27/08/2008 (Daily Times), Kuala Lumpur - Kuala Lumpur Kepong Bhd, Malaysia’s third-largest listed planter, plans to grow oil palm at 10,000 hectares every year, mostly in Indonesia, to meet global demand for the vegetable oil, a top official said.

Many Malaysian plantation firms venturing into the Indonesian side of Borneo island, have started planting oil palm in the past two years, which could lead to high crude palm oil stocks in coming months. KL Kepong Chief Executive Lee Oi Hian said land acquisitions and planting of oil palms have to be done carefully to avoid encroaching into environmentally sensitive areas like peatlands and rainforests.

“We are concentrating on planting areas in Indonesia at very rapid pace, somewhere around 10,000 hectares a year,” Lee Oi Hian told Reuters in an interview.

“We are concerned about the quality of plantings and making sure its a quality job. We do not want to hit into sensitive areas.”

The firm, owning some 210,000 hectares of land in Malaysia and Indonesia out of which 170,000 hectares is planted, expects crude palm oil production to rise in tandem once the oil palm estates in Indonesia start to fruit. “We expect crude oil production to range 580,000 to 600,000 tonnes for this financial year ended Sept 30. Naturally it will go up after the new plantings bear fruit,” Lee said.

Malaysian crude palm oil futures fell 4.2 percent on Monday on increasing supply concerns and weaker crude oil prices, dealers said. The benchmark November crude palm oil contract on the Bursa Malaysia Derivatives Exchange fell 115 ringgit to finish at 2,600 ringgit ($770) per tonne.

KL Kepong’s palm oil production is channelled into its oleochemical business, one of the largest in the world. But KL Kepong will not be expanding its oleochemical business any further, save for 200 million ringgits ($59.29 million) in a biodiesel softening plant in Malaysia with a capacity of 50,000 tonnes a year, which will be commissioned in the second half of 2009.

“Basically, in the next couple of years, we will concentrate on de-bottlenecking plants and running in plants because we have quite a lot of projects,” Lee said.

Although buoyant palm oil prices have kept the firm’s earnings prospects bright, the weakness in the Malaysian stock market has forced KL Kepong to defer a planned $300 million five-year exchangeable bond. reuters