Feedstock supply critical for biodiesel - Carotino

13 June 2007 07:41  [Source: ICIS news]

SINGAPORE (ICIS news)--Making biodiesel in Asia is not feasible in the current environment unless producers are vertically integrated with captive supplies of feedstock palm oil, a senior executive with a Malaysia-based biodiesel firm said on Wednesday.

Assurance of feedstock supply and quality control from raw material to international quality biodiesel is possible only at an integrated facility, said U R Unnithan, executive director of Carotino, at a biofuels conference held in Singapore.

Carotino operates a 60,000 tonne/year biodiesel facility in Malaysia which started up in August 2006. This will be increased to 180,000 tonnes/year, with a new plant due to start in July 2007.

A year ago, there was great interest in production of palm-based biodiesel and licences for over 90 plants were issued in Malaysia alone.

However, in just 10 months, the situation has changed from euphoria to frustration as the industry grapples with negative margins due to a near 50% surge in feedstock palm oil prices, Unnithan said.

Others like John Hewson, chairman of Natural Fuel, Australia said there was scepticism in the market over the feasibility of biofuels, given current fuel prices, feedstock costs, government regulations and technology, all of which were in a state of flux.

Natural Fuel was building large biodiesel facilities at strategic locations although it did not have vertical integration on the feedstock front.

Its objective was to replicate the oil industry’s distribution model, with refineries, fuel and logistic hubs and deep water ports available at plant locations.

Natural Fuel has a 122,500 tonne/year biodiesel plant in Darwin Australia and a 600,000 tonne/year facility due to come up in Singapore at the end of 2007. The company is also building a 200,000 tonne/year biodiesel plant in Houston, due for completion in end of 2008.

Prudent financial management is required to run biodiesel plants in Asia, said Tian Ching Long, director of Vance Bioenergy, Singapore. A jump in feedstock costs and increasing shipment lot size to Europe and the US meant that capital requirements for operation and working capital were now higher.

However, quality control was of paramount importance, Long said. In case of any problem at the consumer’s end, this would automatically be blamed on palm biodiesel as several negative perceptions are associated with it, he said.

One negative perception of palm biodiesel is based on the opinion that rain forests are being cut down to build palm plantations.

However, Malaysia still has a 64% forest cover as compared to the US and the UK, which have are covered by 33% and 11.8% of forest respectively, Unnithan said. A large area of land coming under palm plantations now has replaced earlier rubber plantations, he added

Separately, crude palm oil (CPO) spot prices were close to $700/tonne in Malaysia on Wednesday while third month futures on the Malaysia exchange were at Ringgit (M$) 2,274/tonne ($655/tonne).

Palm biodiesel prices were hovering at $750-780/tonne FOB (free on board) SE (southeast) Asia, according to global chemical market intelligence service ICIS pricing.

By: Anu Agarwal
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