcondition."Ahmad said for MPOB to test the bio-diesel in boilers, it would have toget the cooperation of power plants."We will have to get them involved as they will be the end-users," hesaid. "But it's too early to say whom we will be approaching."An engineer at YTL Power International, a local power generation company,told Reuters last week that in his 20 years in the industry, he had yet tocome across plants that could substitute vegetable oils for fossil fuels.Other said making diesel for car engines was a different ball game fromproducing fuel for boilers."Power generation is an intricate business and plants cost a lot of moneyto build," said one palm oil dealer. "They are also designed to use aparticular kind of fuel.""To use a fatty matter like cpo instead of mineral oil like diesel wouldrequire tremendous changes to the basic structure of the plants and itwould cost money and time."

($1 = 3.8 ringgit).

REUTERSMRAG/hh.02/03/01

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