9/2/06 JOHOR BAHARU (Bernama) -- Diversified palm oil group Kulim (Malaysia) Bhd is set to boost the region's biodiesel production capacity through its partnership with German company Peter Cremer (Singapore) GmbH.

The two parties sealed their partnership Thursday which will see both setting up two new biodiesel plants, with one in Singapore and the other in Malaysia.

The signing ceremony was witnessed by Johor Corporation (JCorp) group chief executive Tan Sri Muhammad Ali Hashim.

JCorp is a major shareholder of Kulim.

The biofuel plants will be located on a 20-hectare site at the Tanjung Langsat Industrial Area in Johor Bahru and the other at Singapore's petrochemical hub in Jurong Island.

The plants will have total capacity of 200,000 tonnes per annum, with 100,000 tonnes each from Tanjung Langsat and Jurong, producing methyl esters for biodiesel and glycerin as by-product bound for the export markets, mainly the European Union countries.

Construction of the Johor biofuel facility is estimated to cost RM75 million while the Singapore facility will have a slightly higher price tag of RM80 million.

Both plants are expected to operational as early as 2007.

To site it’s proposed biodiesel project in Tanjung Langsat, Kulim announced last month that it had entered into a sale and purchase agreement with parent company JCorp to acquire a 50-acre industrial land for RM26.23 million cash.

Speaking to reporters after the signing ceremony, Kulim managing director Ahamad Mohamad said the move was a logical progression as both companies have been working together since 1994.

Peter Cremer is one of the largest purchasers and distributors of fatty acids from Kulim's subsidiary Natural Oleochemicals Sdn Bhd.

The biofuel partnership will see Kulim holding a 51 percent stake in the Johor plant with Cremer taking up the remaining stake.

The German company will have the majority stake in the Singapore facility.

Germany's Peter Cremer is part of the Cremer Gruppe group, a multi-billion dollar family business established in Hamburg in 1946 which today runs trading and manufacturing operations in Europe, the United States and Asia.

Cremer Gruppe has been active in natural renewable fuels for several years, making significant investments in new facilities in Germany and South America last year.

"Moving the production to raw materials has always been the company's strategy, especially in Southeast Asia where we have a history as a producer going back to the late 1960s," Cremer Gruppe managing director Thomas Cremer said.

"Seen through the eyes of a producer and raw material supplier, biodiesel is a local business around the world. However, as a fuel it is also part of the global energy network," he said.

"With our production and trade of biofuels, we help to integrate and commercialise renewable energy in the global market," he added.

On the decision to go into the biofuel industry, Ahamad said that world demand for a "green" alternative energy source is rising, especially with global oil and petrochemical prices remaining high.

The world, he said, has started to seriously look into biofuel as an alternative energy source.

"With readily available demand and biodiesel industry on its way to becoming a lucrative market, it is only natural for Kulim to be in the thick of the action," he added.

Ahamad said Kulim is keen to have a share of the increasingly lucrative biodiesel market.

"In the European Union for example, biodiesel production almost doubled from 1.06 million tonnes in 2002 to 1.93 million tonnes last year. In the US, biodiesel output has gone up from 500,000 gallons in 1999 to 25 million gallons in 2004," he said.

"I believe that is a high enough demand for biodiesel from the West, primarily from European countries such as Germany and Italy. In addition, Turkey, South Korea, India, Colombia and China are also potential biodiesel users," he added.

Global demand for biodiesel is expected to touch 10.5 million tonnes in the next few years and Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui said recently that Malaysia could be positioned to capture at least 10 percent of the market.

The Malaysian government has been publicly supporting the country's biodiesel venture. It is in the midst of drafting a national biofuel policy and had said that it would conduct trial runs using biodiesel on state-owned diesel-powered transport vehicles from three ministries -- Defence, Transport and Plantation.

-- BERNAMA