Biofuel boom: Environmental concerns

Sunday January 27, 2008 - The Star, Malaysia
By RUBEN SARIO

KOTA KINABALU: Sabah's east coast Lahad Datu district has long known the ebb and flow of fortunes.

The district experienced the good times amid the state's timber boom nearly 40 years ago but things quietened down as the timber resources depleted.

The timber men eventually gave way to planters who were initially involved in cocoa cultivation. But the favourite crop that finally emerged was oil palm.

Biofuel boom: Environmental concerns and interest in biodiesel, and therefore palm oil, intensified in recent years due to the volatility in the supply and cost of fossil fuel. More and more countries around the world are legislating laws on the use of biofuels.Over the past two decades, tens of thousands of hectares of land surrounding Lahad Datu were planted with oil palm and the district has been experiencing an economic resurgence.

It was a similar situation in Sabah's other east coast districts and at last count some 1.2 million hectares had been planted with oil palm in areas stretching from Sandakan to Kinabatangan, Lahad Datu, Semporna, Kunak and Tawau.

Sabah is the nation's major palm oil producing state, accounting for 35% of the nation's total output.

A better future is in store for Lahad Datu with the setting-up of the nation's first Palm Oil Industry Cluster (POIC). The 460ha zone just outside the east coast town was set up to house inter-related palm oil-based industries.

State Industrial Development Minister Datuk Dr Ewon Ebin said that under the Sabah Development Corridor the POIC would be a key component in encouraging downstream industries.

"It will also be a catalyst for further expansion of Sabah's oil palm sector," he said, adding that the POIC was projected to attract some RM9bil worth of investments and generate some 8,000 jobs.

"The entire project has been on schedule and on budget. The number of investors have also grown from 10 in 2006 to 17 last year," he said, adding that investment value increased from RM1bil to RM1.78bil.

All of the basic infrastructures at the POIC has either been completed or was nearing completion.

"Roads within the first two phases have been or is about to be completed at a total cost of RM510mil," he said.

Streetlights have been installed while water supply from two million gallon storage tanks is ready to be utilised. Electricity is being supplied via the Sabah electricity grid.

Dr Ewon said two factories commenced operations last year, namely SPC Biodiesel and Global Biodiesel with a combined output capacity of 300,000 tonnes per year.

The major signing last year was the sale and purchase agreement with Eco Biomass Energy Sdn Bhd, a subsidiary of Seoul-based Eco Frontier Co, which is one of the world's leading proponents of renewable energy production.

The company will invest up to RM350m to erect the Combined Heat and Power (CHP) plant to produce electricity and steam by using oil palm biomass such as empty fruit bunches and oil palm fronds.

The plant, Dr Ewon said, would not only put Lahad Datu on the global map of the United Nations-sponsored Clean Development mechanism but also ensure power supply needs of the future.

The central steam supply system is the first of its kind in Malaysia that will help to lower the investment cost of other investors, who need not have to put up their individual steam generation system.

Another component of advanced infrastructure is the bulking installation that provides storage facilities for incoming feedstock like crude palm oil and outgoing products such as biodiesel.
The palm oil industrial zone was being developed by state-owned POIC Sdn Bhd. Chief executive Dr Pang Teck Wai said Sabah's central geographical location in South-East Asia placed POIC at an advantage over nearby palm oil producing regions.

"We have the raw materials for feedstock. We have an excellent harbour and we are located near to southern Philippines and Indonesian Kalimantan, which are sources of future oil," he said, pointing to Lahad Datu's unparalleled superiority as a destination for investments in palm oil downstream industries.

Global demand for palm oil had been growing steadily as a source of edible oil, raw materials for a host of oleochemical and pharmaceutical products and as feedstock for the production of biodiesel, he said.

Environmental concerns and interest in biodiesel, and therefore palm oil, intensified in recent years due to the volatility in the supply and cost of fossil fuel. More and more countries around the world are legislating laws on the use of biofuels, thus adding premium on renewable feedstock such as oils from rapeseed, soya bean and oil palm.

Most of the biodiesel to be produced at POIC is destined for markets in Europe, the United States, Japan and Korea.