KL, RI reaffirm biodiesel plans despite industry uncertainty

The Jakarta Post

KUALA LUMPUR (AP): The Malaysia and Indonesian governments Friday reaffirmed plans to set aside a combined 12 million metric tons of palm oil a year for biodiesel production despite uncertainty about the future of the industry.

The world's two largest palm oil producers said in 2006 - when biofuel projects were flourishing - they would each set aside 6 million tons of palm oil a year. Since then crude oil prices have fallen from their highs and palm oil prices have soared to nine-year highs, putting many biodiesel projects in jeopardy.

"We are far from reaching 6 million tons. What we are saying...is that 6 million tons is our commitment. The rest is up to the private sector," said Peter Chin, Malaysia's Plantation Industries and Commodities Minister.

"If the present (palm oil) price is deemed too high, then manufacturers will have to make their own commercial decisions whether to proceed," he said.

Chin spoke with reporters after a delegation meeting with Indonesian Agriculture Minister Anton Apriyantono.

Both countries have agreed to maintain the allocation despite renewed doubts about the future of biodiesel, Chin said.

Malaysia has approved more than 90 biodiesel manufacturing projects but only six are in operation so far, producing a combined 107,000 tons in the first quarter of 2007, officials said.

Anton didn't provide any details on biodiesel production in Indonesia.

Both ministers said their governments would step up a campaign to counter allegations in the Europe and the U.S. that the expansion of oil palm plantations has caused massive deforestation and loss of habitat for the orangutan in Southeast Asia.

Over the next two months, government and industry officials from both countries will meet legislators and nongovernment organizations in Europe to allay concerns about the impact of plantation growth on the environment.

Yusof Basiron, chief executive of the Malaysian Palm Oil Council, said about 500,000 tons a year of potential palm oil sales have been lost because of environment-related concerns.

Anton said criticism of the industry was unfair as palm oil wasn't the main cause of deforestation in the region.

"(In Indonesia), about 64 million hectares of forest have been opened and oil palm plantations account for only 5.5 million hectares. The (loss) of forest is...mainly because of illegal logging," Anton said.

"So, it's not true at all that orangutan have diminished because of palm oil.