State firms to establish biodiesel plant in Medan

Novia D. Rulistia, The Jakarta Post, Jakarta

State-owned plantation firms have jointly set up a consortium for the construction of a biodiesel plant aimed at supporting the government program to develop alternative energy resources.

The state firms involved include PT Perkebunan Nusantara (PTPN) III, PTPN IV, PTPN V and PTPN VII. PTPN III will act as the head party in the consortium.

PTPN VII president director Andi Punoko said Monday the firms grouped in the consortium had recently signed a memorandum of understanding for the development of the biodiesel plant, which was expected to begin soon.

"The plant will be built in Medan, North Sumatra, near the source of raw material. We expect the construction to finish in 2009," Andi said, refusing to disclose the investment sum needed to set up the plant.

The consortium will function as investors as well as providers of raw materials.

"We will use biodiesel fuel to run the factory because it is cheaper. It will also be used as the main source of energy to process our products," he added.

Andi said that the use of biodiesel would account for 10 percent of the firm's total production costs which reached between Rp 30 billion (US$3.22 million) and 40 billion per year.

The four state firms engage in the cultivation of palm oil and rubber, as well as producing crude palm oil, palm kernels, latex, crumb rubber and rubber smoked sheet.

Andi said state oil and gas company PT Pertamina would help distribute its biodiesel fuel.

PTPN VII's production capacity for palm oil reaches around 200,000 tons per year, or 10 percent of the total output from all state plantation firms. PTPN III contributes the largest portion reaching 2 million tons annually.

Andi said he believed the consortium would face difficulties with transportation infrastructure, which was deemed insufficient to help spur growth of the industry.