28/02/2011 (Financial Times) - Sime Darby, the world’s biggest listed palm oil producer, is considering plans for a 300,000 hectare plantation in Cameroon as the industry rushes to expand in Africa in response to rising demand and near-record prices.

Mohd Bakke Salleh, Sime’s chief executive, said the M$7.5bn ($2.5bn) project was the Malaysian group’s best prospect for expanding its 640,000ha land bank after a 220,000ha concession was granted in Liberia last year.

We are actively looking. We have been shown potential areas in Cameroon, and the development formula is to work with the local communities,” he said in an interview in Kuala Lumpur.

Mr Bakke stressed that discussions had so far led to “nothing conclusive”, while the plantation would take many years to develop, with planting beginning at about 5,000ha a year and peaking at no more than 15,000ha.

Long-term demand for palm oil is rising as a result of population growth and changing dietary preferences in Asia, while supply is constrained by limits on plantation development in Malaysia and Indonesia, the two biggest producer nations.

Indonesia, which accounts for almost half the world’s palm oil production, implemented a two-year moratorium on commercial development of forests and peat lands in January as part of an effort to conserve the country’s remaining rainforests.

Mr Bakke said it was essential for Sime to find further land to defend its market leadership in the face of active prospecting in Africa by other big producers such as Singapore-based Wilmar International and Olam International. “We cannot just sit back and do nothing,” he said, noting that “other plantation players” were looking at potential projects in Ghana, Ivory Coast and Cameroon.

Sime’s Liberia deal was part of a wave of proposed development projects by the industry last year, which included a $1.6bn agreement between Liberia and Golden Agri of Indonesia, and a 300,000ha joint venture in Gabon announced by Olam. Equatorial Palm Oil, a UK-listed palm oil developer, has 169,000ha in Liberia.

Palm oil, although down from the 28-month highs reached last year, was trading at about $1,100 a tonne last week. Before a 2008 spike in food prices that pushed the commodity above $1,000 a tonne, palm oil traded at an average price of about $500 a tonne in the preceding two decades.

Plantation groups do not expect significant local opposition to expansion in Africa, where governments are keen to create jobs and increase export revenues. Sime said its Liberian and Cameroon prospects could create 30,000 jobs each.

Sime also stressed that the land involved was agricultural or degraded forest, reflecting the impact of sustained campaigns against the industry by western environmental lobbying groups such as Greenpeace.