05/03/2008 (The Age) - Indonesian palm oil growers are scrapping or amending plans to make biodiesel after the commodity's surge to a record made the projects unviable, executives say.

Sinar Mas and China National Offshore Oil have halted a $5.9 billion biofuels plan, director Rafael Concepcion said yesterday. PT Bakrie Sumatera Plantations was ''redesigning'' a biodiesel project, president director Ambono Janurianto said.

Palm oil prices have more than doubled in the past year, undermining the economic rationale for turning the vegetable oil into diesel even as governments worldwide mandate greater use of alternative fuels. The increased use of palm oil and other plants including sugar was meant to stretch fossil-fuel supplies.

''Crude palm oil is very expensive now, it's impossible for companies to make profit if it's used as biodiesel,'' said Alhilal Hamdi, head of Indonesia's National Team on Biofuel.

''We are postponing it indefinitely as it's economically not feasible,'' Mr Concepcion said, referring to the venture with China's third-largest oil company. ''The price of the raw material alone is already higher than the price of biodiesel.''

Palm oil futures in Malaysia, the global benchmark, touched a record 4486 ringgit ($A1510) a tonne yesterday, driven by increased investment in agricultural commodities and rising demand. Palm oil is also used in foods and as a cooking oil. China is the biggest importer. -Bloomberg-