31/7/06 (The Star)   - PPB Oil Palms Bhd plans to venture into downstream biodiesel production in Indonesia to cater to its extensive oil palm plantation operations in that country.

However, the company intends to retain its pure plantation player status in Malaysia.

The plantation arm of PPB Group has a total land bank of 363,238ha, of which 78% is in Indonesia and the remaining 22% in Sabah and Sarawak.

PPB Oil managing director Khoo Eng Min said unlike most plantation companies which aimed to produce palm-based biodiesel for export, the company would produce biodiesel to ensure a steady dependable source for its growing plantation operations in Indonesia. 

 
Khoo Eng Min
“Our experience has shown that the supply of diesel, especially in Central Kalimantan, is not very reliable,” he told StarBiz.

“As we produce crude palm oil (CPO), it is logical to go downstream and produce biodiesel in sufficient and reliable quantity for our own vehicle and machinery consumption.”

He said PPB Oil engineers were currently studying the alternative technologies available for producing biodiesel.

“We will soon select the process to be adopted,” he said, adding that the group had also undertaken trials with various olein-diesel blends on its estates in East Malaysia to gauge their suitability as an alternative fuel for use in its plantations.

As PPB Oil's immediate focus is on Indonesia, the group has mapped out big plans for its oil palm plantations in the republic.

“Between 2006 to 2010, we are targeting to spend RM300mil to RM400mil annually as capital expenditure in Indonesia covering plantation development, infrastructure and processing facilities,” he added. 

 
PPB Palm Oils' Mustika Sembuluh mill construction in progress
He said the group's expansion programme in Indonesia would be financed by both internal funds and bank borrowings. 

Last year, PPB Oil invested about RM220mil on new plantings, infrastructure and capital equipment in both Malaysia and Indonesia.

According to Khoo, the group's major expansion into Indonesia will result in more efficient operations and lower costs.

“Indonesia will be the platform to provide PPB Oil with better opportunities to sell its CPO to overseas markets, which are currently limited by the annual CPO export quota in Malaysia,” he added.

Khoo explained that the absence of export restrictions for CPO in Indonesia provided greater opportunity to access overseas markets.

“There is a growing shift towards the importation of CPO rather than processed palm products by markets like China and the European Union (EU).

“Markets like the EU have very stringent health and food specification requirements, and many prefer to refine CPO in their own countries to avoid double handling and processing, which would translate into higher costs,” he said.

In Indonesia, the group will operate its maiden 60-to-120-tonnes-per-hour palm oil mill later this year with an initial throughput of 275,000 tonnes of fresh fruit bunches (FFB) annually. 

“We are targeting to have two to three mills in operation by year 2010,” he said.

PPB Oil's Indonesian operations produced a total of 162,784 tonnes of FFB – 135,462 tonnes from the young and prime plantings in Tidar Sungkai Sawit estates (17.9 tonnes per ha) and 27,322 tonnes from the newly matured Mustika Sembuluh estates (17.1 tonnes per ha).

On the local front, the operations in Sabah and Sarawak accounted for 89% or 1.3 million tonnes of the group's total FFB production at 1.44 million tonnes last year. 

 
PPB Oil currently has a total of nine palm oil mills in Sabah and Sarawak and Indonesia, with another two - one in Sabah and one in Central Kalimantan - to be commissioned by year-end. 

Khoo said PPB Oil was a highly focused company that was involved solely in producing CPO in Malaysia.

“We expect this single-product policy to continue, as downstream activities such as CPO refining and oleochemicals are currently being pursued by our associate companies within the PPB group,” he added.

On upstream activities, Khoo said PPB Oil was seriously looking into expanding the production of clonal plantlets from its tissue culture laboratory in Kuching, Sarawak, and venturing into the production of high quality DxP seeds for own and third-party consumption.

“We believe that demand for quality planting materials will be quite enormous, given the growing global interest in and demand for palm oil, both as an edible oil and fuel substitute, as well as the expected accelerated replanting of old palms in Peninsular Malaysia.”

To date, the group has planted more than 4,300ha of clonal palms in its estates, of which 2,300ha are mature. “We have achieved superior oil yields that are 30% higher than DxP seeds, while abnormalities remain insignificant,” Khoo added.